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The government has extended the deadline for credit-linked subsidy scheme on home loans for middle-income category to March 31, 2019.

How to avail home loan credit linked subsidy scheme; 3 easy steps explained

In order to boost real estate sales, the government has extended the period to avail the credit-linked subsidy scheme (CLSS) under the PMAY (Pradhan Mantri Awas Yojana) on home loans for middle-income from December 31, 2017 to March 31, 2019. This will benefit first time homebuyers with annual income between Rs 6 to 18 lakh a year and save interest payout of up to Rs 2.35 lakh on a 20-year loan.

Eligibility for the subsidy
The loan is available only for the first house and the house purchased should not be over 60 sq meters or 643 sq ft for household income up to Rs 6 lakh a year. It is 90 sq meters (965 sq ft) in carpet area for people in the income bracket of Rs 6-12 lakh. For income group more than of Rs 12-18 lakh, the maximum size of the house should be 120 sq meters or 1,287 sq ft. For this scheme, the annual family income will be income of husband, wife, unmarried sons and unmarried daughters.

Those in the MIG with an annual income between Rs 6 and 12 lakh will get an interest subsidy of 4% for loan up to Rs 9 lakh and those with an annual income between Rs 12 to 18 lakh will get an interest subsidy of 3% on loan up to Rs 12 lakh. The government has also increased the tenure of the loan for low income group (LIG) and economically weaker section (EWS) from 15 to 20 years.

The total interest subsidy to be paid under MIG group for loan up to Rs 9 lakh is Rs 2.44 lakh and on a loan of Rs 12 lakh, it comes to Rs 2.48 lakh per beneficiary. The total interest subsidy on the loan amount will be paid to the beneficiaries up front by the bank, which will reduce the borrower’s burden. The maximum tenure of loan will be 20 years.

Benefits in interest payouts
The interest subsidy of 4% under CLSS for MIG on loan of Rs 9 lakh will bring down EMIs of the borrower by Rs 2,062 per month on a housing loan of Rs 9 lakh and interest subsidy of 3% on a loan of Rs 12 lakh will lower the EMI by Rs 2,019; factoring current housing loan interest rate as 8.5%. Banks deposit the amount of the net present value in the borrowers’ bank account upfront, which helps in reducing the loan amount. So, the borrower pays the interest on the reduced loan amount and it lower the EMI burden.

Boost real estate sales
The CLSS was launched by Prime Minister Narendra Modi in June 2015 to provide ‘Housing for All by 2020’. It was initially offered to EWS and LIG and was extended to MIG in January this year. The scheme can be availed by first-time home buyers who have not used any other assistance under housing schemes and have applied for a housing loan after January 1, 2017.

The extension of CLSS scheme will help new buyers and the scheme and would provide demand impetus in an otherwise sluggish market. Real estate sales have been weak as a report by Knight Frank says that there has been a 25-30% drop in new home sales in the Top-8 cities. The slowdown is also reflected in a drop in bank credit for housing. The extension of the scheme will also make real estate developers to focus on projects with smaller size.

Source: Financial Express


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