Understanding the Concept of PMAY Scheme in India?

PMAY Scheme in India
  • PMAY is intended to make affordable housing a reality by 2022
  • Loan amount eligible for subsidies doubled to Rs.12 lakh last year
  • Will reduce home acquisition cost by up to Rs.2.3 lakhs
  • Partnership with states and UTs, beneficiary led construction and CLSS

The Pradhan Mantri Awas Yojana (PMAY), a brainchild of the current NDA government, was launched in 2015 to make ‘Housing for All’ a reality by 2022. While it was originally designed keeping in mind the economically weaker sections (EWS) and the lower-income groups (LIG) of the society, the scope was expanded last year to accommodate the mid-income category as well. The government had also doubled the Home Loan amount – that qualifies for interest subsidies – from Rs.6 lakh to Rs.12 lakh.

Pradhan Mantri Awas Yojana – What is it?

The Centre backed project was initially envisaged to build pucca houses for the EWS (annual household income not more than Rs.3 lakh) and lower-income groups (annual household income not more than Rs.6 lakh) of the society. However, it now will cater to the middle-income group (MIG) as well.

The Key Features of PMAY

The logistics of the entire project has been structured in a way to make sure no section of the society has to sit out from the benefits of PMAY scheme. It has four key components that have been listed below:

In-Situ Slum Redevelopment

This feature details the project’s plans to transform not only the country’s slums, but also the lives of the slum dwellers, by providing them with affordable housing with all the basic civic amenities such as electricity, 24-hour water supply, sewage lines, etc. A grant of Rs.1 lakh is allowed under this for the slum dwellers to build themselves a house.

Affordable Housing – Partnership with States/Union Territories

Under this component, the government has pledged to extend Rs.1.5 lakhs to the EWS of the society, considering they don’t own any land or a house and can’t build themselves one despite availing a Home Loan. The government will collaborate with states and Union Territories on this one.

Beneficiary Based Construction

This provisions a grant of Rs.1.5 lakhs to the EWS. However, to avail of this benefit, the only prerequisite is that the beneficiary must own a land. This financial assistance is extended by the Centre to help the beneficiaries build their house and even renovate one, for that matter.

Credit Linked Subsidy Scheme

This offers credit linked subsidies on loans availed by the EWS, lower-income as well as the middle-income groups of the society for the purpose of either constructing a house or repairing an existing one.

Category

Annual household income range (Rs.)

Maximum loan amount eligible for subsidies (Rs.)

Subsidy (%)

Maximum subsidy (Rs.)

Maximum carpet area (Sq. meters)

EWS and LIG

Up to 6,00,000

6,00,000

6.5

2,67,000

60

MIG I

6,00,000 – 12,00,000

9,00,000

4

2,35,000

160

MIG II

12,00,000 – 18,00,000

12,00,000

3

2,30,000

200

One can obviously avail additional loan beyond this limit, at non-subsidized rates of interest.

Why is the Scheme Important?

Today, while maximum developers based out of urban India are idly sitting on unsold housing properties worth upwards of Rs.50 lakhs, the country is facing a dearth of about 20 million residential units that both the urban and rural poor could’ve got access to at a far lower price. With the maximum loan amount eligible for interest subsidies now having been stretched to Rs.12 lakhs, the Pradhan Mantri Awas Yojana will work towards covering this deficit.

How is the Scheme Important to You?

  • If You Want to Buy a House

The PMAY scheme reduces the total acquisition cost of a house by as much as Rs.2.3 lakhs. This figure becomes all the more important when it concerns the lower and middle-income groups of the society, who may often lack sufficient funds to buy their own house, without any financial assistance.

  • If You are an Investor

The various benefits of the PMAY scheme, coupled with the overall downward trend of rates of interest in the economy, could well mean a spurt in the loan amounts extended by lenders, both banks as well as NBFCs.

Moreover, this increase in demand within the affordable housing segment, besides bolstering banks and lenders, will provide a major fillip to complementary and affiliated industries such as steel, cement, etc.

Some lenders and banking institutions have also got themselves registered with the PMAY scheme to do away with financial roadblocks on the way to your first home. For instance, Bajaj Finserv Flexi Hybrid Home Loan, besides favorable Home Loan rates, allows the provision of interest-only EMIs wherein you can manage your finances better by paying only the interest component of the loan for the initial part of the Home Loan tenor while enjoying principal holiday for up to 4 years. For the rest of the tenor, you have a Flexi Loan facility wherein you pay interest only on the amount you withdraw from within the sanctioned limit.

You can use the Home Loan EMI Calculator to instantly calculate the EMIs you would have to pay. The tool is readily available on the internet, without any charges. The home loan EMI calculator is very easy to use. You can share a few basic details about yourself and get all the pre-approved offers on home, personal and business loans. Make sure the information i.e. the interest rate you use while doing the calculation is correct. Also, be practical while choosing the repayment tenor, it should be in accordance with your repayment capacity instead of how quickly you want to get rid of the obligation.

In the end, don’t forget to check the eligibility criteria for the PMAY scheme you are eligible for. For your information, PMAY has two components: PMAY-U for the urban poor and PMAY-R for the rural poor.

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