A "low interest" loan shouldn't mean you have very little interest in paying it back!
  • How does the credit-linked subsidy work?

    The government has been trying to support the cause of housing, through its ‘Housing for All by 2022’ mission. Under this mission, the government has come out with two schemes, to partly fund the interest of the borrowers in urban areas. The first scheme, which is very liberal in terms of the interest rate subsidy, is applicable to the Economically Weaker Sections (EWS) and those under the Low-Income Group (LIG). The other scheme covers the Middle-Income Group (MIG). Let us discuss the first scheme in detail.

    Eligibility criteria in PMAY

    The eligible category is divided into two parts – the first category is EWS and the other category is LIG. This scheme is available for acquiring or constructing residential units in the 4,041 statutory towns as per the 2011 census and 274 additional towns, which have separately been notified by the state government.

    The maximum subsidy under this scheme can be Rs 2,67,280. The amount of subsidy will be reduced proportionately, if the loan amount is lower than Rs 6 lakhs. The subsidy benefit is only available for loans that are disbursed on or after June 17, 2015.

    How can the subsidy under PMAY availed?

    The subsidy under this scheme is given as upfront relief, in the form of a reduction in the overall loan liability.

    The amount of original loan reduced by the net present value of the subsidy benefit, is the liability of the borrower and the EMI is computed accordingly, based on the agreed rate of interest.

    In case the borrower borrows more than Rs 6 lakhs, the amount of subsidy shall be restricted to an amount of Rs 6 lakhs and the additional loan shall be charged regular interest rates of the bank. Although the lender has to give the credit for the subsidy to the borrower immediately, the lender gets the amount of interest subsidy, only after the claim made by it is processed by the nodal agency with which it is registered. This is the main reason why lenders are not keen to promote this beneficial scheme of the government.

    Under the scheme, the lenders have to register themselves with one of the nodal agencies – NHB or HUDCO. The lender institutions include various entities engaged in the business of providing home finance, such as scheduled banks, housing finance companies, regional rural banks (RRBs), state cooperative banks and urban cooperative banks. It will also include small finance banks and NBFC- micro finance institutions.

    Processing fee for loan applications under PMAY

    Under the scheme, the lender is not allowed to recover any processing fee from the borrower. So, in addition to reimbursement of the subsidy amount, the lender will also be given a lump sum of Rs 3,000, to cover their cost of processing the loan application for an amount upto Rs 6 lakhs. For additional loan beyond Rs 6 lakhs, the lenders are allowed to recover normal processing fees.

    How To Track PMAY-Subsidy Status

    Step 1: Log on to CLSS Awas Portal

    Step 2: Mention the ‘Application ID’ that your lender has provided. This ID is sent within 24 hours of your lender submitting your application.

    Step 3: Verify your mobile number through an OTP.

    Step 4: The system will display stages of the beneficiary’s application.

    Also note: If the borrower/co-borrower are existing CLSS beneficiaries who have received subsidy amount in multiple disbursements, then CLSS tracker will display details of all past disbursements i.e. dates of disbursement and subsidy amounts.

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