PMAY Home Loan – Pradhan Mantri Awas Yojana

With a view to help people own a roof over their head government has announced ‘Housing for All by 2022’ mission, under which it is partly financing the interest cost to the borrowers. The same is done under Pradhan Mantri Awas Yojana (PMAY) in urban areas as well as in rural area.

Eligibility Criteria for Home Loans under PMAY

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 details of such towns can be downloaded from http://nhb.org.in/government-scheme/pradhan-mantri-awas-yojana-credit-linked-subsidy-scheme/statutory-towns/

For qualifying under the scheme the individual should own any pucca house either in his/her name or in the name of any unmarried child anywhere in India. The home loan under this scheme can also be availed for the purpose of extension of the existing residential house, either self-acquired or inherited, in addition to for acquiring or constructing a new house. In case the borrower wants to avail home loan under PMAY for extension of his existing house then the condition of owning a pucca house does not apply.

The eligibility for availing the home loans under the Pradhan Mantri Awas Yojana is based on the income for the family as a whole and not only of the head of the family. In order to avail the subsidy offer under PMAY home loans the borrower has to submit a self-declaration for income of the family and about the title of the property to be purchased.

In case the home loan is disbursed for construction of property or self construction, the lender has to monitor the construction progress and legal compliance of the dwelling units financed under the PMAY scheme, like approvals for the building design, infrastructure facilities, quality of construction, etc. The lender is also required to verify the costs incurred up to different stages of construction, through site visits, photographs of the site certificates of architect, engineers etc. The government provides subsidy only for home loans under PMAY but the lender has to take all the necessary precautions, which it takes for any other home loans.

The house which qualifies for the interest subsidy, can either be a single unit or a unit under any multi story building. The eligible unit under Pradhan Mantri Awas Yojana needs to have basic facilities and infrastructure like toilet, water, sewerage, road, electricity, etc. For the purpose of ascertaining eligibility only area on which a carpet can be laid shall be considered and therefore it will not include the walls in the house or the outer wall of the house.

The house to be constructed or acquired under PMAY has be purchased either in the name of the female head of the family or alternatively, in the joint name of the male head of the household and his wife. The dwelling unit can be acquired in the name of the male member of the family only if there is no adult female member in the family.

The income eligibility and rate of interest subsidy available and the exact quantum of benefits is tabulated as under:

Particulars EWS (Economically Weaker Section) LIG (Lower Income Group)
Annual family income Upto Rs 3 lakhs Above Rs 3 lakhs and upto Rs 6 lakhs
House area Carpet area upto 30 sq metres Carpet area upto 60 sq metres
Rate of interest subsidy 6.50% 6.50%
Maximum loan eligible for subsidy Rs 6 lakhs Rs 6 lakhs
Maximum loan tenure 20 years 20 years

The maximum subsidy under PMAY can be Rs 2,67,280. The eligible amount of subsidy will come down proportionately in case the home loan is lower than Rs 6 lakhs. The subsidy benefit is only available for loans that are disbursed on or after June 17, 2015.

Methodology of giving the subsidy under PMAY

The subsidy under PMAY granted in the form of upfront credit for the present value of the amount of subsidy from the amount of loan disbursed. The amount of loan to be serviced comes down to the extent of present value of the subsidy of 6.50% is discounted  at 6.50%, for a maximum tenure period of 20 years, on the maximum loan amount of Rs 6 lakhs. The EMI thus is computed on the reduced home loan liability based on the agreed rate of interest.

Though the lender gives the credit for subsidy to the borrower immediately, the lender gets it only the its claim is processed by the nodal agency. This is the main reason why lenders are not keen to promote this beneficial scheme.

PMAY Home Loan Processing fee for loan applications

Under PMAY home loan the lender is not allowed to charge any processing fee from the borrower in lieu of which it is given a a lump sum of three thousands rupees to cover cost of processing the home 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.

Balance transfer on PMAY Home Loan

Although the borrower is allowed to shift the home loan taken under Prime Minister Awas Yojana he cannot claim the subsidy again on such balance transfer. Moreover, benefits under PMAY cannot be claimed by transferring your existing home loan after the notified date, as the subsidy is only available to the borrower when he acquires or constructs his house whether new one or second hand.