Interest subsidy for home loans under Pradhan Mantri Awas Yojana

Subsidized home loans
Subsidized home loans - Pradhan Mantri Awas Yojana

It is to be recalled that our Prime Minister, Narendra Modi had announced a lot of new schemes in his New Year’s Eve address to the people of India. The Pradhan Mantri Awas Yojana was one of them, which was about interest rate subsidies for the middle-income group. Those who are earning an annual income of above INR 6 lakhs up to INR 18 lakhs are considered as the middle-income group. People belonging to this group and buying their first home are eligible for this interest subsidy. This subsidy scheme comes under the ‘Housing for All initiative’ by the government.

The scheme is named as the Credit-Linked Subsidy Scheme for the Middle Income Groups. An interest subsidy of 4% can be availed for home loans up to 9 lakhs getting an annual income of up to INR 12 lakhs. For home loans up to INR 12 lakhs and the annual income of up to INR 18 lakhs, the interest subsidy is 3%. The interest subsidy is not applicable for loans beyond this.

Few points about Pradhan Mantri Awas Yojana:

    • The person who is availing this benefit should not own a house in his/her name.
    • Home loans which have been sanctioned or the in-progress loan applications from 01 January 2017 are eligible to avail the subsidy.
    • In order to avail the interest subsidy, the beneficiaries must apply through the lenders.
    • The amount of interest subsidized will be directly paid to the lenders by the National Housing Bank and Housing & Urban Development Corporation.
    • No additional charges will be levied from the beneficiaries for processing this interest subsidy.
  • The tenure of the loan availed through this benefit can be 20 years or lesser than that.

According to Sriram Kalyanaraman, MD & CEO of the National Housing Bank, the interest subsidy of 4% for the housing loan of INR 9 lakhs will reduce about INR 2,062 of the amount from the monthly EMI and about INR 2,019 of EMI amount will be reduced for the housing loan of INR 12 lakhs. This calculation is based on the assumption of interest rates to be 8.65%.

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