The affordable housing loan is an ambitious plan of the Government of India under the scheme Pradhan Mantri Awas Yojana (PMAY) to provide housing for all in urban areas by 2022.
It is a credit-linked subsidy scheme (CLSS) designed to target economically weaker section, lower and middle-income groups living in the urban regions including Metro, Tier I-II-III cities.
The loan under the scheme is offered to purchase a new home from a builder, or from the secondary market, construction of a new home or improving/strengthening the structure of your existing house.
Definition of Income Groups in PMAY
Following are the income groups eligible for the loan under the affordable home loan scheme:
The economically weaker section (EWS) and the lower-income group (LIG) having an annual income of up to Rs 6 lakh
The middle-income group (MIG) is divided into two categories, MIG I and MIG II. MIG I comprises households having an annual earning in the range between Rs 6,00,001- 12,00,000. And, the MIG II comprises households earning an annual income in between Rs 12,00,001 – 18,00,000.
Key Features of the Affordable Housing Loan
- Eligible Loan Amount
In the EWS & LIG category, the benefits of the interest subsidy will be applied to the maximum loan amount of Rs 6 lakh.
In MIG I category, the maximum loan amount eligible for benefits is Rs 9 lakh and Rs 12 lakh is for MIG II category.
Borrowers can avail for a higher loan amount, but the additional loan amount beyond the specified limits will attract normal home loan interest rate.
- Interest Subsidy
In the EWS & LIG category, the borrower gets an annual interest subsidy of 6.5%, and the maximum interest subsidy is Rs 2.67 lakh in the whole tenure of the loan.
Under MIG I, the annual interest subsidy is 4%, and the maximum interest subsidy is Rs 2.35 lakh in the whole tenure of the loan.
And, in the MIG II category, the annual interest subsidy is 3%, and the maximum interest subsidy is Rs 2.30 lakh in the whole tenure of the loan.
- Dwelling Unit Carpet Area
For the EWS and LIG category, the maximum carpet area should be 60 sq. mt. to be eligible for the affordable housing scheme. For MIG I and MIG II category, the maximum carpet area is 160 sq. m. and 200 sq. m. respectively.
- Loan Tenure
The maximum loan tenure under all the categories is 20 years.
- Processing Fees
No processing fee is charged on the loan amount as per the income criteria of the scheme. For loan amounts beyond the specified limit, the normal processing fee is charged.
How Home Loan Interest Rate is Calculated?
The interest subsidy is calculated on the net present value (NPV) of the interest subsidy amount. The discounted rate used is 9% over the maximum tenure (20 years) or the actual tenure of the loan, whichever is less.
From Where to Avail Affordable Housing Loan?
The PMAY affordable housing loan can be availed from any scheduled commercial banks, housing finance companies, regional rural banks, co-operative banks, small finance banks and NBFCs.
The affordable home loan scheme provides a golden opportunity for people to own a house and ensure the safety of their loved ones.