17 AUGUST, 2022

What is a housing loan subsidy?

The government of India offers a housing loan subsidy that aims at providing housing for all. The PMAY - Pradhan Mantri Awas Yojana – Housing for All scheme was launched to ensure that everyone owns a pucca house by 2022. Under the PMAY-housing for all scheme, individuals who meet specific eligibility criteria can avail of the home loan subsidy. The interest subsidy is offered under the Credit Linked Subsidy Scheme (CLSS).

What does CLSS mean?

CLSS, or the Credit Linked Subsidy Scheme, is a critical element of the Pradhan Mantri Awas Yojana. Through CLSS, financial assistance is extended to specific individuals through multiple financial institutions in the country. One can even apply for the PMAY scheme via Kotak Mahindra bank. It is a means by which the central government eases credit flow and provides interest subsidy to applicants who plan to avail of home loans. If individuals fall under the following income groups, they can apply for a home loan subsidy under PMAY via our bank:

  • Economically Weaker Section and Low Income Group (EWS and LIG) - Income up to Rs. 3 lakh
  • Revised Economically Weaker Section or revised Low Income Group - Income between Rs. 3 lakh to Rs. 6 lakh
  • Middle Income Group 1 (MIG – I) - Income between Rs. 6 lakh to Rs. 12 lakh
  • Middle Income Group 2 (MIG – II) - Income between Rs. 12 lakh to 18 lakh

A PMAY subsidy calculator can be used to get clarity about the home loan subsidy available to you.

ELIGIBILITY CRITERIA FOR THE VARIOUS INCOME GROUPS:

Economically Weaker Section or Low Income Group

For those individuals that fall under the EQS/ LIG group:

  • Interest subsidy offered: 6.50%.
  • Maximum loan amount: Rs. 6 lakhs
  • Maximum loan subsidy amount that can be availed: Rs.2.67 lakh.
  • Maximum loan tenure: The subsidy is accessible for the actual tenure of the home loan or a period of 20 years.
  • Date of subsidy: Can be availed on home loans approved on or after January 01, 2017.
  • Carpet Area of the house: 30 metres2 and 60 metres2 for EWS and LIG, respectively

Middle Income Group 1

For those individuals that fall under the MIG-I group:

  • Interest subsidy offered: 4%.
  • Maximum loan amount: Rs. 9 lakhs
  • Maximum loan subsidy amount that can be availed: Rs. 2.35 lakhs.
  • Maximum loan tenure: The term of the subsidy is for a period of 20 years.
  • Date of subsidy: Can be availed on home loans approved on or after January 01, 2017.
  • Carpet Area of the house: 160 metres2

Middle Income Group 2

For those individuals that fall under the MIG-II group:

  • Interest subsidy offered: 3%.
  • Maximum loan amount: Rs. 12 lakhs
  • Maximum loan subsidy amount that can be availed: Rs. 2.30 lakhs.
  • Maximum loan tenure: 20 years is the maximum term on which the subsidy is calculated.
  • Date of subsidy: Can be availed on home loans approved on or after January 01, 2017.
  • Carpet Area of the house: 200 metres2
What are the other eligibility criteria to avail the benefits of the PMAY home loan subsidy?

In order to avail of the benefits under PMAY, one needs to make sure that the following eligibility criteria are fulfilled:

  • The person applying for the loan should not be a pucca house owner and neither should any member of their family own a pucca house in their name.
  • Applicants from the Economically Weaker Section or Low Income Group need to have a female member as the owner of the house, or it needs to be in joint ownership with a female member.
  • Each home loan subsidy applicant should fall under the income bracket as stated for the categories under the scheme.
  • The applicant should not have availed any government-supported housing scheme or availed any interest grant under the housing scheme.
  • The PMAY subsidy applies to funds being utilised for renovation, construction or purchase of a property for those that fall under the EWS and LIG criteria. For applicants in the MIG I and MIG II criteria, the home loan subsidy is only applicable for property purchase
Frequently Asked Questions about the Home Loan Subsidy

Q.1. What is the maximum subsidy I can claim under CLSS?

Under CLSS, the maximum subsidy can be claimed by those who fall under the Economically Weaker Section or Low Income Group which is Rs. 2.67 lakhs. The rate of subsidy offered is 6.50% for a maximum loan amount of Rs. 6 lakhs.

Q.2. Which central nodal agencies operate the subsidy disbursal under CLSS?

Housing and Urban Development Corporation Limited (HUDCO) and National Housing Bank (NHB) are the two central nodal agencies that carry out the subsidy disbursal under the CLSS scheme.

Q.3. How is the subsidy paid out to the central nodal agencies?

At the start of the scheme, the central government disburses an advance subsidy. The balance subsidy amounts are released when 70% of the amount issued at the start has been utilised on a quarterly basis or based on CNA claims.

Q.4. Do Primary Lending Institutions such as Kotak Mahindra Bank need to enter into MOUs with the central nodal agencies to claim subsidies?

Yes, Primary Lending Institutions such as Kotak Mahindra Bank are mandated to enter into an MOU with either of the two central nodal agencies to benefit from the CLSS scheme.

Q.5. Can I avail of the home loan subsidy if I want to purchase a newly constructed house that is for sale?

Yes, you can avail of the home loan subsidy in this case. This is because the resale of a newly constructed house falls under the new construction category.

Q.6. Can I do repair work to my existing one in accordance with the CLSS scheme?

Yes, the CLSS scheme covers repairs work in the existing homes. However, you can only carry out the repair work in semi-pucca or kutcha houses. In case your house is a semi-pucca house, you can only avail the benefit under the CLSS scheme if you are carrying out extensive renovation to make the house a pucca house.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.