With PMAY or Pradhan Mantri Awas Yojana Home Loan, it has now become possible for many LIG families to own a house of their own. The “Housing for All” Scheme is expected to become a reality in 2022 and although the scheme had initially started keeping in mind the needs of the LIG and EWS (Economically Weaker Section), it has recently expanded its scope to include the MIG as well. The Pradhan Mantri Awas Yojana eligibility ordained the amount of loan eligible for interest benefits in urban areas be increased to Rs 12 lakhs.
The PMAY Scheme was launched in June 2015 and its objective is to build affordable, pucca houses for all- which includes sanitation, electricity and water supply facilities. The scheme comprises of four main aspects:
- It aims to transform slum areas by building homes for slum dwellers. This is to be done in collaboration with private developers.
- It also plans to give a Credit Linked Subsidy (CLSS) to the weaker and middle income sections who are applying for loans for either new construction or renovation of existing homes. The interest subsidy has been announced to be between 3 to 6.5 percent of the home loan interests- with the loan amount ranging from Rs 6 lakhs to Rs 12 lakhs. For those who belong in the EWS or LIG category, and who wish to apply for a loan up to Rs 6 lakhs, there is also an interest subsidy of 6.5% for a tenure of 15 years. As of now, more than 25,000 people have been benefited under this scheme. With the loan amount being increased to Rs 12 lakhs, the MIG is also applying for the loan. The home loan interest rate subsidy for loans up to Rs 12 lakhs is going to be 3%. On the other hand, in rural areas, the interest subsidy for loan up to Rs 2 lakhs for construction of new homes or renovation of old homes is 3% as well.
- The Government will also provide all the financial assistance for affordable housing projects that are being constructed on partnerships with State and Union Territories for the EWS group.
- The Government will also extend a direct financial assistance of up to Rs 1.5 lakhs to the EWS.
The scheme is considered to be important, and also quite a milestone, because it has been seen that developers across Indian metropolitan cities still have unsold residences in their inventory costing upwards of Rs 50 lakhs and yet, there is a shortage of housing of about 20 million units needed by the rural section as well as by the urban poor, with homes ranging from Rs 5 to 15 lakhs. The PMAY can be instrumental in addressing this gap and the increase in subsidized loan amount of Rs 12 lakhs is expected to cover a large proportion of urban poor. Moreover, it is expected that the scheme would provide incentives to the realty sector to make more consumer- affordable projects rather than just catering to the affluent home buyers.
How does in Facilitated a Regular Home Buyer?
If you are someone who belongs to the LIG or the MIG, then the PMAY scheme can largely reduce the costs of acquiring a new home by 1 to 2.3 lakhs. The inclusion of the MIG has been a special addition as a larger group of people can be included under the purview of the scheme. If one is an investor, then the combined effect of the falling interest rate regime could mean greater opportunities for asking for home loans from banks and NBFCs who have tied up with HUDCO and similar nodal heads to focus on this segment. The improvement of this sector will not only improve the housing finance companies but will also help related companies like steel and cement- the pivotal elements of building a home.