Pradhan Mantri Awas Yojana (PMAY) is one of the most beneficial schemes launched by Government of India in 2015 and intends to provide ‘housing for all’ by constructing 6 crore budget homes by 2022. The initiative is categorized under two segments; Pradhan Mantri Awas Yojana- Urban (PMAY-U) for the urban poor and Pradhan Mantri Awaas Yojana- Gramin (PMAY-G and also PMAY-R) for the rural poor.
The scheme is linked with Credit Linked Subsidy Scheme (CLSS), which aims to cut short the housing loan EMIs by over Rs. 2000 per month by offering an interest subsidy.
Under PMAY housing scheme, Economically Weaker Section (EWS), Low Income Group (LIG) and Middle Income Group 1 & 2 (MIG) can purchase a house and avail a subsidized rate of interest on their loan. However, there is an eligibility criterion upon meeting which, a person can avail the scheme. Let us understand these income group and their eligibility criteria to avail PMAY.
Economically Weaker Section (EWS) and Lower Income Group (LIG)
EWS includes the households with an annual income between Rs. 0 to 3, 00,000, whereas, LIG covers households with Rs. 3, 00,001 to 6, 00,000 as their annual income. Below table states the condition and coverage of PMAY for EWS and LIG.
|Annual family income||Upto 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 tenure||20 years||20 years|
Table Source: Housing.com
The middle-income group (MIG)
MIG has two slabs, categorized as per the income group. Middle Income Group (MIG) – I comprises of households having an annual income between Rs.6, 00,001 up to Rs.12, 00,000. While Middle Income Group (MIG) – II comprises of households having an annual income between Rs.12, 00,001 up to Rs.18, 00,000. With the below table, you’ll be able to understand MIG’s applicability.
|Particulars||MIG I – PMAY (U)||MIG II – PMAY (U)|
|Household annual income (Rs.)||6-12 lakhs||12-18 lakhs|
|Eligible loan amount for interest subsidy (Rs.)||9 lakhs||12 lakhs|
|Dwelling unit carpet area||160 Sq. mt.||200 Sq. mt.|
|Max. loan tenure||20||20|
|NPV subsidy||Rs. 2.35 lakhs||Rs. 2.30 lakhs|
Table Source: Economic Times
PMAY Urban Eligibility Criteria
The initiative is focused provide house to everyone except the families already owning a pucca house. As per the rule, “The beneficiary family should not own a pucca house and the beneficiary family should not have availed of central assistance under any housing scheme from Government of India.”
A beneficiary family includes a husband, wife, unmarried sons and/or unmarried daughters. The beneficiary family has to provide their Aadhaar number while applying for loan, in order to avoid duplicity. However, the guidelines permit an adult to own a house under the scheme. The guideline reads as, “An adult earning member (irrespective of marital status) can be treated as a separate household, provided that he/she does not own a pucca (an all-weather dwelling unit) house in his / her name in any part of India.”
With this exception, an adult who is earning can opt for PMAY, whether or not his/her parents own a house or not in any part of India. This rule also makes married couples eligible to own a single house under PMAY, even if their parents own one.
Individuals falling under EWS and LIG are granted 6.5 percent interest subsidy on a loan amount up to Rs. 6 lakhs. The maximum subsidy amount to be availed can be Rs 2, 67,280.
MIG- I category allows 4 percent interest subsidy on a loan amount up to Rs 9 lakhs. The MIG – II slab gives an exemption of 3 percent on a loan amount up to Rs 12 lakhs. The loan amount which goes beyond the subsidised loan amount is charged at the normal interest rate and not at the subsidised rate of interest. Here are two tables for a clearer understanding of PMAY scheme:
Net Present Value (NPV) calculation for MIG I under PMAY (U)
|Income Category||Up to Rs 12 lakh|
|Original Loan (A): At 8.5 % for 20 years||Rs 9 lakh|
|Total Interest (20 yrs)||Rs. 9,74,498|
|NPV: After subsidy of 4% (B)||Rs. 2,35,000|
|Reduced Loan (A-B) : At 9 % for 20 years||Rs. 6,65,000|
|New EMI||Rs 5,771|
|Total Interest (20 yrs)||Rs. 7,20,045|
|EMI Saved||Rs 2,039|
|Interest saved||Rs. 2,54,453|
|Govt. Subsidy = B||2,35,000|
|Discount rate for NPV is 9%|
Net Present Value (NPV) calculation for MIG II under PMAY(U)
|Income Category||Up to Rs 18 lakh|
|Original Loan (A): At 8.5 % for 20 years||Rs 12 lakh|
|Total Interest (20 yrs)||Rs 12,99,331|
|NPV: After subsidy of 3% (B)||Rs. 2,30,000|
|Reduced Loan (A-B) At 8.5 % for 20 years||Rs. 9,70,000|
|New EMI||Rs 8,418|
|Total Interest (20 yrs)||Rs 10,50,292|
|EMI saved||Rs 1,996|
|Interest saved||Rs 2,49,039|
|Govt. subsidy = B||Rs. 2,30,000|
|Discount rate for NPV is 9%|
Table source: Economic Times
So if an individual falling under MIG- II category and he/she is getting a house for 48 lakhs, then the person will have to make a mandatory down payment of 20%, which would be 9.6 lakhs. Now the PMAY loan subsidy would be applicable on 12 lakhs and the remaining 26.4 lakhs loan would be charged at the usual rate of interest. PMAY has many more aspects to understand before you apply for it. Our next blog will take you through these aspects and give a comprehensive understanding on how you can go for it.