Business & Economy

All you wanted to know about Pradhan Mantri Awas Yojana

By A Correspondent

Mumbai, September 10, 2020

The Pradhan Mantri Awas Yojana (PMAY) scheme expanded its scope to cater to the housing needs of individuals from the mid-income group, besides the economically weaker sections (EWS) and low-income group (LIG). The government doubled the quantum of a loan eligible for interest benefits under the PMAY in urban areas to Rs12 lakh.

The PMAY initiative aims to complete 2 crore houses by the year 2022 and has made quite a remarkable progress towards that result. The PMAY scheme offers a subsidised rate of interest on loans availed by eligible individuals to build their houses.

What is PMAY?

Pradhan Mantri Awas Yojana was launched in June 2015. The Government plans on building affordable "pucca" houses with amenities like clean water facility, sanitation and electricity supply. The scheme initially was meant to build homes for the EWS and LIG sections, but now covers the mid-income group (MIG) as well. The PMAY scheme comprises four key aspects. They are as follows:

● The scheme aims to transform slum areas by building homes for slum dwellers in collaboration with private developers.

● The government plans to give a credit-linked subsidy to weaker and mid-income sections on loans taken for new construction or renovation of their existing homes.

● The government announced an interest subsidy of 3 per cent to 6.5 per cent that ranges between Rs 6 lakh and Rs 12 lakh. For individuals who fall under the EWS and LIG category, there is an interest subsidy of 6.5 per cent for a loan of up to Rs 6 lakh, for a tenure of 15 years. This month, the loan amount increased to Rs 12 lakh. Interest subsidy of 3 per cent is offered, if the loan amount is up to Rs 2 lakh for construction of new homes or extension of existing homes in rural areas.

● The government will provide financial assistance for affordable housing projects done in partnership with States/ Union Territories for the EWS. The PMAY scheme will extend Rs 1.5 lakh to EWS for financial aid.

Why is it important?

The rise in the prices of homes lead to many developers in India with unsold residences that cost more than Rs 50 lakh; the country is estimated to have a shortage of nearly 20 million housing units required by the rural and the urban poor, at a lower price point of Rs 5-15 lakh. The Pradhan Mantri Awas Yojana aims to address this shortfall by increasing the subsidised loan amount to Rs 12 lakh; this step will help cover a higher proportion of the urban poor.

The PMAY scheme will hopefully incentivise India’s construction and realty sector to reduce its traditional obsession with affluent home buyers in the cities. For those in the EWS and MIG, the PMAY reduces the cost of homes by Rs 1lakh to Rs 2.3 lakh. The increase in the loan amount and extension of the scheme to the MIG may help make more homes for the urban poor. For an investor, this scheme combined with a falling interest rate regime could mean improved loan growth for banks and NBFCs that are focussed on this segment.

Eligible Income Groups for PMAY list 2020

Before moving on how to check the different beneficiary lists under this scheme, the borrowers must check the list of individuals that are eligible for the scheme. Mentioned below are beneficiaries of PMAY list 2020, including different income groups and other qualified groups.

● Individuals belonging to scheduled castes can apply.

● Individuals belonging to scheduled tribes can apply.

● Women, irrespective of their caste can get a loan.

● Families that fall under the Economically Weaker Section (EWS) with a total income up to Rs. 3 lakh can apply for PMAY.

● Families that fall under the Lower Income Group (LIG) with total income up to Rs. 6 lakh.

● Families that belong to both the Middle-Income Groups (MIG I & II). Here, the total income under Category I cannot exceed Rs. 12 lakh while that of Category II cannot exceed Rs. 18 lakh.

The Government of India considers the income generated by the whole family while deciding whether the applicant is eligible for a subsidy. Furthermore, the rate of subsidy offered to applicants is also determined as per the economic group they are a part of.

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