Sukanya Kumar (more) Founder & Director, RetailLending.com | Source: Moneycontrol.com
Know all that is required to avail home loan subsidy offered by the government.
Government of India, on 17-Aug ’16 has announced a long-awaited scheme for the urban dwellers, under which a home loan interest subsidy of 6.5% has been announced which reduces burden from the home buyer. A welcome move!
Some pointers and some insights here on this Credit Linked Subsidy Scheme(CLSS):
This subsidy is for economically weaker section (EWS) of people residing in urban areas which even include slum-dwellers. Annual household income should not exceed Rs 3 lakh. The marginalised sections of the society such as disabled, transgender, women, widow, scheduled caste and tribes will get priority. Lower income group(LIG) who has annual household income between Rs 3 and 6 lakh will be eligible.
Those who do not have any other home-ownership in his own or family’s name will qualify.
Your age should not be more than 70 years as on date.
Besides public sector banks (PSU) and home finance companies (HFC), some co-operative banks and microfinance institutions are also extending this offer. The long list of lenders include HDFC, LIC Housing Finance, PNB Housing Finance, Dewan Housing, GIC, ICICI HFC, Tata Capital, L&T Housing Finance, Muthoot Finance, Yes Bank, Indiabulls, Axis Bank, DCB, Federal Bank and almost all PSU banks.
Max subsidy is on a loan amount of Rs 6 Lakh for a maximum loan tenure of 15 years, at an interest of 6.5%. Hence, if the rate of interest by the lender is 10%, then the actual payable by the borrower under the subsidy scheme is 3.5%.
FOR WHAT PURPOSE:
The subsidy is allowed to borrowers buying a home either under-construction from a builder, a ready-to-occupy house, self-construction, or extension (adding new room, kitchen, bathroom etc.)
The maximum size should not exceed 30 sq. mt.(carpet) for EWS, and 60 sq. mt.(carpet) for LIG applicants.
Currently, HUDCO and NHB has been identified by the Govt. as Central Nodal Agencies (CNAs) to tie up with lenders to extend this facility.
An applicant will apply for a home loan in any of the lenders ( CLSS lender list ) where upon credit appraisal, the specific form supplied by the CNAs will be sent to HUDCO/NHB. They will come back with an approval after due verification and give their nod to the lending company. The disbursed loan will be adjusted with the subsidy, which, thankfully, the government is paying upfront.
Q: How much time will it take for HUDCO/NHB to approve the subsidy?
A: It is said that it will take 30-45 days time post all verifications done by the CNA to check the eligibility criteria.
Q: How much time will it take for the subsidy to arrive to the lender?
A: The lender does not have a clear answer to this. For them, it is just another loan. Once the subsidy is approved and received, they will act on it.
Q: What will happen if the purchase/construction area is more than the specified sq. mt.? Will the subsidy be declined?
A: It is okay to have a higher construction area or loan amount exceeding Rs 6 lakh. The balance area sq. mt. and the additional loan amount will not get the subsidy benefit. For example if your loan amount is Rs 6 Lakh, then the subsidy is on the whole and for a 15 year tenure at 6.5%, it is INR 2,20,187.05 (if the lender’s ROI is 10%). For a Rs 12 lakh loan amount, keeping the tenure and rate same, the subsidy amount will remain unchanged. Subsidy calculator here .
Q: Will there be one EMI for the subsidised as well as non-subsidised portion of the loan (in case of loan amount exceeding Rs 6 lakh) or it will be split?
A: It will not be split. The lender will consider this as one loan.
Q: When will the loan be disbursed? Will it have to wait till the subsidy confirmation comes in?
A: Lenders do not give one answer to this question. It is quite possible that they haven’t yet formed a firm decision over it. Some say they will hold on to the disbursement till the subsidy confirmation comes in, some say, they will disburse the loan anyways and they are just a facilitator and are not worried much as to when or whether it comes along.
Q: Will the builder / seller wait till subsidy confirmation for the borrower comes? Will the borrower be okay for the disbursement of loan without subsidy-confirmation?
A: A self-construction may wait, but a builder or a reseller to wait till the subsidy confirmation comes in, is going to be a long haul. Wonder how practical will it be.
Q: Govt. says the borrower should not be more than 70 years. Will the lenders comply?
A: Surely enough, the lenders I spoke with did not want to comply. They will stick to their own policy of the maximum age limit while doing a loan. So, if an applicant is 60, some may decline giving a loan to him or her.
Q: How will the subsidy get adjusted with the payable amount by the borrower?
A: The subsidy, as mentioned earlier, will come at one shot from government. The subsidy is basically to give relief to the borrower and instead of paying a monthly EMI of ‘X’ amount, he should pay lesser. However, the lenders are going to straightaway reduce the principal outstanding of the borrower by that Rs 2 lakh odd amount and adjust his tenure! So, his loan may now become a few years lesser, but monthly outflow remaining the same. A few borrowers who are educated and understand mortgage may, and I repeat may, seek an adjustment on the EMI and the lender will oblige. But how many borrowers in this category will actually know that this is an option too?
Q: Is this a real benefit to the borrower?
A: If the monthly outflow does not reduce while acquiring a home, then the benefit is definitely not looking attractive initially. Over the period of time, buy reduction of the tenure, it will bring joy to the borrower’s face, but the tough time is now. isn’t it?