PM had announced interest subsidy of 4% on housing loans of up to Rs 9 lakh of those with annual income of Rs 12 lakh and of 3% on housing loans of up to Rs 12 lakh of those earning Rs 18 lakh per year.EMIs for house in an urban area to shrink if bought under PM Awas Yojna
TNN | Mar 23, 2017, 02.31 AM IST | Times of India
NEW DELHI: Your monthly home loan installment or EMI for a new property will come down by around Rs 2,000 if you are buying your first home in a city or town under the PM Awas Yojna (PMAY) and if your annual household income is in the range of Rs 12-18 lakh.
The government is offering an interest subsidy of 3-4% on borrowings of Rs 9 lakh to Rs 12 lakh even if the overall loan is higher. Loans availed from January are entitled for the subsidy announced by PM Narendra Modi as part of the post-demonetisation package.
On Wednesday, 70 lending institutions including 45 housing finance companies, 15 scheduled banks, regional rural and cooperative banks signed MoUs with National Housing Bank for implementation of the scheme for the middle class in urban areas.
Union housing and urban development minister M Venkaiah Naidu said that middle income groups (MIGs) make substantial contribution to the economic growth of the country besides paying taxes and deserved support to fulfill the dream of owning a house which is a basic and genuine aspiration. He urged banks and other lending institution to adopt pro-active approach to deliver the benefits to people.
The benefit will be extended to families as comprising of wife, husband and unmarried daughters and son. Moreover, unmarried and earning young adults buying their first house will be eligible to avail the benefit.
Though PM Narendra Modi had announced these subsidies on December 31to meet the aspiration of owning a pucca house for the tax paying large middle class, the operational guidelines could not be notified because of election code of conduct. TOI on February 15 had first reported about the interest subsidy scheme kicking off from January 1.
PM had announced interest subsidy of 4% on housing loans of up to Rs 9 lakh of those with annual income of Rs 12 lakh and of 3% on housing loans of up to Rs 12 lakh of those earning Rs 18 lakh per year.
“Those who have been sanctioned housing loans and whose applications are under consideration since January first this year are also eligible for interest subsidy,” a housing ministry spokesperson said.
As per the scheme, the tenure of loan has been stipulated to be 20 years or that preferred by the beneficiary, whichever is lower. The total interest subsidy accruing on these loan amounts will be paid to the beneficiaries upfront in one go thereby reducing the burden of EMI.
Sriram Kalyanaraman, managing director and CEO of National Housing Bank said the interest subsidy of 4% will bring down EMI of beneficiaries by Rs 2,062 per month on a housing loan of Rs 9 lakh and interest subsidy of 3% will bring down EMI by Rs 2,019 on a loan of Rs 12 lakh, considering normal housing loan interest rate as 8.65%.
He added said during 2015-16, against total new bookings of 28.9 lakh units with loans of up to Rs 10 lakhs each, public sector banks and housing finance banks advanced loans of Rs 9.5 lakh crore and accounted for 64% of total bookings.
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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?
TNN | Jun 18, 2015, 12.47AM IST | Times of India
NEW DELHI: Owning a house by people from economically weaker section (EWS) including slum dwellers and low income group (LIG) in cities and towns will be easier as the government on Wednesday approved a steep hike in interest subsidy for beneficiaries of these categories – from 5% to 6.5% – under the flagship “Housing for All” scheme.
This means the overall interest rate payable by the beneficiaries would be around 4%, Union minister Ravi Shankar Prasad said. TOI on Wednesday had reported this proposal of government, which had emerged after an inter-ministerial consultation.
It also widened the criteria to bring more beneficiaries under this scheme by increasing the income limit. Moreover, to ensure that the marginalized sections of society get the benefit of this scheme, transgenders, widows, women, SCs, STs and disabled will get priority under this programme. The Cabinet also expanded the lending base by allowing cooperative banks, urban cooperative banks and micro-financial institutions to finance affordable housing besides the public sector banks and housing finance corporations.
Moreover, to provide greater comfort to lenders, the government has also decided that the loan subsidy amount will be given up front against the earlier practice of releasing it on quarterly basis.
The government is likely to formally launch the “Housing for All by 2022” scheme by next week.
Sources said the higher interest subsidy decision would benefit urban poor by an amount of Rs 2.30 lakh each and as a result of this the monthly EMI would come down by Rs 2,582 per month. According to housing ministry official, at present, with the interest rate of 10.50%, current EMI on admissible loan component of Rs 6 lakh, over 15-year loan duration works out to be Rs 6,632 per month. With Cabinet deciding to increase credit-linked subsidy, EMI comes down to Rs 4,050 per month thereby benefiting the urban poor by Rs 2,582 per month, he said.
On the whole, central assistance in the range of Rs 1 lakh to Rs 2.30 lakh per beneficiary would be provided under different components of the National Urban Housing Mission in urban areas to build two crore new houses to meet the housing shortage over the next 7 years.
The Cabinet had earlier approved four components to the mission. Under the redevelopment plan of slums with participation of private developers using land as a resource component, a central grant of Rs 1 lakh on average per beneficiary would be provided. States/ Union Territories are at liberty to use this grant for any slum redevelopment schemes to be taken up to make such projects viable, if required.
In the second category, is the affordable housing through credit-linked subsidy scheme.
Under third component of affordable housing in partnership with private and public sectors, central assistance of Rs 1.50 lakh to each beneficiary would be provided to promote housing stock for urban poor with the involvement of private and public sectors, provided 35% of dwelling units of the projects proposed are earmarked for EWS category.
Individual beneficiary-led construction or enhancement of houses falls in the fourth category where a central assistance of Rs 1.50 lakh would be provided to those eligible to enable him to build his own house or undertake improvements to existing houses.