The Impact Of Affordable Housing Schemes Such As PMAY On Homebuyers
- 30 April 2019
In the Budget that was announced in 2017, affordable housing in India was granted infrastructural status. Since then until then recently presented Interim Budget 2019, the government has given due emphasis to affordable housing schemes and their beneficiaries. In these efforts, the Pradhan Mantri Awas Yojana (PMAY) has played an instrumental role. The scheme underlines the objectives of providing housing across urban India and to subsidize the purchase of residential property for various economic segments.
To make housing accessible to all, the government has devised two schemes to fund the interest of the borrowers in the urban areas. The first scheme, which pertains to interest rate subsidy, is applicable to the Economically Weaker Sections (EWS) and the Low-Income Group (LIG). The other scheme is for the Middle-Income Group (MIG).
PMAY has made it much easier for homebuyers to apply for and avail home loans at interest rate subsidies, thereby making housing accessible to various economic segments across urban India.
Here are some ways in which PMAY has impacted homebuyers:
- Inclusive eligibility criteria: The PMAY scheme offers a different set of eligibility criteria for various income groups, including the LIG, EWS, and the MIG, which is further segregated into two slabs—MIG I and MIG II. Depending on the annual income of the family, applicants are categorized into the aforementioned slabs. Apart from the criteria of annual income and property size, it is required that applicants do not previously own a pucca house in their name in any part of the country, or in the name of any of their immediate family members, as the idea behind the scheme is to provide housing for all.
- Subsidy disbursal: Under the PMAY scheme, prospective homeowners can apply for an interest rate subsidy. One of the greatest advantages that the scheme has offered homebuyers is that the subsidy is disbursed as soon as the application is approved, so as to provide upfront financial relief and reduce loan liability.
- No processing fee: Under the PMAY scheme, lenders are not allowed to charge the applicant a processing fee for the loan. The government takes it upon itself to compensate the lender for both the subsidy amount concession and processing fee that was not charged. However, for the cases in which the loan amount exceeds Rs. 6 lakhs, then the lender can charge the regular processing fee.
- Tax concessions: There have been several GST concessions announced by the government in recent months, among which the most prominent ones are for affordable housing homebuyers. Concessional GST rates have been announced for residential properties that have been constructed or acquired under the CLSS (Credit-Linked Subsidy Scheme) for EWS, LIG, MIG-I, and MIG-II. These rates are also applicable to flats with a carpet area of up to 60-square meters.
- Ease of application: The recently announced PMAY-U app extends the benefits of the scheme to a digital platform. The app will enable the existing beneficiaries of PMAY to upload photos and/or videos of completed houses along with testimonies, so as to apply for an interest rate subsidy for the home with the use of just their smartphone.
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