In an aim to provide affordable housing to a certain section of the population in India, Narendra Modi announced the Pradhan Mantri Awas Yojana (PMAY) initiative in June 2015. The main aim of this initiative is to provide “Housing for All” with the construction of 2 crore houses by the year 2022. There are two components to this scheme – the Pradhan Mantri Awas Yojana (Urban) (PMAY-U) for the urban poor section of society and the Pradhan Mantri Awas Yojana (Gramin) (PMAY-G or PMAY-R) for the rural poor demographic.
Before you can think about the benefits this system provides on your home loan EMIs, there are some things you should keep in mind.
- The beneficiary’s maximum age should be 70 years old.
- The beneficiary should belong to the following demographics:
- Economically Weaker Section (EWS) – Annual income of less than Rs. 3 lakhs.
- Lower Income Group (LIG) – Annual income ranging between Rs. 3 and 6 lakhs.
- Middle Income Group-I (MIG-I) – Annual income ranging between Rs. 6 and 12 lakhs.
- Middle Income Group-II (MIG-II) – Annual income ranging between Rs. 12 to 18 lakhs.
- The beneficiary should not own a property or have one listed under their family name.
- The properties given under this scheme will be owned either by the woman or jointly with males.
After checking your eligibility, the next thing to check out is the exact manner in which PMAY can help reduce the overall EMI you need to pay on your housing loan. The first thing that needs to be discussed in this regard is the interest subsidy that can be availed.
- If your yearly income is Rs. 12 lakhs and you go for a housing loan of up to Rs. 9 lakhs, then you’re eligible for a 4% reduction on your overall home loan EMIs.
- If your yearly income is Rs. 18 lakhs and you go for a housing loan of up to Rs. 12 lakhs, then you’re eligible for a 3% reduction on your overall home loan EMIs.
This, coupled with the fact that the National Housing Bank will pay off your subsidy amount to the lenders, will substantially reduce the overall EMI amount you need to pay. Take into account the address of Mr. Sriram Kalyanaraman, the MD and CEO of the National Housing Bank, who put these EMI savings into context(1). Assuming that you go for the maximum tenure amount of 20 years that you can avail under the PMAY scheme, your EMI payments will be affected in the following manner:
- With the interest subsidy of 4%, you will pay monthly EMI of Rs. 2,062 for a 9-lakh housing loan.
- With the interest subsidy of 3%, you will pay monthly EMI of Rs. 2,019 for a 9-lakh housing loan.
Thus, for struggling families with lower income that need to buy a home, the Pradhan Mantri Awas Yojana has proven to be an excellent scheme, due to the bevy of benefits that this scheme provides.