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Interest subsidy to middle class home buyers

CA Neha Agrawal (CA) (816 Points)

23 March 2017  

Govt offers interest subsidy to middle class home buyers (from The Financial Express)

If you are earning above Rs 6.00 lakh and up to Rs 18 lakh per annum, you are now eligible for interest subsidy on housing loans under the new Credit Linked Interest Subsidy Scheme for Middle Income Groups. Moreover, those who have been sanctioned housing loans and whose applications are under consideration since January 1 this year are also eligible for interest subsidy.

This interest subsidy scheme, announced by PM Modi on December 31 last year, has been named as ‘Credit Linked Subsidy Scheme for Middle Income Groups – CLSS(MIG)’ and its Operational Guidelines were released by Minister of Housing and Urban Poverty Alleviation, M Venkaiah Naidu on Wednesday.

1. Middle income groups (MIG) with annual income of above Rs 6.00 lakh and up to Rs 18 lakh per annum are eligible for interest subsidy on housing loans under the new CLSS(MIG). Those who have been sanctioned housing loans and whose applications are under consideration since January first this year are also eligible for interest subsidy.

2. The Prime Minister has announced interest subsidy of 4% on housing loans of up to Rs 9 lakh of those with an income of Rs 12 lakh a year and of 3% on housing loans of up to Rs 12 lakh of those earning Rs 18 lakh per annum.

3. The interest subsidy of 4% under CLSS(MIG) can bring down Equated Monthly Installments of beneficiaries by Rs 2,062 per month on a housing loan of Rs 9.00 lakh and interest subsidy of 3% will bring down EMI by Rs 2,019 on a loan of Rs 12.00 lakh, taking normal housing loan interest rate as 8.65%.

4. 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 up front in one go, thereby reducing the burden of Equated Monthly Instalments (EMIs).

5. The total interest subsidy to be paid to MIG people on Rs 9.00 lakh loan comes to Rs 2.35 lakh and on a loan of Rs 12.00 lakh, it comes to Rs 2.30 lakh per beneficiary. While the new CLSS(MIG) covers people with income of up to Rs.12 lakh and Rs.18 lakh a year, the CLSS component of PMAY(Urban) launched in June, 2015 and applicable to Economically Weaker Sections (EWS) and Low Income Group (LIG) covers urban poor with income levels of Rs 3.00 lakh and Rs 6.00 lakh per annum, respectively.

6. Under CLSS(EWS/LIG), interest subsidy of 6.50% is being provided on a loan of up to Rs 6.00 lakh. Tenure of this loan is now increased to 20 years from the earlier 15 years to enable easy repayments. Total interest subsidy available to each beneficiary under this component is Rs 2.30 lakh.

7. Beneficiaries include wife, husband, unmarried daughters and sons. The guidelines have also made unmarried and earning young adults eligible for taking the benefit of interest subsidy under CLSS(MIG), for acquisition/construction of a new house, including repurchase.

8. Interest subsidy will be provided on loans for construction/ acquisition of house with carpet area of 90 sq.mtres by those earning Rs 12 lakh per annum and of 110 sq.mt by those earning Rs 18 lakh per annum. Under the guidelines, preference is to be given to women with overriding preference to widows, single working women, persons belonging to Scheduled Castes and Scheduled Tribes, backward classes, differently abled and transgender people.

9. Small Finance Banks and Non Banking Finance Company-Micro Finance Institutions also have been recognized to function as Primary Lending Institutions to widen the scope of implementation of CLSS(MIG) in addition to Scheduled Commercial Banks, Housing Finance Companies, Regional Rural Banks, State and Urban Cooperative Banks for accepting applications directly from beneficiaries and advancing loans under the scheme

10. 70 lending institutions, including 45 Housing Finance Companies, 15 Scheduled Banks, 2 Regional Rural Banks, 1 Cooperative Bank, 4 Small Finance Banks and 3 Non-Banking Finance Companies-Micro Finance Institutions, have signed Memoranda of Understanding with National Housing Bank (NHB) for implementation of the CLSS(MIG) component of PMAY(Urban).


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