Pradhan Mantri Awas Yojana is a Government-backed scheme launched on 1 June 2015 to promote and encourage sustainable and affordable housing for the urban poor. It is a Credit Linked Subsidy Scheme (CLSS), which means PMAY scheme beneficiaries are eligible for interest subsidy if they want a loan to buy or construct a new house.
Property and land prices are on a continuous surge in India, which has reduced affordability significantly. It is especially true for individuals residing in metropolitan cities. Therefore, to promote and encourage sustainable and affordable housing, the Government of India launched the Pradhan Mantri Awas Yojna or PMAY in June 2015.
Also known as ‘Housing for all by 2022’, this credit-linked subsidy scheme (CLSS) aims to construct more than 2 crore houses for Indians belonging to particular economic sections. Individuals availing loans to buy residential property or land or to construct homes would be eligible for interest subsidies on the said credit. However, the loan interest subsidy is only available for individuals belonging to Economically Weaker Sections (EWS), Lower Income Group (LIG) or Middle Income Group (MIG).
Economic Section | Eligible Subsidy (%) |
EWS | 6.5 |
LIG | 6.5 |
MIG I | 4 |
MIG II | 3 |
The first thing that housing scheme’s applicants need to understand is whether they are eligible for the subsidy. Their annual family income is the key determinant for the purpose. Keep in mind that family income calculation takes into account the income of all members in a family from various sources, including investments, jobs and others.
The following table divides the various economic groups as per their annual income range for easier assessment.
Economic Sections | Annual Income Range |
EWS | Upto Rs. 3 Lakh |
LIG | Between Rs. 3 Lakh and Rs. 6 Lakh |
MIG I | Between Rs. 6 Lakh and Rs. 12 Lakh |
MIG II | Between Rs. 12 Lakh and Rs. 18 Lakh |
If a person’s family income exceeds Rs. 18 Lakh per annum, they are ineligible for subsidies under the Pradhan Mantri Awas Yojana.
The housing scheme is divided into two primary types, depending on the area where the subsidy scheme is extended, namely, PMAY Urban (PMAY-U) and Gramin (PMAY-G).
The Urban division of Pradhan Mantri Awas Yojana comprises around 4,300 cities and towns across India. PMAY-U also accounts for several developmental authorities that are in charge of planning across urban centres, including development authority, industrial development body, special area development department, notified planning authority and others.
As per the latest survey, the progress of PMAY-U is as follows.
The rate of completion of this project increased to over 31% by June 2019, as the government shifted its focus on the completion of sanctioned houses. However, the rate of occupancy of the completed houses has shown steady statistics and was close to 92% in June 2019.
In 2020, the validated demand for affordable housing remained at 1.12 crores. By December 2019, a total of one crore homes were sanctioned. The central assistance provided for the mission to date amounts to Rs 1.66 lakh crores, from which Rs 72,646 crores has already been released. The total investment stands at Rs 6.41 lakh crores, as per the official data.
The various features and benefits of PMAY-U have been enlisted in the table below to help prospective homebuyers.
Features | MIG-I | MIG-II |
Interest rate subsidy | 4.00% | 3.00% |
Maximum carpet area of a dwelling unit | 160 sq. m | 200 sq. m |
Maximum subsidy amount | Rs. 2.35 Lakh | Rs. 2.30 Lakh |
Maximum Home Loan Quantum for Subsidy | Rs. 9 Lakh | Rs. 12 Lakh |
Maximum home loan tenure | 20 years | 20 years |
The discount rate for interest subsidy NPV | 9% | 9% |
Consider the following example to understand how the PMAY-U would affect interest rates and home loan repayment.
Mr Arun Tiwary belongs to MIG-I and is buying a house worth Rs. 50 Lakh. He would need to clear the mandatory 20% down payment on his own, which amounts to Rs. 10 Lakhs. For the remaining Rs. 40 Lakh, Arun opts for a home loan. The interest rate charged is 8.50% p.a.
Because he belongs to MIG-I, Rs. 9 Lakh from the loan amount is eligible for interest rate subsidies. It means he would need to pay the original 8.50% interest on only Rs. 31 Lakh, while on the remaining amount he would bear an interest of 4.00% per year. However, the subsidy amount cannot exceed Rs. 2.35 Lakh.
Conversely, if Mr Tiwary belonged to the MIG-II section, he would be eligible to receive a subsidy on Rs. 12 Lakh of the total loan amount. In such a case, he would only pay interest at the initial rate of Rs. 28 Lakh. In this circumstance, the total subsidy cannot amount to more than Rs. 2.30 Lakh.
The PMAY scheme is not limited to just the bigger cities and towns. Villages, slums and other rural areas also come under the purview of this credit-linked subsidy scheme. The PMAY Gramin plan was launched to aid families categorised as Economically Weaker Sections and Lower Income Group to help them avail affordable financing for their homes.
The implementation of PMAY-G has been better than its counterpart. Around 1.4 crore houses have been sanctioned as of January 2020. It is in tune with keeping the scheme’s Housing for All’ outlook intact.
The table listed below showcases some of the basic features that individuals can expect from the Gramin division of PM Awas Yojana.
Features | EWS | LIG |
Interest rate subsidy | 6.50% | 6.50% |
Maximum dwelling unit carpet area | 30 sq. m | 60 sq. m |
Maximum interest rate subsidy amount | Rs. 2.67 Lakh | Rs. 2.67 Lakh |
Maximum home loan quantum for subsidy | Rs. 6 lakh | Rs. 6 lakh |
Maximum home loan tenure | 20 years | 20 years |
The discount rate for interest subsidy NPV | 9% | 9% |
For example – Mr Rakesh Yadav decides to build a house, for which the net cost is around Rs. 25 Lakh. He applies for a home loan worth Rs. 20 Lakh to construct the building. Due to subsidy applicable on up to Rs. 6 Lakh under PMAY-G, Mr Yadav would only need to pay the regular interest rate of Rs. 14 Lakh, leading to substantial reductions in interest payments.
As mentioned previously, the primary goal of Pradhan Mantri Awas Yojana 2021 is to provide housing for all by 2022. Apart from this overall objective, listed below are some other features that the scheme brings along for its beneficiaries.
Before applying to the scheme, however, one must consider whether he/she is eligible to receive subsidies. The following factors determine eligibility for PM Awas yojna.
Following the steps mentioned below should help individuals avail subsidies on their home loans under the housing scheme. The method listed below is the online process.
Alternatively, individuals can opt for the offline application procedure and approach an authorised bank branch to apply for the scheme if they find the online process inconvenient.
Documents necessary to apply for PMAY differs based on whether the beneficiary is a salaried or a self-employed individual.
Those who are salaried need to present the following documents to avail the benefits from this CLSS.
Self-employed individuals need to present mostly the same set of documents as that of salaried people. However, they must provide certain details regarding their business, along with additional documents as income proof.
One must make sure that he/she is eligible for the subsidy before application. Also, the applicant should check whether his/her name is present on the beneficiary’s list as well to receive the subsidy benefit.
An individual can claim tax benefits under the following sections of the Income Tax Act 1961 when availing subsidy under this scheme as per the tax regime of FY 2019-20.
Ques. What is the maximum tenure for the PMAY scheme?
Ans. The PMAY scheme comes with a maximum tenure of 20 years.
Ques. Do I need to provide Aadhaar Card details for all my family members to avail housing loan under PMAY?
Ans. Yes, you need to provide Aadhaar details of the entire family if it comes under either MIG-I or MIG-II category.
Ques. Where can I apply for PM avas yojana?
Ans. You can apply for the scheme online. Alternatively, you can also apply with one of the financial institutions that support PMAY.
Ques. My family’s annual income is Rs. 2.60 Lakh. Which income group do I fall under, as per PMAY?
Ans. Families with an annual income lower than Rs. 3 Lakh come under the EWS section of PMAY.