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What is Pradhan Mantri Awas Yojana?
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 (%)|
Income Range for Various Economic Groups
The first thing that the 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.
According to a July 2019 survey, the progress of PMAY-U is as follows.
- Completed residences – 26.08 Lakh
- Approved residences – 83.63 Lakh
- Occupied residences – 23.97 Lakh
Total estimated subsidies under PMAY-U, according to the same survey, amounted to around Rs. 4.95 Lakh Crore. Out of this, the scheme has already provided more than Rs. 51,000 Crore as assistance to eligible applicants.
Offers and Advantages of PMAY-U
The various features and benefits of PMAY-U have been enlisted in the table below to help prospective homebuyers.
|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 on 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 categorized 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.
Offers and Advantages of PMAY-G
The table listed below showcases some of the basic features that individuals can expect from the Gramin division of PM Awas Yojana.
|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%|
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 on Rs. 14 Lakh, leading to substantial reductions in interest payments.
Features of PMAY Scheme
As mentioned previously, the primary goal of Pradhan Mantri Awas Yojana 2020 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.
- PMAY looks to offer affordable housing to individuals and families belonging to the economically challenged section of society. It prioritizes housing for women, as well as minorities, including those belonging to the Scheduled Castes and Scheduled Tribes.
- Senior citizens can take advantage of the scheme with the government favouring their claims when it comes to ground floor properties.
- To avail the benefits from this scheme, interested individuals need to register for it. Further, it is mandatory for women, primarily mothers or wives, to be named the beneficiary.
- Other minorities are also preferred under Pradhan Mantri Awas Yojana, including the transgender community, widows and members belonging to the lower-income group.
PMAY Scheme Eligibility Criteria
Before applying to the scheme, however, one must consider whether he/she is eligible to receive subsidies. The following factors determine eligibility for PMAY.
- Depending on a person’s income range, he/she would fall in EWS, LIG or MIG categories. However, if the family’s annual income exceeds the income range for the MIG group, which is Rs. 18 Lakh per year, they would be ineligible to avail benefits under the Pradhan Mantri Awas Yojana.
- A woman’s name should be on the deed or the property papers. It can either be a sole proprietorship, where the woman owns the house, or it can be joint ownership, where one of the owners must be female to avail the scheme. Only when there are no females in a family can this rule be surpassed.
- PMAY is only available for the new property purchase. Also, an applicant must not possess any other pucca properties when applying for the said credit-linked scheme.
- The beneficiaries must not have availed any central assistance or benefits from any other housing scheme beforehand, from either the state or the central government for the scheme to apply.
- The house or property for purchase must belong to one of the areas, towns, villages or cities as per the Census 2011.
- Beneficiaries must not have availed benefits under PMAY or any other credit-linked subsidy scheme from any of the financial institutions beforehand.
- If the primary reason for availing a home loan is the renovation or extension of an already existing property, the said work must be completed within 36 months from receiving the first loan installment.
How to Apply for PMAY Scheme?
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.
- Step 1: Visit the official government website belonging to PMAY.
- Step 2: Click on the ‘Citizen Assessment’ option under the ‘Menu’ tab.
- Step 3: An applicant must enter his/her Aadhaar number.
- Step 4: With the successful submission of the Aadhaar number, he/she will be redirected to the application page.
- Step 5: The applicant must proceed to enter all relevant details on this page, including income details, personal details, bank account details and other necessary information.
- Step 6: Applicants should recheck all information before submission.
- Step 7: Once a person clicks on the ‘save’ option, he/she will find a unique application number.
- Step 8: Applicants should, next, download the filled-in application form.
- Step 9: Finally, the person can deposit the form at his/her nearest CSC office or a financial institution offering PMAY. He/she must also submit all necessary documents along with the form.
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 Required for Pradhan Mantri Awas Yojana
Documents necessary to apply for PMAY differs based on whether the beneficiary is a salaried or a self-employed individual.
- For salaried applicants
Those who are salaried need to present the following documents to avail of the benefits from this CLSS.
- Application form (Download from official website).
- Proof of identity – Pan Card is mandatory. Additionally, individuals need to provide an additional identity proof, which can include Aadhaar Card, Voter ID Card, Driving License, Passport, Photo Credit Card, or any other Photo-identity card issued by a government authority.
- Proof of address – Acceptable documents include valid passport, Voter ID Card, Aadhaar Card, utility bill, rent agreement, life insurance plan, residence address certificate, savings bank account statement in post office, property tax receipts, credit card statement that should not be older than three months, etc.
- Proof of income – 6 months’ bank statement, last 2 months salary slip and ITR or latest Form 16.
- Property documents – Agreement to sell, a chain of property documents (as required), the allotment letter or buyer agreement, and a copy of receipts related to any payments made to the developer.
- For self-employed applicants
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.
- Address proof for businesses – One of the documents to prove the existence of an individual’s business is mandatory. It may include trade license certificate, Shops and Establishment Certificate, sales tax, PAN Card or VAT registration certificate, SEBI Registration Certificate, Memorandum of Association, Partnership Deed, etc.
- Income proof – It can include ITR for the preceding two years, Profit & Loss and Balance Sheet info. Lastly, the individual also needs to provide the last six months’ account statement for the business, along with a similar statement for his/her personal bank account.
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.
Tax Benefits under PMAY
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.
- Section 80C – Deductions of up to Rs. 1.50 Lakh per year on the home loan principal repayment.
- Section 24(b) – Deductions of up to Rs. 2 Lakh per year on home loan interest payment.
- Section 80EE – First-time homebuyers can avail yearly tax relief of up to Rs. 50,000.
- Section 80EEA – Deductions of up to Rs. 1.50 Lakh per year on home loan interest payment in case your property comes under the affordable housing category.
- What is the maximum tenure for PMAY scheme?
The PMAY scheme comes with a maximum tenure of 20 years.
- Do I need to provide Aadhaar Card details for all my family members to avail housing loan under PMAY?
Yes, you need to provide Aadhaar details of the entire family if it comes under either MIG-I or MIG-II category.
- Where can I apply for PMAY?
You can apply for the scheme online. Alternatively, you can also apply with one of the financial institutions that support PMAY.
- My family’s annual income is Rs. 2.60 Lakh. Which income group do I fall under, as per PMAY?
Families with an annual income lower than Rs. 3 Lakh come under the EWS section of PMAY.