The scheme under PMAY commences from January 1, 2017. The subsidy will be available for all home loans taken by eligible borrower on or after this date
The Union government is planning to disburse a subsidy of Rs 31,000 crore through credit-linked subsidy scheme under the Pradhan Mantri Awas Yojana (PMAY).As the scheme includes the middle-income group of households with income up to Rs 18 lakh per annum in this scheme, market-watchers say that this will promote sales among first-time homebuyers.
Here is a primer for the interest subsidy on home loan:
Q: What is subsidy scheme under the PMAY?
In the subsidy scheme under PMAY, a home loan borrower with a family income of up to Rs 18 lakh per annum is entitled for benefits, as shown in the chart, provided he or she is buying his or her first house.
The scheme contemplates an interest subsidy at the rate of 4% on loans of up to Rs 9 lakh for households with an income of up to Rs12 lakh per annum, and an interest subsidy of 3% on a loan of up to Rs 12 lakh for households with an income of up to Rs 18 lakh per annum.
However, while a homebuyer can borrow any amount, the subsidy will be given on the a maximum amount of Rs 9 lakh and Rs 12 lakh, in the respective salary brackets, at 4% and 3% respectively.
The subsidy for EWS or LIG households with an income of up to Rs 6 lakh is 6.5% for loans of up to Rs 6 lakh.
This is also known as credit-linked subsidy scheme.
Q2: What is the effective date of commencement of the scheme; will it be also applicabl le retrospectively to applicants whose loans are still under consideration?
The scheme under PMAY commences from January 1, 2017. The subsidy will be available for all home loans taken by eligible borrower on or after January 1, 2017.
All those whose home loans have been disbursed on or after January 1, 2017 can claim the subsidy and can ask the disbursing bank to process their application under the scheme.
Q3: In terms of eliigibility, is the income calculated on an individual basis or a family basis?
The income will be calculated on the household basis, which includes the income of the borrower and his or her spouse.
Q4: On what basis has s the NAV of 9 % been calculated and is this indexed on any variable parameter sets?
The NAV (net asset value) is computed mainly to standardize the scheme. However, the net subsidy amount will vary if the home loan rates offered by banks or NBFCs change.
Q5: What is the process of crediting the interest subsidy?
The subsidy is released by the government through Central Nodal Agency (CNA), like National Housing Bank or HUDCO, for the purpose of disbursement made by banks and housing finance companies to the beneficiaries.
Subsidy given by the government is credited by the bank or the housing finance company that received the subsidy through CNA to the borrower's home loan account upfront by deducting it from the principal loan amount.
Because of this, the borrower will pay EMI on the remainder of the principal amount.
If a borrower with a house hold income of Rs 15 lakh borrows Rs 50 lakh from a housing finance company to buy a house, the bank will send his application for the subsidy to the desig nated CAN while processing his loan. Officials of CAN claim that the subsidy is disbursed within a few weeks of receiving the application.
In the Rs 18 lakh income category, the net present value of the subsidy works out to be around Rs 2,30,000, for a loan of Rs 50 lakh on a repayment peri od of 20 years, at an interest rate of 8.25%. This amount will be deducted from the borrower's princi pal amount and the borrower will, in effect, have to pay an EMI on around Rs 47,70,000. This will reduce his EMI by around Rs 1,961.
But for the smaller loan amount, savings--in per centage terms--is huge. On a Rs 10 lakh loan for 20 years at 8.25%, the subsidy results in the reduction of EMI from Rs 8,500 to Rs 6,200--at 27%!
Q6: Which institutions give this benefit? ?
Lending institutions like banks, housing finance companies, regional rural banks, state cooperative banks, urban cooperative banks, and NBFCs, which give home loans, also extend the benefit to borrowers.
The government is also trying to rope in developers to assist borrowers to secure the benefit.
Here is a primer for the interest subsidy on home loan:
Q: What is subsidy scheme under the PMAY?
In the subsidy scheme under PMAY, a home loan borrower with a family income of up to Rs 18 lakh per annum is entitled for benefits, as shown in the chart, provided he or she is buying his or her first house.
The scheme contemplates an interest subsidy at the rate of 4% on loans of up to Rs 9 lakh for households with an income of up to Rs12 lakh per annum, and an interest subsidy of 3% on a loan of up to Rs 12 lakh for households with an income of up to Rs 18 lakh per annum.
However, while a homebuyer can borrow any amount, the subsidy will be given on the a maximum amount of Rs 9 lakh and Rs 12 lakh, in the respective salary brackets, at 4% and 3% respectively.
The subsidy for EWS or LIG households with an income of up to Rs 6 lakh is 6.5% for loans of up to Rs 6 lakh.
This is also known as credit-linked subsidy scheme.
Q2: What is the effective date of commencement of the scheme; will it be also applicabl le retrospectively to applicants whose loans are still under consideration?
The scheme under PMAY commences from January 1, 2017. The subsidy will be available for all home loans taken by eligible borrower on or after January 1, 2017.
All those whose home loans have been disbursed on or after January 1, 2017 can claim the subsidy and can ask the disbursing bank to process their application under the scheme.
Q3: In terms of eliigibility, is the income calculated on an individual basis or a family basis?
The income will be calculated on the household basis, which includes the income of the borrower and his or her spouse.
Q4: On what basis has s the NAV of 9 % been calculated and is this indexed on any variable parameter sets?
The NAV (net asset value) is computed mainly to standardize the scheme. However, the net subsidy amount will vary if the home loan rates offered by banks or NBFCs change.
Q5: What is the process of crediting the interest subsidy?
The subsidy is released by the government through Central Nodal Agency (CNA), like National Housing Bank or HUDCO, for the purpose of disbursement made by banks and housing finance companies to the beneficiaries.
Subsidy given by the government is credited by the bank or the housing finance company that received the subsidy through CNA to the borrower's home loan account upfront by deducting it from the principal loan amount.
Because of this, the borrower will pay EMI on the remainder of the principal amount.
If a borrower with a house hold income of Rs 15 lakh borrows Rs 50 lakh from a housing finance company to buy a house, the bank will send his application for the subsidy to the desig nated CAN while processing his loan. Officials of CAN claim that the subsidy is disbursed within a few weeks of receiving the application.
In the Rs 18 lakh income category, the net present value of the subsidy works out to be around Rs 2,30,000, for a loan of Rs 50 lakh on a repayment peri od of 20 years, at an interest rate of 8.25%. This amount will be deducted from the borrower's princi pal amount and the borrower will, in effect, have to pay an EMI on around Rs 47,70,000. This will reduce his EMI by around Rs 1,961.
But for the smaller loan amount, savings--in per centage terms--is huge. On a Rs 10 lakh loan for 20 years at 8.25%, the subsidy results in the reduction of EMI from Rs 8,500 to Rs 6,200--at 27%!
Q6: Which institutions give this benefit? ?
Lending institutions like banks, housing finance companies, regional rural banks, state cooperative banks, urban cooperative banks, and NBFCs, which give home loans, also extend the benefit to borrowers.
The government is also trying to rope in developers to assist borrowers to secure the benefit.
Harsh Vihar Noida Extension is a project in which individual villa are developing in Noida Extension. This is the suggested project and home loan also available.
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