Government Extended Credit Link Subsidy Scheme on Home Loans for MIG


The Central Government provided major relief to home buyers from Middle Income Group or MIG under the renewed policies of Pradhan Mantri Awas Yojana 2019 scheme. The Union Minister for Housing and Urban Affairs confirmed that the Central Government would extend the Credit Linked Subsidy Scheme or CLSS to aspiring home-owners who belong to the MIG income background.

Several top government sources and independent analysts now suggest that this extension will aim at further fulfilling the ‘housing for all’ scheme that the Central Government has repeatedly stressed upon.

Before the Ministry clarified on the matter, all MIG applicants for the Pradhan Mantri Awas Yojana loan would stop receiving any concession under the CLSS after March 31, 2019.

Excellent news for all eligible applicants

When the PMAY scheme was first rolled out in June 2015, the Government had defined PMAY eligibility based on yearly income. Thus, all applicants were assigned categories like LIG or Lower Income Group, MIG and so on. Based on these economic considerations, the Government had devised financial incentives and interest rate cuts on a home loan.

Furthermore, the PMAY scheme had different measures for rural and urban poor. Under this rule, the extension of CLSS on home loans for MIG applicants is applicable only for the urban populace.

The Government had earlier declared that it would aim to provide considerable financial assistance to the urban population. To be categorized under the MIG segment, your yearly income has to exceed Rs. 6 Lakh every year.

Thereafter, the Government declared two types of assistance on home loan interest rates:
  • For those who earned between Rs. 6 and Rs. 12 Lakh per annum, the Government would grant a 4% interest subsidy on loans up to Rs. 9 Lakh availed for a 20-year tenor.
  • For those who earn between Rs. 12 lakh and Rs. 18 Lakh per annum, the interest rate subsidy would be 3%. Other aspects including the loan amount and tenor would remain the same.
Under the Government’s CLSS, if you fall within the income brackets mentioned above, you will continue to receive the subsidy in interest.

Already applied for this scheme, check your status in PMAY List online to know whether your application is approved or not.

Why is this important?

Most independent agencies have stated that the MIG applicants typically receive economic benefits of between Rs 2 and 2.5 Lakh under the present scheme. In turn, it has a major effect on the existing home loan interest rates.

That is because the growth in real estate in India, especially for residential purposes, has become sluggish over the last few years. Fewer people are buying expensive properties even in the metro cities. In turn, the demand for high-value home loans has fallen.

That is why the Government has once again intervened. The Credit Linked Subsidy Scheme was first introduced in December 2016 and would run for one year. However, even after December 31, 2017, there was no noticeable rise in credit extension by various financial institutions including NBFCs.

There are two reasons why the scheme may work better this time:

  • Realty developers are slashing prices after facing a slump in demand. Also, the Credit Linked Subsidy Scheme has made it possible for MIG customers to avail home loans for significant amounts. These twin factors may accelerate faster growth. If you plan to avail a home loan, now is the right time. You can check your expected EMI amount by using a housing loan EMI calculator.
  • The number of beneficiaries who availed the PMAY scheme increased in 2018 to touch an all-time high of 3,39,713. The encouraging response may see further growth in 2019-2020.
Before you apply for an interest cut under Credit Linked Subsidy Scheme, ensure that you check your eligibility to avail a loan using a home loan eligibility calculator.

Since the extension now runs until 2020, you can approach a financial institution immediately and claim a significant subsidy on your home loan. That is because there is no clarity so far if the scheme will be extended again.

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