Pradhan Mantri Awas Yojana (PMAY)

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	Annul Income Range	Subsidy
EWS	Up to 3 Lakh	6.5%
LIG	3 Lakh to 6 Lakh	6.5%
MIG - I	6 Lakh to 12 Lakh	4%
MIG - II	12 Lakh to 18 Lakh	3%

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 above table divides the various economic groups as per their annual income range for easier assessment.

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).

PMAY-U

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 centers, including development authority, industrial development body, special area development department, notified planning authority and others.

Offers and Advantages of PMAY-U

The various features and benefits of PMAY-U have been enlisted in the table below to help prospective home buyers.

Consider the following example to understand how the PMAY-U would affect interest rates and home loan repayment.

Mr. Ajay 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. Ajay 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.

PMAY-G

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.

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.

Mr. Ajay 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 Ajay 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 favoring 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.

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.