Do YOU wish to own a HOME but DON’T HAVE MONEY?
Great… I have a GOOD News for You.
You can own a home even with low salary or income. Pradhan Mantri Awas Yojana allows you to get housing loans at very low-interest rates easily to buy a house or build your own home anywhere in India.
Families whose total household income is less than Rs. 300,000 per year can also get a home under PMAY.
PMAY: A Backgrounder
Launched on June 25, 2015, the PMAY (Pradhan Mantri Awas Yojana) aims at providing affordable housing to urban and rural poor as well as middle-income groups in cities.
The scheme, also called PMAY, aims at providing some 20 million homes in 4,041 cities and towns located in 29 states and seven Union Territories at subsidized rates, by March 31, 2022.
Additionally, it will help builders sell houses to people who were deterred by high-interest rates on home loans.
What is PMAY (Pradhan Mantri Awas Yojana)?
With realty prices going through the roof, owning a home became a pipe-dream for millions.
Slums and shanty towns began flourishing in otherwise prosperous cities.
The number of homeless people living on streets increased exponentially over the last few decades, due to various reasons ranging from unemployment to insufficient income to rent dwellings.
The Indian government led by Prime Minister Narendra Modi, to redress this situation, launched PMAY.
The scheme is also labeled as ‘Housing for All’ (HFA) and is spearheaded by Ministry of Housing and Urban Affairs in collaboration National Housing Bank and other government organizations.
PMAY Housing For All mission:
- Rehabilitation of slum dwellers with the participation of private developers using existing slum land and as a resource.
- Promotion of affordable housing for economically weaker sections of the society through credit linked subsidy.
- Providing affordable housing in partnership between public and private sectors.
- Giving subsidies for beneficiary-led individual house construction.
- Help the building and construction industry saddled with empty buildings to sell homes faster
However, there is a lot of ambiguity and debate over the relevance of PMAY for ordinary citizens.
Benefits of PMAY
Pradhan Mantri Awas Yojana offers the unique advantage of availing loan for the full- 100 percent-cost of the house. Meaning, you are not required to make a down-payment while booking a house under PMAY.
Further, to allow the maximum number of Indians to benefit from the scheme, the Central government has two broad categories of the PMAY.
- PMAY Gramin: which covers all areas that are located outside of urban centers of India. This category also includes semi-urban areas that have Gram Panchayat or Village Panchayat system. This category is also aimed at empowering women in rural parts of the country, especially those from Scheduled Castes and Scheduled Tribes.
- PMAY-Urban: to offer benefits to the urban poor as lower, middle and upper-middle sections of the society.
NOTE: Some builders can ask you to pay a part of the cost of your house as down-payment while booking, especially if a project is under construction. Sadly, this clause nullifies benefits offered by the government of full funding.
A lot of prospective buyers are unable to raise funds for this down-payment that builders and developers insist upon.
How does PMAY (Pradhan Mantri Awas Yojana) Work?
Pradhan Mantri Awas Yojana works on three different components:
- Credit Linked Subsidy Scheme (CLSS) scheme. This means, the subsidy amount given by the Central government will be credited directly to your loan account. Hence, the bank or lender will calculate a lower Equated Monthly Installment (EMI).
- Affordable Housing in Partnership: The Central government and various state governments will develop housing units under the Public-Private Partnership model. AHP schemes will utilize land as a resource. Meaning, the government will provide the plot of land covered by slum areas on leases as long as 99 years to builders. These builders are to offer affordable dwelling units to slum residents who will be offered credit linked subsidy schemes by banks.
- Beneficiary Led Construction/ Enhancement: Here, the government will offer a subsidy through banks for you to construct or enhance your existing house.
NOTE: There are off-shoots of these schemes that allow builders and developers to directly offer CLSS and collect installments directly from house owners.
Advantages of PMAY (Pradhan Mantri Awas Yojana):
There are several positive points about Pradhan Mantri Awas Yojana. Other than providing stimulus to the real estate and construction sector, it is helping Indians buy homes at a younger age. Other salient features include:
- Subsidy of 6.5 percent on a loan of less than Rs.600,000 to those, who have an annual household income of up to Rs.600,000.
- Persons with annual household income up to Rs. 1.2 million will get an interest subsidy of four percent on loans of Rs. 900,000 and below from the government.
- The government will provide a subsidy of three percent on the loan of up to Rs. 1.2 million if the yearly household income does not exceed Rs. 1.8 million.
- People with income can also avail of PMAY schemes. For example, a family with an annual household income of Rs 1 million can avail of a loan of Rs. 2.5 million at 8.5 percent. However, they will pay only 4.5 percent interest while the remaining four percent will be subsidized by the government for Rs. 1 million. However, for the balance Rs.1.5 million, they have to pay the full rate of 8.5 percent. This leads to lower Equated Monthly Installment while significantly lowering cost of the dwelling.
- PMAY does not have any bearing on Income Tax you pay. Meaning, you will be entitled to all exemptions and benefits enjoyed by people who take home loans, regardless of the fact, your borrowings are at a subsidized rate.
- The subsidy on loan interests will be credited directly to your loan account by the government.
- You can avail of a housing loan from over 150 banks, financial institutions, housing finance firms and other lenders participating in the PMAY scheme.
- Builders undertaking projects labeled as PMAY schemes have to complete all works and hand over housing units within three years of commencement.
- Well reputed, large corporations of India including Tata and Mahindra groups are developing PMAY housing projects. This ensures you get superior quality homes while reducing chances of builders fleeing with your money.
- Anyone legally ‘major’ person below the age of 70 years can avail PMAY schemes.
- Pradhan Mantri Awas Yojana bars people who own a ‘pucca’ or house made of concrete with proper roofing from availing the scheme. This prevents speculators from buying cheap dwellings to sell at a premium later.
Disadvantages of PMAY (Pradhan Mantri Awas Yojana):
Understandably, every major project has inherent drawbacks too. The PMAY also has some cons, you may wish to consider before applying for the scheme.
- Pradhan Mantri Awas Yojana schemes require you to hold an Aadhar card, regardless whether you are a slum dweller or hail from the low and middle to upper middle-income groups.
- Middle and upper-middle class applicants have to get their eligibility for PMAY schemes assessed online.
- The assessment link on Pradhan Mantri Awas Yojana scheme often does not recognize the Aadhar number, forcing you to make repeated attempts.
- A few real estate industry leaders claim, the savings in terms of interest paid by middle class and upper-middle class applicants on PMAY schemes, is not very significant.
- Due to unavailability of adequate plots of land, a majority of PMAY housing projects are located on outskirts of cities and sometimes, within the jurisdiction of ‘Gram Panchayats’.
- Due to remote locations, most builders will be unable to ensure round-the-clock electricity and water supplies. Adequate infrastructure for providing these and other utilities including a cooking gas can become a major hassle.
- Healthcare facilities are not located in the vicinity of these large PMAY projects, which is also said to be another area of major concern.
- Middle and upper-middle class persons booking PMAY housing units could face difficulties finding proper educational facilities for their children in some remote areas.
- Transportation infrastructure lags behind in areas where PMAY schemes are under development.
- Since banks will lend the money, people with poor credit ratings will most likely be disqualified for PMAY loan.
- Under the schemes for Economically Weaker Sections (EWS) and Low Income Group categories or people with less than Rs. 300,000 annual income, benefits of Pradhan Mantri Awas Yojana can be availed by females only.
Who can Apply for PMAY:
Broadly speaking, there are four main schemes offered by PMAY. These are
- Economically Weaker Section: With an income of Rs 300,000 or lower per annum.
- Low-income Group: Annual household earnings of Rs. 300,000 to Rs.600,000.
- Middle Income Group- I: Those with household income between Rs. 600,000 and Rs 1.2 million per year.
- Middle Income Group-II: People with household income of Rs. 1.2 million to Rs. 1.8 million per annum.
- The Center has permitted governments of states and Union Territories to define their own income categories. Any such revision by state government needs a nod from the Ministry of Housing and Urban Affairs, National Housing Bank and other concerned government departments.
- PMAY loans are also offered to existing home owners for further developing their rudimentary dwellings into ‘pucca’ or concrete structures with proper roofing, as stipulated by the government.
- PMAY houses for EWS and LIG groups have to be registered in the name of a female member of the family only. However, this clause is waived if there is no adult woman in the household.
- There are no specific reservations quotas announced by the government. However, preference will be given to female members from economically weak sections of Scheduled Castes and Scheduled Tribes for EWS and LIG schemes.
A. Benefits for EWS/ LIG applicants
Credit Linked Subsidy Scheme for EWS/LIG
Beneficiaries of Economically Weaker section (EWS) and Low Income Group (LIG) seeking housing loans from banks, housing finance companies and other financial institutions and lenders are eligible for an interest subsidy at the rate of 6.5 percent for period of 20 years or during tenure of loan, whichever is lower. The 20-year loan period clause came into force from January 1, 2017.
For Economically Weaker Sections/ Low Income Group (EWS/LIG) applicants, Credit Linked Subsidy Scheme (CLSS) will be available only for loan amounts up to Rs 600,000.
If they borrow a higher amount, the balance will not be covered by the subsidy and borrowers are obliged to pay the bank or lender’s interest rate.
CLS is given for housing loans availed for new construction and addition of rooms, kitchen and, toilets, to existing dwellings as incremental housing.
The carpet area of houses being constructed under this component of the mission should be up to 30 square meters for EWS applicants and 60 square meters for LIG borrowers, to be eligible CLS.
However, the applicant can build or buy a house larger than these dimensions. The size of the house has no bearing on the loan amount. Meaning, subsidy will be offered only on borrowings up to Rs. 600,000.
B. Benefits for MIG-I and MIG-II applicants
Credit Linked Subsidy Scheme for MIG-I and MIG-II applicants
As explained earlier, the newly launched CLSS for MIG covers two income segments, MIG-I (annual income between Rs. 600,000 and Rs.1.2 million) and MIG-II (annual income between Rs. 600,000 and Rs. 1.8 million)
For the MIG-I segment, an interest subsidy of four percent will be provided for loan amounts up to Rs.900,000. For MIG-II, an interest subsidy of three percent is being given for loan amount of Rs.1.2 million.
The interest subsidy will be calculated at nine percent per annum on Net Present Value over a maximum loan period of 20 years or the actual term, whichever is lesser. Housing loans above Rs. 900,000 for MIG-I segment and over Rs. 1.2 million for MIG-II category will attract regular interest that lenders levy.
CLS for MIG-I and MIG-II applicants is available for buying, construction or purchasing a house in the secondary market.
National Housing Bank (NHB) and Housing and Urban Development Corporation (HUDCO) are designated as Central Nodal Agencies (CNAs) to channelize subsidized loans to the lending institutions and for monitoring the progress of this component. The Ministry of Housing and Urban Affairs intends to appoint more CNAs in future.
Home sizes of PMAY (Pradhan Mantri Awas Yojana):
Firstly, it I important to remember, builders are required to sell all houses under Pradhan Mantri Awas Yojana on “Carpet Area’ basis.
This means the actual dimensions of the house, without considering the thickness of walls and other irrelevant measurements used by builders nowadays. Hence, a 30 square meter carpet area means you get a house with that much interior or floor space.
Secondly, all states have the discretion to decide carpet area for EWS, LIG, MIG-I and MIG-II dwelling units. This area has to be finalized based upon the size of land available for the housing project and its location, among others.
However, the Center stipulation for PMAY Homes is as follows:
|Applicant Category||Size of dwelling unit (Carpet Area)|
|Economically Weaker Section||30 sq. meters|
|Low Income Group||30 sq. meters|
|Middle Income Group- I||120 sq. meters|
|Middle Income Group-II||150 sq. meters|
CAUTION: While buying a home under Pradhan Mantri Awas Yojana, ensure that it conforms to the sizes stipulated by the government.
You may inadvertently end up paying more for ‘Built Up’ and ‘Super Built Up’ areas which favor the builder and not the homeowner. Your PMAY loan will be calculated on basis of your income.
NOTE: It is not known whether it is legitimate for builders to sell houses under PMAY schemes using ‘Built Up’ and ‘Super Built Up’ calculations for floor space. Therefore, we advise checking these intricate details with the bank or financial institution from which you intend taking a PMAY loan.
How to Apply for PMAY (Pradhan Mantri Awas Yojana):
Generally, applications for subsidized housing under Pradhan Mantri Awas Yojana are made online. However, to cater to needs of people who are not computer literate, the Ministry of Housing and Urban Affairs also provides the facility to submit a physical form.
- Online Application Form for Pradhan Mantri Awas Yojana are available from the scheme’s website, operated by the Ministry of Housing and Urban Affairs.
- Regular or physical forms are available from Customer Service Centers (CSCs) of Central and state governments located in all the 4,071 cities and villages of India that are covered by Pradhan Mantri Awas Yojana. The form costs Rs. 25 each.
NOTE: The ministry warns, it has not authorized any private organization, company or individual to sell these forms or act as intermediaries/ agents for providing any Pradhan Mantri Awas Yojana related services.
Online Application For PMAY:
Firstly, access the online Application Form for Pradhan Mantri Awas Yojana.
- First, fill in your Aadhar card number, without spaces. The website is directly linked to database of the Unique Identification Development Authority of India or UIDAI, which issues Aadhar card. It will verify your Aadhar card details automatically. Once verified, the main Pradhan Mantri Awas Yojana online application form will open.
- Select from one of the three components of Pradhan Mantri Awas Yojana that best suits you. These components are: Credit Linked Subsidy, Affordable Housing in Partnership and Beneficiary Led Construction or Enhancement.
- Here, you have to key in your full name, the name of your father, gender, age, present address, permanent address details, marital status, names of dependent relatives if any and their age and Aadhar card numbers and state your monthly income.
- On the lower part of the form, you have to select the bank from where you wish to avail the subsidized loan, bank branch and its location as well as your account number at the bank.
- You have to accept the terms and conditions of PMAY enter a captcha code and submit this completed online form.
- Click on save to proceed further. The second page will ask you for a confirmation. Upon accepting, you will be asked for an email ID and your mobile phone, where the unique registration number will be sent.
- The unique registration number helps you track the status of your application.
NOTE: Filling the online form for Pradhan Mantri Awas Yojana can be quite a bother. Very often, the website may inform you that do not qualify for a particular scheme. For some reason, this happens to all applicants- EWS, LIG, MIG-I and MIG-II.
Despite filling the Pradhan Mantri Awas Yojana online form, you may be asked to approach your bank to complete the formalities.
Documents Required for PMAY Application
Before you apply online for Pradhan Mantri Awas Yojana, here are some facts you should know.
‘Know Your Customer’ (KYC) formalities are compulsory for all applicants of Pradhan Mantri Awas Yojana scheme, Regardless whether you are applying offline or wish make a physical application, ensure you have the following documents:
- Aadhar Card.
- Permanent Account Number (PAN) card. The PAN card is mandatory for taxpayers. However, applicants from Economically Weaker Sections and Low Income Group can request a waiver of this requirement.
- Under latest rules, implemented mid-2017, applicants should have linked their Aadhar and PAN cards.
- While Aadhar card is a must, you can also submit other documents issued by the Central government including Voters ID, Mahatma Gandhi National Rural Employment Guarantee card or a valid driving license for proof of name, age and address.
Additional documentation for PMAY
In addition to identity and address proofs, you will also have to submit a plethora of documents to avail benefits. These include:
- Nationality Identification Proof
- Proof of category such as caste certificate if you belong to Scheduled Caste, Scheduled Tribe, Other Backward Classes.
- Copy of proof of address.
- Proof of income including original salary slip, salary certificate from employer and proof of additional income and its sources.
- Statements of the latest Income Tax returns, Income Tax assessment order and other tax-related documents.
- Bank account statements for the last 6 months on the date of application.
- A written summary about the nature of business/ activity/ self-drawn attested financial statement/ business license in case of self-employed.
- Valuation certificate from the approved Valuer, if not your dwelling was not assessed earlier.
- Construction plans approved by concerned government authorities.
- Certificates from architects and engineers stating explicitly, the cost of construction or repair or extension of an existing dwelling.
- Architects certificate confirming expected life, fitness and future of flat/ house if purchasing new dwelling.
- Agreement for with builder/ developer from whom you will buy the house.
- No Objection Certificate from the housing society/ or other competent authority stating that you are eligible to buy and live in the house.
- Affidavit asserting the construction authorized and conforms to all prescribed rules and regulations of the government regarding residential dwelling.
- Receipt of advance payment made to builder or seller, if any.
- An affidavit from the beneficiary stating explicitly, they or any of the family members do not own a ‘pucca house’ anywhere in India.
- Letter of Allotment of Property, if the house is being bought from a builder or housing boards. Alternatively, you have to submit Agreement of Sale if buying a house in the secondary market.
- Title deeds/ lease deed and other relevant documents if you are availing a credit for upgrading your existing home to a ‘pucca’ or concrete structure with proper, all-weather concrete roofing.
Pradhan Mantri Awas Yojana and Banks
Before approaching your bank for the CLSS, check your application status using the registration number provided. Should your application be successful, you will be informed so by email or SMS on phone.
Simultaneously, your bank is also informed about the successful registration.
All other formalities regarding the housing loan under CLSS have to be completed at your bank.
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NOTE: Always choose the bank where your salary is transferred or you have regular dealing with, in case you are self-employed or run a small business. This will save you the hassles of getting bank statements and providing proof of income. A list of participating banks and financial institutions participating in the scheme is available at the Pradhan Mantri Awas Yojana website. Alternatively, you can also ask your bank if it is a participant in this scheme. You will also have to complete KYC and other loan application procedures at the bank.
Guarantees & collaterals
You do not require a guarantor to avail CLSS loans from banks under the Pradhan Mantri Awas Yojana. Instead, the house is held by your lender as the collateral. This system is similar to housing loans offered by banks, housing finance companies and other lenders.
The flip side of this collateral scheme is, the lender can forfeit your house if you are unable to pay the monthly installments for a prolonged period.
Additionally, you may have to pay stiff charges for delaying payment of monthly installments.
Latest developments in PMAY
During the budget for the financial year 2017-2018, the Union government has increased its allocation for Pradhan Mantri Awas Yojana.
The 2017-2018 Union budget allocates Rs.230 million to PMAY-Gramin as compared to an Rs. 150 million during fiscal 2016-2017.
The government hopes to complete some 10 million dwelling units in rural areas by the end of the financial year 2018-2019.
Meanwhile, captains of India’s booming construction industry estimate, large and small developers, as well as state housing boards, are expected to build some 40 million affordable housing units to meet the demand from people availing the Pradhan Mantri Awas Yojana scheme.
The Union government, they aver, will have to step up budgetary allocations for PMAY during the next financial year 2018-2019 as well as during three more fiscals till March 31, 2022, to achieve any significant progress in reducing slums and providing cheaper housing.
As we have read above, Pradhan Mantri Awas Yojana has several salient features that far outweigh its negatives.
Indeed, it is a scheme that may well change the landscapes of cities like Mumbai, where seedy, unhygienic slums and shanties vie with plush, state-of-the-art skyscrapers.
However, the Union government needs to clarify on a few points. These include:
- Whether a person who does not own a house is eligible to avail affordable housing, regardless whether her or his parents already possess a house.
- Are there any laws preventing slum dwellers rehabilitated in buildings from selling their homes and coming back on streets?
- Rules regarding owning a home in a place outside the native state of the applicant.
Additionally, state governments also need to announce any revisions to the LIG, MIG-I and MIG-II income requirements stipulated by the Center.
For example, applicants from Mumbai do not qualify under LIG schemes, though their annual income is below Rs. 600,000 per month.
A lot of ambiguity exists over PMAY. The Central and state governments have to take adequate measures by clarifying on various issues.