How Buyers Benefit from Credit Link Subsidy Scheme

How Buyers Benefit from Credit Link Subsidy Scheme

Credit Link Subsidy Scheme (CLSS) is one of the parts of PMAY (Pradhan Mantri Awas Yojana). CLSS scheme was launched to promote affordable housing for all by 2022 under PMAY. The scheme is introduced to give interest concession to financial borrowers who are looking to secure a house loan from different lending institutions under Pradhan Mantri Awas Yojana Scheme (PMAY Scheme). Almost 70 banking and non-banking institutions like housing finance institution, small finance institution, rural banks and commercial banks are collaborated with National Housing Bank (NHB) to provide financing to people for affordable houses.  

The CLSS provides interest subsidy on housing loan taken by the urban and middle-income group people. The main aim of the CLSS scheme is to make home loans affordable for urban poor and middle-class people as they can own a house. The scheme was launched in 2015 for Economically Weaker Sections (EWS) and Lower Income Group (LIG) as Credit Linked Subsidy Scheme for EWS (Economically Weaker Sections) and LIG (Lower Income Group). In January 2017 it was expanded to include Middle-income group (MIG) as Credit linked subsidy scheme (CLSS) for MIG.

Eligible Beneficiaries of the Interest Subsidy

The beneficiary income groups of the subsidy scheme are as follows.

  • The income of husband, wife, unmarried sons and unmarried daughters will be considered under Annual family income.
  • Economically weaker sections (EWS) – Annual family income is less than Rs 3 lakhs
  • Lower Income Group (LIG) whose Income is between Rs 3 lakhs and Rs 6 lakhs
  • Middle-income group-1 (MIG-I) their Income should be between Rs 6 lakhs and Rs 12 lakhs
  • Middle-income group-2 (MIG-II) income is between Rs 12 lakhs and 18 lakhs.
  • This subsidy is available for housing loans used for constructing a new house or buying a house.
  • In the case of married couples, either of the spouse or both together in joint ownership will be eligible for a single subsidy.

What is the Interest Rate of Subsidy Scheme?

The amount of interest subsidy is calculated by the Net Present Value (NPV) method and used for the NPV calculation of interest subsidy is 9%.

  • The subsidy interest rate for EWS and LIG is 6.5 %
  • For MIG-I 4 % subsidy interest rate
  • The subsidy interest rate for MIG-II is 3%

What is the Loan Tenure Under CLSS?

Under CLSS, the loan amount of maximum up to 6 lakhs home loan is given with a maximum of 20 years tenure. An interest subsidy rate under the scheme is 6.50% for a tenure of 20 years or during the tenure of the loan for all Housing Finance Companies and other related institutions.

Subsidy Scheme Eligibility for EWS and LIG:

The families who are eligible under the scheme should not have a pucca house in India. It is available for those whose home loans are approved after 17th June 2015 for constructing or buying a house. The amount of Rs.6 lakhs is the eligible loan under the scheme. There will be a 20 years maximum tenure given for the home loan. The carpet area of property should be 30 sq.mts. and 60 sq.mts. The beneficiary would not have any house that is given under government schemes with the name of their family members.

Look at Eligible CLSS for Economically Weaker Section (EWS) and Lower Income Group (LIG) categories in the below table.

              Section

                         LIG

                              EWS

  Limit of annual income

        Rs. 3 Lakhs  to Rs. 6 Lakhs

                       Rs. 3 Lakhs

     Size of the House

          60 Square Meters.

                    30 Square Meters

       Interest Subsidy

                         6.50%

                              6.50%

  Limit for subsidy loan

                      Rs 6 Lakhs

                        Rs 6 Lakhs

       Subsidy Loan Tenure

            20 years or less than this

           20 years or less

   Max. Subsidy Amount

                Rs. 2.2 Lakhs

             Rs. 2.2 Lakhs

Subsidy Scheme Eligibility for MIG-1 and MIG-II:

The eligible beneficiary families should not have a pucca house or own a house in India. The subsidy is benefited to those whose housing loan approved after 1st Jan 2017. The amount of Rs.9 lakhs to Rs.12 lakhs is the maximum home loan given under the scheme and tenure of the loan is 20 years or less than that. The maximum carpet area of houses should be up to 90 square meters and 110 square meters. Also, the beneficiary families should not have any other house under any scheme from the Government. The subsidy will support the acquisition/ construction of the house.

Look at Eligible CLSS for MIG 1 and MIG 2 in the below table.

            Section

            Middle Income Group 1

              Middle Income Group 2

 Limit of Annual Income

         Rs. 6 Lakhs  to  Rs. 12 Lakhs

           Rs. 12 Lakhs to  Rs. 18 Lakhs

        Size of the House

            160 Square Meters.

                  200 Square Meters.

  Subsidy Interest Rate

                            4%

                                       3%

      Limit of subsidy loan

                     Rs. 9 Lakhs

                           Rs. 12 Lakhs

          Subsidy’s Tenure

            20 years or  less

                        20 years or  less

How to Apply for CLSS Scheme?

The people who are eligible for interest subsidy scheme under CLSS LIG or EWS or MIG can directly apply to Reputed Lending Institutions. The Prime Lending Institutions (PLIs) after the due verification of applications will sanction loans, and later Central Nodal Agencies (CNAs) will claim the subsidy.

Is There Any Processing Fees For Applying CLSS?

There will be no processing fee charged by PLIs for applicants applying under CLSS. Therefore, making no hassle for the applicants to plan their EMIs and avail the benefits of this scheme.

Conclusion

The proposed Credit Link Subsidy Scheme (CLSS) is positive to many first time home buyers and assist them in owning a home. The maximum families will have their own house and lead a comfortable life. The repayment of housing loans (principal repayment under Section 80C and interest payment under Section 24 provides tax benefits. If you are in a plan to purchase a house, this scheme will facilitate your decision.

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By: Shailaja K