Pradhan Mantri Awas Yojana: Will FM Make Changes In Interest Subsidy, PMAY Limits This Budget?

One of the key expectations for Budget 2024 is a revision in housing support under Pradhan Mantri Awas Yojana (PMAY) for interest subsidies. Real estate is expecting measures in PMAY that could be beneficial for home buyers and boost affordable housing.

Amrita Gupta, Director of Manglam Group and Founder President of CREDAI Rajasthan Women's Wing said, "The focused announcements will make homes more accessible, aligning with the government's vision of 'Housing for All' as envisioned in schemes like PMAY."

Meanwhile, Aditya Kushwaha, CEO and Director Axis Ecorp said, "The recent focus on affordable housing is expected to continue, especially with FM Nirmala Sitharaman's interim budget announcement of adding 2 crore more houses to the PMAY-U scheme. A similar emphasis on affordable housing in the upcoming budget would be beneficial."

Incepted in June 2015, Pradhan Mantri Awas Yojana-Urban (PMAY-U) is meant for 'Housing for All' by giving Central assistance to implementing agencies through States/Union Territories (UTs) for providing all-weather pucca houses with basic civic amenities to all eligible urban beneficiaries.

PMAY(U) has made a mandatory provision for the female head of the family to be the owner or co-owner of the house under this Mission. A basket of options is adopted to ensure a greater number of people depending on their income, finances and availability of land through the following four options. These are:

1. "In-situ" Slum Redevelopment (ISSR)

2. Credit Linked Subsidy Scheme (CLSS)

3. Affordable Housing in Partnership (AHP)

4. Beneficiary-led individual house construction/enhancements (BLC)

For the upcoming Budget, Atul Monga, CEO and Co-Founder, of Basic Home Loan expects revision in the housing limit support under PMAY for interest subsidy benefits.

Monga said, "Affordable Housing Boost: Significant benefits and tax breaks are anticipated to encourage the development and purchase of affordable housing. There is also a call to adjust the qualifying cost of affordable properties, especially in expensive cities like Mumbai, where the current limit of ₹45 lakh is considered insufficient. Currently, interest subsidies under the Pradhan Mantri Awas Yojana (PMAY) are available for homes costing up to ₹45 lakh, but there are expectations to raise this limit to ₹65 lakh to reflect rising property prices."

As per the guideline, interest Subsidy up to 2.67 lakh per house is admissible for Beneficiaries of Economically Weaker Section (EWS)/Low Income Group (LIG), Middle Income Group (MIG)-I and Middle Income Group (MIG)-II seeking housing loans from Banks, Housing Finance Companies and other such institutions for acquiring/constructing houses. The interest subsidies of 6.5%, 4% and 3% on loan amounts up to Rs. 6 lakh, Rs. 9 lakh and Rs. 12 lakh are admissible for a house with a carpet area of up to 60, 160 and 200 Sq.Meter for EWS/LIG, MIG I and MIG II respectively. The benefit for EWS/LIG beneficiaries under CLSS works out to as high as Rs. 6 lakh over a loan period of 20 years.

How subsidy is released to beneficiaries? As per the government website, the subsidy would be released by the CNAs based on the disbursements made by PLIs to the beneficiaries. The subsidy, so disbursed by the CNA to the PLI, will be credited by the PLI to the borrower's account upfront by deducting it from the principal loan amount. As a result, the borrower will pay EMI on the remainder of the principal loan amount.

Here is an example: The borrower avails a loan for Rs. 6.00 lakhs and subsidy thereon works out to Rs. 2.20 lakhs, the amount (Rs. 2.20 lakhs) would be reduced upfront from the loan (i.e., the loan would reduce to Rs. 3.80 lakhs) and the borrower would pay EMIs on the reduced amount of Rs. 3.80 lakhs.

After winning India's election for the third consecutive time, Prime Minister Narendra Modi's government will present the Union Budget of 2024 anytime in July. With Budget FY25, Finance Minister Nirmala Sitharaman will be presenting the Budget most likely on July 23rd or 24th.