For those who are planning to take a home loan to build a new house or buy one, there’s good news. Through the Pradhan Mantri Awas Yojana (PMAY) scheme, the government is providing a subsidy of ₹2.67 lakh on home loans. Understood? This subsidy means we don’t have to repay this amount to the bank; instead, the government pays it to the bank on our behalf. For example, if we have an outstanding loan of ₹2.7 lakh, including principal and interest, we need to clear it.
The government directly pays ₹2.67 lakh to the bank. So, if only ₹3,000 remains, paying that off clears the loan. This way, we don’t have to repay the subsidized amount; the government settles it for us, and we only need to clear any remaining balance to fully settle the loan. This is how the subsidy works. However, many people are unaware of this scheme and don’t apply for it. That’s why you need to know about it. In today’s article, I’ll explain what the Pradhan Mantri Awas Yojana is, how it works, who is eligible, and whether everyone qualifies or if there are specific conditions.
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Overview of PMAY Scheme
how the subsidy is provided, how much home loan you can get, and everything from A to Z. So, watch this video till the end, and if you haven’t subscribed to this channel yet, please subscribe. I’m your Kaushik, and let’s dive in. What is this scheme? The Pradhan Mantri Awas Yojana was launched by our government on June 25, 2015. Under this scheme, in places like Surguja, 22,000 poor families have been provided homes. The main objective of this scheme is “Housing for All”—ensuring every individual has their own house.
Goals and Progress of PMAY
The scheme was started with the goal that everyone should have their own home. In the recent budget, the Finance Minister clearly stated that in the next five years, through this scheme, two crore houses will be built. Despite challenges due to COVID, the implementation of PMAY (Rural) has continued, and we are close to achieving the target of three crore houses. Two crore more houses will be taken up in the next five years to meet the growing demand due to the increasing number of families.
Applying for PMAY with a Home Loan
So, if you’re planning to buy or build a house and apply for a home loan, apply for this scheme at the same time. Understood? This is a Credit-Linked Subsidy Scheme (CLSS). Credit means a loan—specifically, a home loan. You can’t directly ask for a ₹2 lakh subsidy without applying for a home loan; it won’t work. You need to apply for this scheme when you apply for a home loan.
Details of Credit-Linked Subsidy Scheme
As I mentioned, it’s a credit-linked subsidy scheme. The subsidy of up to ₹2.67 lakh is not given to us directly; it’s adjusted against the loan. Understood? The government pays this amount to the bank on our behalf. To apply for this scheme, you need to apply for it at the same time as your home loan application. For example, if you’re applying for a home loan at an Indian bank, tell them you also want the PMAY subsidy. The bank manager will provide an additional PMAY form along with the home loan form.
Application Process for PMAY
You need to fill out both forms, and if you’re eligible, you’ll receive the subsidy. Clear? You can also apply through the PMAY website—I’ve provided the link below—or through CSC (Common Service Centers). Understood? You can apply through banks, the PMAY website, or CSC centers when applying for a home loan.
Eligibility for Existing Home Loan Holders
A doubt might arise: if you already have a home loan from two years ago, will you get this subsidy? No, you won’t. That’s why you need to subscribe to the channel. You must apply for the subsidy at the time of taking the home loan, not later. So, you can apply in these ways. You might ask, “Okay, when applying for a home loan at a bank, what documents do I need to submit?” The documents required for a home loan are the same for this scheme. For example, for identity proof, submit your Aadhaar card or PAN card—either one will do.
Required Documents for PMAY
For address proof, submit a license, passport, or similar document. For income proof, if you’re salaried, provide Form 16 (ask your company for it), the last three months’ salary slips, and the last three months’ bank statements. If you’re self-employed or running a business, submit your profit and loss account, balance sheet, the last six months’ bank statements, and the last two years’ income tax returns. Understood?
Eligibility Criteria for PMAY
, who is eligible? First, your family’s annual income (combined income of all family members) must be less than ₹18 lakh. For example, if you’re married and have children, and you’ve created a separate ration card for your family (including you, your wife, and kids), the combined income of everyone listed on the ration card must be less than ₹18 lakh annually. If it exceeds that, you’re not eligible.
Income Verification Process
00:07:27 When you submit documents like Form 16 for yourself and your wife (if she’s employed), the bank manager will calculate the total income. If it’s, say, ₹16 lakh combined, they’ll approve the scheme. Otherwise, they won’t. Understood? That’s why you submit income proof during the application. They may also ask for a ration card to verify the family members listed.
Property Ownership Conditions
Second condition: no one listed on the ration card—neither you, your wife, nor your children—should own a house. Understood? If you have a ration card for your family (you, your wife, and kids), none of you should own a pucca house. A kaccha house (like a thatched roof) isn’t counted, but a pucca house with a concrete slab is. If you have a kaccha house, you can demolish it and build a new pucca house. Additionally, your age must be above 18. If you meet these eligibility criteria, you’ll definitely get the subsidy.
Income Categories and Loan Limits
Based on annual income, applicants are divided into four categories. For the Economically Weaker Section (EWS), if your family’s annual income is less than ₹3 lakh, you’re considered EWS. You can get a loan of up to ₹6 lakh. Understood? Can you get more than ₹6 lakh? It depends on the bank, but the PMAY subsidy is calculated only on a loan up to ₹6 lakh. Even if you take a larger loan, the subsidy applies only to ₹6 lakh.
Loan and Subsidy Details for LIG, MIG-1, and MIG-2
For the Lower Income Group (LIG), if your family’s annual income is between ₹3 lakh and ₹6 lakh, you’re classified as LIG. You can also get a loan of up to ₹6 lakh, and the subsidy is calculated on that amount. The bank may approve a higher loan, but the government calculates the subsidy only on ₹6 lakh. For Middle Income Group 1 (MIG-1), if your family’s annual income is between ₹6 lakh and ₹12 lakh, you can get a loan of up to ₹9 lakh. For Middle Income Group 2 (MIG-2), if your income is between ₹12 lakh and ₹18 lakh, you can get a loan of up to ₹12 lakh.
Subsidy Based on Income and Carpet Area
Why this division? Poorer individuals get more benefits, like a higher subsidy, while those with higher incomes get less. For EWS and LIG, the subsidy can go up to ₹2.67 lakh. For example, if you’re in the EWS category with an income of up to ₹3 lakh, you can’t build a large house. The carpet area (livable space, excluding walls) must be up to 30 square meters for EWS, 60 square meters for LIG, 160 square meters for MIG-1, and 200 square meters for MIG-2. If your house is larger, the government only considers the specified area for the subsidy.
Subsidy Calculation and Interest Rates
The government looks at the loan amount and carpet area to decide the subsidy. They’ve divided people into four categories based on family income, and the loan amount and subsidy depend on this. For EWS, the interest subsidy is 6.5%. For example, if a bank charges 10% interest on your home loan, and you’re in the EWS category, the government subsidizes 6.5%, so you effectively pay only 3.5% interest. This results in a subsidy of up to ₹2.67 lakh credited to your bank account.
Interest Subsidy for Different Categories
For LIG, the interest subsidy is also 6.5%, so the effective interest rate is 3.5%, with a subsidy of around ₹2.67 lakh. For MIG-1, the interest subsidy is 4%, so if the bank charges 10%, you effectively pay 6%, resulting in a subsidy of about ₹2.35 lakh. For MIG-2, the interest subsidy is 3%, so you effectively pay 7%, with a subsidy of about ₹2.3 lakh. The subsidy amount depends on your income category.
Example Scenarios for Subsidy
For example, if your annual income is ₹7 lakh, you fall under MIG-1, and you can get a loan of up to ₹9 lakh with a subsidy of ₹2.35 lakh for a 20-year tenure. If your income is ₹3 lakh (EWS), you can get a loan of up to ₹6 lakh with a subsidy of ₹2.67 lakh. You can check this on the PMAY website by entering your details. I’ve provided the link below.
Funding Structure of PMAY
You might wonder who’s providing this scheme—Jagan Mohan Reddy or Modi? In plain areas, 60% of the funding comes from the central government (Modi), and 40% from the state government (e.g., Jagan Mohan Reddy). In remote areas, it’s 90% central and 10% state. In Union Territories, it’s 100% central. Both central and state governments provide this benefit.
Importance of Term Insurance with Home Loans
Another important point: if you’re paying EMIs for a home loan and something happens to the family’s breadwinner, what happens to the family and the loan? That’s where term insurance comes in. When taking a home loan, also get term insurance. If something happens to you, the insurance (e.g., ₹2 crore coverage) will go to your family, ensuring financial security and helping clear the loan. Otherwise, the bank may seize the house. I’ve provided a link below for term insurance.
Benefits of Max Life Term Insurance
Among the best options is Max Life Term Insurance, which has a claim settlement ratio of over 99%. You can enter your details online and purchase it directly. It offers benefits like return of premium (if nothing happens to you, you get the premiums back), low premium amounts (e.g., ₹1,025/month for ₹2 crore coverage), and tax benefits under Section 80C. Women get a 20% lower premium with Max Life. You can also add riders for critical illnesses.