All of us wish to go back to ‘OUR HOME’ after a hard day’s work. Unfortunately, in our country, this is true for only a few individuals.Rest have to either live under the open sky as ‘homeless’ or rent an accommodation. This is an unfortunate scenario across India as after Independence successive governmentspromised pucca house to every individual of this country but had miserably failed to provide one.
During his election campaign and as a part of his party’s manifesto Prime Minister Narendra Modi had promised ‘House for All’. True to his words, he launched the now famous Pradhan Mantri Awas Yojana (PMAY) in June 2015.
After the launch of this scheme, I have met scores of people across India and have realized that there is lack of awareness and the information about this great initiative has not been disseminated properly to the masses. I have toiled hard to gain insights into this topic since its inception by reading scores of literature and meeting many people directly involved with PMAY. I feel indebted to share my knowledge on this subject with my followers and avid readers so that they can take advantage of this initiative. I have been asked the following questions, which I will try to answer through this writeup:
- What is vision and purpose of PMAY?
- What are the different categories of accommodation available under this scheme?
- Who all are eligible and can apply under this scheme?
- What is Credit Link subsidy and how is it different for various categories?
- What are benefits to the buyer and builder under PMAY scheme?
- While applying for a house under PMAY, which documents do I need to furnish?
The PMAY scheme has been envisaged with the vision to provide a ‘liveable’ house to every Indian who does not have a houseby the year 2022, the year that marks the 75th year of Indian Independence. Under this scheme 2 crore houses will be built for all eligible poor families and beneficiaries across all the States and Union territories of India. Research conducted by the government has revealed startling facts about the dismal condition of housing in the country.
- Out of 7,935 cities and towns in India, 495 urban cities have a population of over 1 lakh.
- There is a demand for 1.9 crore houses, of which approximately 96% is for the Economically Weaker Section (EWS) and Lower Income Group (LIG).
- An estimated 40-45% of households earning INR 10,000 – 25,000 per month live in rented accommodation.
The scheme encompasses four broad programs for successful implementation of the initiative:
- Slum rehabilitation
- Provision of credit-linked subsidy for the weaker section
- Provision of affordable housing by collaborating with public and private sectors
- Beneficiary-led house construction or enhancement
Some of the key features of the PMAY scheme are:
- Housing and Urban Development Corporation (HUDCO)and National Housing Bank (NHB) have been identified as Central Nodal Agencies (CNAs) to channelize the subsidy to the lending institutions and for monitoring the progress of this component. Ministry may notify other institutions as CNA in future.
- Beneficiaries can apply for the loan either directly or through Urban Local Body or NGO or through the Local Agency identified by the State/ULB.
- NRIs are also eligible under the scheme.
- Under the Pradhan Mantri Awas Yojana (Urban), government has set an ambitious target to construct as many as 2 lakh houses in 2017-18, although only 1.49 lakh houses were built under the scheme in 2016-17.The proposal for construction of 18.76 lakhs houses have been sanctioned, and funding for construction of 13.06 lakh houses has been issued. But, due to delay in land acquisition, only 1.49 lakh houses have been completed under PMAY (Urban) in 2016-17. The future plan for construction is as follows:
- 26 lakh houses in 2018-19
- 26 lakh houses in 2019-20
- 30 lakh houses in 2020-21
- 80 lakh houses in 2021-2022
The scheme offers 4 different categories of accommodation, these are :
- MIG I
- MIG II
The scheme is applicable to the following:
- Purchase of house/flat, construction of house on the site owned, or purchase of flats under construction.
- Repairing work and addition of rooms, kitchen, toilet etc. to existing dwelling kuccha unit requiring extensive renovation to make pucca house for EWS/LIG beneficiaries.
- The carpet area of house being constructed/enhanced should be upto 30 sq. meters for EWS beneficiaries, 60 sq. meters for LIG beneficiaries,90 Sq.meters for MIG I and 110 Sq. meters for MIG II respectively. (Carpet Area is the Area enclosed within walls).
- A house is defined as an all-weather single unit or a unit in a multi-storied super structure having carpet area of upto 30 sq.meters for EWS and up to 60 sq.meters for LIG 90 sq.meters for MIG I and 110 sq.meters for MIG II category with adequate basic services.
- The eligible beneficiary, at his/her discretion, can build a house of larger area for EWS/LIG beneficiaries only but interest subsidy will be limited to loan amount of first Rs.6 lakh only.
- For extension/repairs to the existing houses, the area limit will be 30 sq. m and 60 sq. m built up area for EWS and LIG category respectively.
Various details in each of these categories along with Credit linked interest subsidy are summarized in the table below:
|Household Income (Rs. p.a)||3,00,000||6,00,000||12,00,000||18,00,000|
|Interest Subsidy (% p.a.)||6.5%||6.5%||4%||3%|
|Maximum loan tenure (in years)||20||20||20||20|
|Eligible Housing Loan Amount for Interest Subsidy (Rs.)||600,000||6,00,000||9,00,000||12,00,000|
|DwellingUnit Carpet Area||30 sqm||60 sqm||90 sqm||110 sqm|
|Discount Rate for Net Present Value (NPV)calculation ofinterest subsidy (%)||9%||9%||9%||9%|
The scheme is open from 17.6.2015 to 31.03.2022 for EWS/LIG and MIG I & MIG II will be in operation from 01.01.2017 to 31.12.2017to all residents of India including Non Resident Indians (NRIs) provided they fulfil the eligibility criteria set up for this scheme.
The PMAY-linked loan can be availed from any primary lending institution such as scheduled commercial banks, housing finance companies, Regional Rural Banks, State Cooperative Banks, Urban Cooperative Banks, Small Finance Banks, and Non-Banking Financial Company. No processing fees will be levied for eligible housing loan amount. For additional loan amount,the lenders may charge the normal processing fee.
The eligibility criteria for the scheme under various categories is as follows:
- A person or his immediate family ‘beneficiary’ should not own a ‘pucca’ home anywhere in India. Beneficiary means husband, wife, unmarried son/s and/or unmarried daughters.
- Age of the beneficiary should be between 21 years to 55 years. However, if the age of the head of family/beneficiary is more than 50 years, the major legal heir will have to be part of loan.
- An adult earning member is considered as a separate household and is eligible to apply.
- In case of a married couple, either of the spouse or both together in joint ownership will be eligible for a single house, subject to income eligibility of the household under the scheme
- Income criteria for various categories of houses:
- For EWS or CLSS LIG: The household income of the beneficiary is up to ₹6,00,000 per annum.
- For CLSS MIG I house: The household income of the beneficiary is up to ₹6,00,000 to 12,00,000 per annum.
- For CLSS MIG II house: The household income of the beneficiary is up to ₹12,00,000 to 18,00,000 per annum.
The following documents are required to be furnished at the time of applying for the scheme
- Application Form duly filled in
- Self-declaration – EWS/LIG/MIG Income certificate
- Self-Affidavit Income Certificate (only if the income is below taxable limit)
- Unique Identification – PAN Card / Aadhaar No./ Voter’s Card Driving License /MNREGA No./ Any Other Number or A Certificate of house ownership from Revenue Authority of Beneficiary’s Native District, etc.
- Nationality Identification Proof
- Proof of category (belonging to SC/ST/OBC/Minority etc.)
- Copy of Address Proof
- Income Proof – Original Salary slip / salary Certificate /other income.
- Latest I.T.Return/ I.T Assessment Order/Form no 16 if applicable
- Statement of Bank Accounts – last 6 months
- A brief note on 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 valued earlier.
- The approved plan of Construction.
- Architects/Engineers Certificate confirming cost of construction / cost of repairs / Cost of improvements / cost of Extension.
- Architects Certificate confirming expected life, fitness and future of Flat / House in case of purchase.
- Agreement for construction with Builder/Developer
- NOC from Housing Society / Competent Authority
- Affidavit-cum-Undertaking to the effect that the construction is in an authorized area, construction is strictly as per sanctioned plan/building bye-laws, loan is being availed for acquiring plot/house/flat for residential purpose only.
- Receipt of advance payment made to builder / seller. If any
- Affidavit from the beneficiary that either he / she or any of the family members do not own a pucca house (all weather dwelling unit) in any part of India.
- Letter of Allotment of Property (where property is proposed to be purchased from builder / housing boards, etc)/OR Agreement to Sale (where resale property is proposed to be purchased), Title deeds / Lease Deed / Mutation in respect of pre-owned property, which is to be extended.
There are multifold benefits for buyers and builders from PMAY scheme. The key benefits are:
Benefit for Common man/ Buyers
- Subsidy: A subsidy will be granted to people from LIG or EWS segments. It will come from the central government treasury and will range between Rs.1,00,000 to 2,30,000. The subsidy can be used only for possessing a house under this scheme.
- Subsidized rate of interest: The Pradhan Mantri Awas Yojana comes with a promise of substantial decrease in the rate of interest. For a loan under this scheme up to the amount of Rs. 600,000, the applicable rate of interest would be 6.5% as against the current market rate at 10.5%.
- Credit-linked loan subsidy directly deposited : Primary Lending Institute (PLI) will directly deposit the loan subsidy in beneficiaries account. This will prevent any middle man from siphoning funds.
- Zero Processing fees : No processing fees will be levied on eligible loan within the specified amount.
- Preference to females: Female members will be given the preference in case of allotment of houses. In other words, female applicants will be given the priority over male applicants. This makes the scheme a pro‐women scheme.
- Ground floor houses for physically challenged:For ground‐floor houses, preference will be given to the people who are disabled or who are aged.
- Eco‐friendly houses: It has been strictly instructed that the housing enclaves developed should strictly follow the eco-friendly construction technology.
- Loan to EWS or LIG for renovation or extension: A person from EWS or LIG category can also avail this loan if he /she already possesses a house but that needs renovation or extension or he/she actually wants to build a new house on his own instead of purchasing a house from the government‐made homes. If the loan is taken for extension or renovation of an old house, the carpet area has to be 30 sq meters for EWS category people and 60 sq. meters for LIG category people. If this condition is not fulfilled, the loan would not be granted.
- Development of slum areas The slum areas to be developed using land as a resource with the help of private participation.
Benefit for Builders:
- 100% tax exemption: for all the private players involved in the construction of 30 sq mtrs houses in the four metros and 60 sq mtrs in all other cities that are approved for the period from June 2016 to March 2019 of affordable housing segmentand is completed within three years of the approval.
- 100% excise duty exemption for Ready Mix Concrete: this will help in bringing down the cost of construction, making housing affordable.
- Service tax exemption : Service tax exemption on construction of affordable houses up to 60 square metres under any scheme of the Central or State Government including PPP Schemes.).
To conclude, I would like to statea famous quote by John Paulson ‘… buying a house is the best investment any individual can make’. I know every individual would agree with this. I will be extremely happy if this small endeavourof sharing this valuable information from my end can benefit the common manof this country in gaining knowledge, applying for the scheme, and procuring his/ her own house. This I can proudly say will be the true success of this great scheme – Pradhan Mantri Awas Yojana.
CA Sunil Kumar Gupta
Business Expert, Economist, Author & Philanthropist