As house prices show an upward trend with the recovering economy, the subject of affordability comes into question, especially for the sections of society whose income levels haven’t risen in proportion to the rising costs of construction and housing. In order to protect the interest of these people, the government has come up with the Pradhan Mantri Awas Yojana Housing Scheme.
The Pradhan Mantri Awas Yojana (PMAY) is an initiative launched by the Government of India which aims to provide affordable housing to certain sections of the society.The scheme aims to construct around 20 million affordable priced houses by 31 May 2022.
Targeting the Urban Poor, PMAY had created waves of change since its inception by making house acquisition affordable for large numbers of people.
If you are looking to purchase a house under the PMAY scheme, here is everything you need to know.
The overarching purpose of PMAY is to provide affordable housing for the urban poor. Apart from that, here are the following features that must be highlighted.
1. The major reason why PMAY was introduced was to provide a level playing ground for the economically disadvantaged members of the society.
2.It prioritizes housing for women and those belonging to the minority castes, including those belonging to the Scheduled Castes and Scheduled Tribes.
3.Senior citizens benefit from the scheme as the government prioritizes their need to acquire a ground floor property.
4.Upon registration, the members can avail its benefits.
5.It is mandatory for the women to be named the beneficiary of the property.
6.Other minority individuals, including the transgender community, widows and those belonging to the Lower Income Group, are also included in this scheme.
The scheme was introduced to bridge the gap between the demand and supply of housing especially in urban areas. With the fluctuating economic conditions and the rising prices of raw materials, the cost of owning a house has become high. In order to combat this demand-supply problem, the government has undertaken the responsibility to bring affordable housing for all. The following are the key objectives of the scheme:
1.To undertake the help of private developers to rehabilitate slums.
2.To use the Credit Linked Subsidy Scheme to help underprivileged sections of the society secure housing.
3.To conduct private-public partnerships in order to construct affordable housing.
4.To provide subsidies for beneficiary-led individual house construction.
Beneficiaries of PMAY(U) mainly include:
Middle Income Groups (MIG I) with annual income between Rs. 6 -12 LakhMiddle Income Group (MIG II) with annual income between Rs. 12 -18 Lakhs
Low-income Groups (LIGs) with annual income capping between Rs. 3 -6 Lakh
Economically Weaker Sections (EWS) with an annual income capping Up to Rs. 3 Lakh
It must be noted that beneficiaries from LIG and MIG are eligible only for the Credit Linked Subsidy Scheme that comes under PMAY while beneficiaries from EWS are eligible for complete assistance. The applicant must submit an affidavit as a support to his income proof for them to be able to be recognized as an LIG or EWS beneficiary under the Scheme.
Here is an illustration that will help you understand the mechanics of the scheme.
Let’s say you fall in the MI G-II category (i.e. your total household income is between Rs 12-18 Lakhs). You are planning to buy a house worth Rs 50 Lakhs. Your minimum down payment would be 20%, i.e. Rs 10 Lakhs, and you can arrange the remaining amount via a loan.
However, under PMAY, MIG-2 category applicants are eligible for a subsidy of 3% on loans upto Rs 12 Lakhs. Therefore, for the remaining Rs 28 Lakhs of loan, you will have to pay the regular (non-subsidized) interest rate to the lender.
The PMAY scheme offers subsidies to beneficiaries. This means that the interest rates charged under the scheme fall under a lower bracket than the regular interest rates offered by financial institutions. This effort is undertaken to ensure that everyone can afford housing without being bogged by high interest rates for loans.
Let us elaborate further with an example.
For a loan amount of Rs. 6 lakhs given at an original interest rate of 9% for a period of 20 years, a beneficiary belonging to the LIG category will get the loan at a subsidised rate of 6.5%. Here, the Net Reduction in EMI is Rs. 2405
Apart from the regular documents that are required to submit a loan application, there are several other documents and proofs that are necessary for you to avail the benefits of the PMAY scheme.
Affidavit and Declaration that proves that the beneficiary family does not own any pucca house.
1.Annual household income with self attested income certificates and salary slips.
2.Declaration for property under construction, if applicable – Construction Agreement with the developer or builder, Valuation Certificate for the property you intend to buy, Receipt of advance payment for the property you intend to purchase.
3.Identity Proof – Aadhaar Card/PAN Card/Driving License/Voters’ ID
4.Copy of Address Proof.
5.NOC from a Competent Authority or any Housing Society.
Affordable housing is a subject that has held widespread interest not only for potential buyers but also developers who are looking to enter the market and build houses that can be bought by all. If you are interested to know further about the scheme, head to https://pmaymis.gov.in/. And if you’re on the lookout to invest in residential plots and housing, head to Wisdom Properties!