Slate

All you want to know about Credit Linked Subsidy Scheme

Bavadharini KS | Updated on January 28, 2020 Published on January 28, 2020

With the real estate sector going through difficult times, expectations run high on the Budget doling out more sops to revive the sector, particularly for Pradhan Mantri Awas Yojana (PMAY), the affordable housing scheme. One of the key schemes through which the Centre has been trying to push demand for affordable housing is the credit linked subsidy scheme (CLSS) which offers an interest subvention on low-ticket housing loans.

What is it?

The CLSS is the only scheme under the PMAY (Urban) which is directly implemented by the Centre. Through this scheme, the Centre provides direct subsidy on home loans taken by urban buyers of affordable homes, with incomes below specific thresholds. The benefits are targeted at individuals from economically weaker sections (EWS), the lower income group (LIG) andthe middle income group (MIG).

Under this scheme, individuals purchasing a new affordable home can get interest concessions of 3-4 per cent on the amount borrowed, subject to some conditions. The subsidy is calculated as the present value of interest savings on home loans over the entire tenure of the loan, capped at a maximum of ₹2.35 lakh.

This subsidy is deducted from the principal dues of the borrower, reducing the amount of EMIs payable.

For getting the subsidy, the borrower has to submit a self-declaration on the income and title of the property to be acquired, to the lender who verifies these details.

Though the banks are supposed to give immediate credit to the borrower, the lender gets subsidy amount only after the claim is processed by the nodal agency with which it is registered. Recent reports suggest delays in receipt of subsidy by the lenders, leading to poor interest in promoting it.

Why is it important?

While owning a house is every individual's dream, high property prices have kept homes out of buyers' reach in India. With the affordable housing segment gaining traction both from developers and home buyers, and the CLSS helping the process, the gap between home buyer aspirations and what’s available in the market could narrow.

Given that the real estate sector is reeling under a slowdown due to lack of demand, high unsold inventories and high property prices, developers have started launching more projects in the less than ₹1 crore segment. Last year saw nearly 40 per cent of project launches in the affordable housing segment, according to a report by property consultant Anarock.

The subsidy scheme has seen a notable rise in beneficiaries according to the annual report of the Ministry of Housing & Urban Affairs.

There were 5,67,950 beneficiaries to whom a subsidy of ₹12,717 crore had been disbursed until March 2019. This amount had been ₹1,684 crore in March 2018 (83,334 beneficiaries).

Why should I care?

If you are an affordable home buyer falling under any of the above income categories, then CLSS can help you shave a good bit off your EMIs.

But it comes with caveats. For one, this benefit is available to borrowers in four income segments — MIG I (₹6-12 lakh), MIG II (₹12-18 lakh), LIG (₹3-6 lakh) and EWS (up to ₹3 lakh). Two, in addition to income levels, the subsidy is subject to carpet area limits on the property you buy, at 200 square metres for MIG II, 160 sq.m for MIG I, 60 sq.m for LIG and 30 sq.m for EWS. Three, the maximum loan on which CLSS can be availed of is ₹12 lakh for MIG II, ₹9 lakh for MIG I, ₹6 lakh for EWS/LIG. Finally, all houses constructed or purchased under PMAY will need to be the first house owned by the beneficiary.

The bottomline

Have you been fretting about why only farmers and BPL families get subsidies? Buy an affordable home, meet the eligibility criteria and you can pocket a subsidy too.

A weekly column that puts the fun into learning

Published on January 28, 2020

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.