All you want to know about Credit Linked Subsidy Scheme

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.

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.

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).

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