Credit Linked Subsidy Scheme (CLSS) aims at giving an impetus to the middle-income group in order to realise its home-buying dream.

Ministry of Housing and Urban Poverty Alleviation (MoHUPA) had introduced on June 2015, an interest subsidy scheme called Credit Linked Subsidy Scheme (CLSS) under Pradhan Mantri Awas Yojana (PMAY), for the purchase and construction of homes catering to the Economical Weaker Section (EWS) Lower Income Group (LIG) Middle Income Group (MIG), given the projected growth of urbanisation and the consequent housing demands in India.

What benefits can the Middle Income Group (MIG) avail?

If you are a young professional, with an annual income of Rs 6-12 lakh, you can avail a housing subsidy of four per cent. And if your annual income is between Rs 12-18 lakh, you can avail a subsidy of three percent.

For instance: if you earn Rs 18 lakh per annum, you are eligible for a subsidy of three per cent on the first Rs 12 lakh of the total loan amount. If you plan to buy a house worth Rs 75 lakh, then you are eligible for a home loan of 80 percent of this amount, which is Rs 60 lakh (all banks have different eligibility criteria). The remaining amount has to be paid by the borrower.

Once your loan gets sanctioned, the bank sends your application to the National Housing Bank (NHB) for a CLSS subsidy wherein NHB evaluates it. After a green signal from the NHB, the borrower gets the subsidy of Rs 2.30 lakh (three percent interest on Rs 12 lakh), which is credited directly into your account by the bank. On the remaining amount (in this case Rs 60 2.30 = 57.70 lakh), the borrower will have to pay the EMI, as per the current home loan interest rates, depending upon the bank heshe takes the loan from.

"We send the list of eligible borrowers and cases to NHB. They take about a week's time to check the documentation and revert to the bank with the subsided amount. As soon as the subsidy comes to us, within two-three days, we credit the subsidy into the borrower's account," informs Renu Sud Karnad, Managing Director, HDFC Bank.

Scheme Details:

 Beneficiaries of MIG will be eligible for an interest subsidy with following feature:

Particular

MIG-I

MIG-II

House hold income (Rs.p.a.in Lakh)

6-12

12-18

Interest Subsidy (% p.a.)

4%

3%

Maximum Loan Tenure (in years)

20

20

Eligible housing loan amount for interest subsidy (Rs. in Lakh)

9

12

Max interest subsidy eligible (Rs.in Lakh)

2.35

2.30

Dwelling Unit Carpet Area

90 sq mts

110 sq mts

Discount rate for Net Present value (NPV) calculation of interest subsidy

9%

9%

 

The announcement is also seen as a much needed push to the real estate market as it implies that over 55 percent of the stock that is available is between Rs 40 and 70 lakh, which comes under the category of MIG I and MIG II. According to experts, banks have enough money to lend and hence, consumers should take advantage of it. Also, the idea behind the scheme is constant upgrade. The poor should upgrade to the lower-middle class and the lower-middle class should upgrade to the mid-income segment.

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