pmay scheme

How Can PMAY CLSS Help Buy Your Dream Home?


Earning above 50,000 a month and searching for a home to buy? Well, you have quite an exciting option of Pradhan Mantri Awas Yojana (PMAY), launched by the government to house everyone by 2022, to avail.

The flagship housing program has now got the string of  Credit Linked Interest Subsidy (CLSS), which makes it an attractive proposition for the prospective home buyers. What subsidy does well is lower the interest cost associated with a home loan.

CLSS, currently, has two segments – MIG-I and MIG-II. The other two EWS and LIG, which were also the part of CLSS earlier, no longer exist. The MIG-I and II are going to be applicable till March 2019, extended from the previous deadline of December 2017. Let’s just explore the benefits of PMAY CLSS in the article.

How Much Subsidy Available Under PMAY CLSS?

Middle Income Group -I (MIG-I) lists those borrowers having an annual income of above 6 lakhs-12 lakhs, while MIG-II includes people earning above 12 lakhs-18 lakhs a year. While MIG-I is entitled to a 4% interest subsidy on a loan amount of 9 lakhs, the MIG-II enables a borrower to avail 3% subsidy on a loan portion of 12 lakhs. The unsubsidized portion of the loan in each of the two cases will bear a normal rate of interest.

Hearing this, a lot many can say that interest subsidy will be calculated from the differential of interest amount under subsidized and normal rates. But that’s not how it’s calculated. In fact, it’s calculated by the net present value (NPV) of the interest subsidy amount. The NPV calculation is to be made at a discounted rate of 9%. The interest subsidy so calculated is first deducted from the original loan amount before the normal rates apply to a balance amount of the loan.

Mathematics of PMAY CLSS

To understand the mathematics better, you must take a look at the example below.

Example – You earn ₹58,000 per month and so fall under the MIG-I category. You are planning to avail a 20-year home loan of ₹45 lakhs, having a normal interest rate of 8.45% per annum. Without CLSS, you are likely to pay an EMI of ₹38,910, which can culminate into an interest outgo of as much as ₹48,38,342. The total payout would thus be ₹93,38,342.

In this case, the subsidy amount is calculated to be 2,35,000. Now, this amount will get subtracted from the original loan of 45 lakhs to arrive at 42,65,000, on which the normal rate of interest will apply. The EMI and interest outgo after subsidy would thus be ₹36,878 and ₹45,85,673, respectively. The total repayment is likely to be ₹88,50,673, decreasing the overall liabilities by ₹4,87,669.

Someone falling under the MIG-II would receive a subsidy of ₹2,30,000. The remaining process of EMI and other calculations remains the same.

No Processing Fee – Another Temptation That’s Hard to Resist

What’s more is that home loans can be disbursed without any processing fee under the PMAY scheme. So, a fee of 10,000-20,000 which remains the case with normal home loans won’t apply here, resulting in enhanced savings.

Where to Apply for PMAY CLSS Home Loans?

Most public sector banks including State Bank of India (SBI), premiere private lenders, housing finance firms, and a few others have joined hands with National Housing Bank (NHB) to make sure the subsidy reaches to the PMAY CLSS home loan applicants.

CLSS Scheme Eligibility

You must also know the factors that can make you eligible for the scheme. First and foremost, there shouldn’t be any home under your/spouse/father/mother’s name anywhere in India. The home loan, which you want to buy or construct, must have a carpet area of 120 square meters, as you are in MIG-I category. For those in the MIG-II category, the carpet area requirement is 150 square meters.

The article has thus done its job of enlightening on subsidy, its calculation, the eligibility one must have to avail it, and other critical information. So, don’t wait for the last date of CLSS scheme to arrive, avail it now to buy your dream home and save on the interest repayments.

Vikas Das is one of those expert writers in finance who has enlightened the readers about various banking and investment products like personal loan, home loan, car loan, mutual fund, fixed deposit and others.

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