Pradhan Mantri Awas Yoajna (Urban) in 3 states 90,095 Affordable Homes
Govt approves 90,095 more affordable homes under PMAY(Urban) in 3 states
The total investment approved for the same is Rs 5,590 crore, with a central assistance of Rs 1,188 crore
The government on Monday approved construction of 90,095 more affordable houses for urban poor under Pradhan Mantri AwasYojana (Urban) with an investment of Rs 5,590 crore in three states. The central assistance for the same would be Rs 1,188 crore.
The ministry of housing & urban poverty alleviation (HUPA) has allotted the highest 82,262 houses in 49 cities and towns of Madhya Pradesh with an investment of Rs 5,260 crore with a central assistance of Rs 1,071 crore.
Jammu & Kashmir got 4,915 houses in 24 cities and towns with an investment of Rs 240 crore and central assistance of Rs 74 crore, while Dadra & Nagar Haveli’s capital Silvassa has been sanctioned 803 affordable houses with an investment of Rs 26 crore and central assistance of Rs 12 crore.
The government approved 46,823 new houses under the beneficiary led construction (BLC) component of PMAY (Urban), enhancement of 773 houses in Jammu & Kashmir under BLC and building 42,499 new houses in Madhya Pradesh under affordable housing in partnership (AHP) component.
In Madhya Pradesh, he will build another 39,763 new houses under BLC component under which an eligible beneficiary is assisted to build a house on the land owned. This takes the total affordable houses approved for Madhya Pradesh to 187,135 and for Jammu & Kashmir to 5,864.
The government has so far approved construction of 1,651,687 affordable homes for the benefit of urban poor under PMAY (Urban) with a total investment of Rs 89,072 crore with central assistance of Rs 25,819 crore.
Under BLC and AHP components of PMAY (Urban), central assistance of Rs 1.50 lakh is provided for each beneficiary.
After the recent changes in the PradhanMantriAwasYojana (PMAY), it seems that the interest in the scheme is picking up. Developers have started promoting their offerings in the affordable housing segment, which may sound tempting to those interested in government subsidy.
Real estate has its own share of concerns, both for the end-consumer as well as an investor looking to lock in funds for a quick gain. From a delayed home possession to oversupply of units, there’s a lot to tackle in such an illiquid and immovable asset class. PMAY may, however, still generate a positive response, especially if the builders live up to their promise in terms of construction quality and timely delivery. The infrastructure related to affordable housing is also something the government needs to address.
Meanwhile, the subsidy in PMAY is in real rupee terms. Existing guidelines are aimed at the economically weaker section (EWS) and the lower income group (LIG) category, earning Rs 3 lakh and Rs 6 lakh per annum respectively. The two new subsidy slabs (yet to be notified) will bring in people earning up to Rs 12 lakh and Rs 18 lakh per annum into the fold. Irrespective of the loanamount, the subsidy is fixed for each category of income level.
Government subsidy in percentage
The credit-linked subsidy of 6.5 per cent will be available only for loan amounts up to Rs 6 lakh. In the two new slabs, people earning up to Rs 12 lakh per annum will get 4 per cent interest subsidy on a loan amount of Rs 9 lakh, and the Rs 18 lakh per annum income category will get a 3 per cent subsidy on a loan amount of Rs 12 lakh. Any additional loans beyond the subsidised loan amount will be at a nonsubsidised rate. For all the slabs, the scheme will apply to loans with a tenure of up to 20 years.
Government subsidy amount
The interest subsidy amount will not be the differential of interest amount (of actual and subsided rate) but will be the net present value (NPV) of the interest subsidy amount. It is to be calculated at a discount rate of 9 per cent. For calculating NPV of the subsidy, one will need the loan’s amortisation schedule as the interest portion of each equated monthly instalment (EMI) has to be considered. Thereafter, use the Fx function in an excel sheet to arrive at the NPV.
Because of the subsidy amount, your loan amount reduces and, therefore, the interest burden too comes down. Let us now see how the interest subsidy amount will be calculated and how it will be applied to one’s loan.
I. First, let’s consider someone with an income up to Rs 6 lakh
(Maximum subsidised loan of Rs 6 lakh; Subsidy: 6.5 per cent)
Original loan amount: Rs 6 lakh
Interest rate: 9 per cent
EMI: Rs 5,398
Total interest cost (over 20 years): Rs 6.95 lakh
At 6.5 per cent (subsidy), the NPV of the interest subsidy amount comes to Rs 2,67,000.
This interest subsidy amount is what the government is offering to the borrowers. So instead of the Rs 6 lakh loan, the revised loan amount comes to Rs 3,33,000. Remember, the borrower has still to service the loan at 9 per cent per annum. This is because the interest subsidy amount will be credited upfront to the borrowers. The net effect: Reduced EMI and a lesser interest burden.