Subsidy on Interest Rates – How They can Help You Buy Your Home

The credit linked subsidy scheme (CLSS) is a scheme of the Central Government which was launched under the Pradhan Mantri Awas Yojana (PMAY) scheme in 2015.

The Ministry of Housing and Urban Poverty Alleviation (MoHUPA) launched the credit linked subsidy. The purpose of this scheme was to provide interest subsidy on home loans to people who are unable to get on the list of 2 crore homes.

What is the Credit-Linked Subsidy Scheme?

The credit linked subsidy scheme offers interest subsidy on home loans availed by the urban poor and middle group populace. The scheme was launched to make it affordable for poor and middle-class people to own a home. If you are eligible, you can easily claim a home loan interest rate subsidy of up to 6.5% as per your income level.

The credit linked subsidy scheme home loan under the Pradhan Mantri Awas Yojana was initiated to help people realize home dreams without paying higher EMIs.

What’s the Purpose of the CLSS Scheme?

The basic purpose of the credit linked subsidy scheme is to offer interest subsidy to eligible beneficiaries.

The eligible home loan subsidy (up to 6.5%) is credited to the home loan accounts of the beneficiaries which leads to the overall reduction of the principal amount. Hence, when the principal amount gets reduced so is your home loan EMIs which in turn, helps to save money.

Let’s clear the air around the same with a relevant example:

A beneficiary availing the credit linked subsidy scheme under the Pradhan Mantri Awas Yojana takes a home loan of Rs.6,00,000 for funding a home purchase. The interest subsidy of Rs.1,56,712 as per the income group gets credited to the loan account. Now, the beneficiary only needs to repay the remaining principal amount of Rs.4,43,288 only and not Rs.6,00,000.

Accordingly, his/her EMI will get adjusted and he will be able to pay a lower housing loan EMI.

Beneficiaries under the Credit-Linked Subsidy Scheme

A family/household will emerge as the beneficiary if it belongs to the discussed income group such as:

  • People belonging to Economically weaker section and earning lesser than 3 lakhs
  • Lower income group of people (LIG) earning an income between Rs.3 lakh and Rs.6 lakh
  • The people belonging to the Middle-income group (MIG-I) and earning an amount between Rs.6 lakh and Rs.12 lakh
  • Middle-income group (MIG – II) taking home a salary or annual income between Rs.12 lakh and Rs.18 lakh

A family here, in this case, comprises of a husband, wife and unmarried sons and daughters (children)

Who will earn How Much Interest Subsidy on Home Loan CLSS Scheme?

The rate of interest subsidy will be:

  • 5% for the Economically weaker section (EWS) and Lower income group (LIG)
  • 4% for Middle-income group category I, and
  • 3% for Middle-income group category II

How is the Amount of Interest Subsidy Calculated?

The figure for home loan interest subsidy gets calculated through the Net Present Value (NPV) technique.

The Eligibility Criteria for Credit Linked Subsidy Scheme at a Glance

  • The people applying for the CLSS must not have a pucca house in India
  • The home loan sanctioned after 17th June 2015 is eligible for the interest subsidy
  • The maximum amount that’s applicable for interest subsidy is Rs.6 lakh
  • You can get a maximum of up to 20 years as the housing finance tenor
  • The beneficiary should not have availed earlier housing schemes of the Government ever

The Bottom Line

As you now know the basic inputs about the credit linked subsidy scheme, you can apply for it after assessing your needs and repayment capacity. All the best!

andrew Author

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