Credit Linked Subsidy Scheme

Credit Linked Subsidy Scheme

Prime Minister Narendra Modi gives new guidelines of CLSS for Middle Income Group (MIG) people. This scheme is the part of Narendra Modi Scheme of Pradhan Mantri Awas Yojana (PMAY). Under this housing scheme, the people of MIG category will be provided loan on subsidy.

Here are the important points you need to know about Credit Linked Subsidy Scheme for Middle Income Group:

  1. Middle-income groups (MIG) who earn above Rs 6.00 lac or up to Rs 18 lac annually are eligible for interest subsidy on housing loans under the new CLSS (MIG).
  2. The people who have been approved housing loans; also, whose applications are under consideration since 1st January this year are also eligible for interest subsidy.
  3. The Prime Minister has declared interest subsidy of 4% on housing loans of up to Rs 9 lac of those with an income of Rs 12 lac a year and of 3% on housing loans of up to Rs 12 lac of those earning Rs 18 lac per annum.
  4. The interest subsidy of 4% under CLSS (MIG) can bring down Equated Monthly Installments of beneficiaries by Rs 2,062 per month on a housing loan of Rs 9.00 lac and interest subsidy of 3% will bring down EMI by Rs 2,019 on a loan of Rs 12.00 lac, taking normal housing loan interest rate as 8.65%.
  5. The total interest subsidy increase on these loan amounts will be paid to the recipients up front in one go, thereby reducing the burden of Equated Monthly Installments (EMIs). In addition to this, the term of loan has been predetermined to be 20 years or that chosen by the receiver, whichever is lower.
  6. The total interest subsidy to be paid to MIG people on Rs 9.00 lac loan comes to Rs 2.35 lac and on a loan of Rs 12.00 lac, it comes to Rs 2.30 lac per beneficiary.
  7. The new CLSS (MIG) covers people with income of up to Rs.12 lac and Rs.18 lac a year, the CLSS component of PMAY (Urban) launched in June, 2015 and applicable to Economically Weaker Sections (EWS) and Low Income Group (LIG) covers urban poor with income levels of Rs 3.00 lac and Rs 6.00 lac per annum, respectively.
  8. Under CLSS (EWS/LIG), interest subsidy of 6.50% is being provided on a loan of up to Rs 6.00 lac. Tenure of this loan is now increased to 20 years from the earlier 15 years to enable easy repayments. Total interest subsidy available to each beneficiary under this component is Rs 2.30 lac.
  9. Beneficiaries include wife, husband, unmarried daughters and sons. The guidelines have also made unmarried and earning young adults eligible for taking the benefit of interest subsidy under CLSS(MIG), for acquisition/construction of a new house, including repurchase.
  10. Interest subsidy will be provided on loans for construction/ acquisition of house with a carpet area of 90 square meters by those earning Rs 12 lac per annum and of 110 square meters by those earning Rs 18 lac per annum.
  11. Under the guidelines, preference is to be given to women with superseding preference to widows, single working women, persons belonging to Scheduled Castes and Scheduled Tribes, backward classes, differently-able and transgender people.
  12. Small Finance Banks and Non-Banking Finance Company-Micro Finance Institutions also have been recognized to function as Primary Lending Institutions to widen the scope of implementation of CLSS (MIG) in addition to Scheduled Commercial Banks, Housing Finance Companies, Regional Rural Banks, State and Urban Cooperative Banks for accepting applications directly from beneficiaries and advancing loans under the scheme.
  13. 70 lending institutions, including 45 Housing Finance Companies, 15 Scheduled Banks, 2 Regional Rural Banks, 1 Cooperative Bank, 4 Small Finance Banks and 3 Non-Banking Finance Companies-Micro Finance Institutions, have signed Memoranda of Understanding with National Housing Bank (NHB) for implementation of the CLSS(MIG) component of PMAY(Urban).
  14. National Housing Board (NHB) and Housing and Urban Development Corporation (HUDCO) have been designated as Central Nodal Agencies for implementation of Credit Linked Subsidy Scheme CLSS. These agencies would then reimburse the interest subsidy to Primary Lending Institutions (PLIs) based on the loans advanced to beneficiaries by PLIs.
  15. Credit linked subsidy would be available for housing loans availed for new construction and addition of rooms, kitchen, toilet etc. to existing residences as incremental housing. The area of houses built under this component of the mission should be up to 30 square meters and 60 square meters for EWS and LIG, respectively in order to get credit linked subsidy.

The interest rate subsidy at the rate of 6.5% is to be calculated at the rate of 6.5% for a period of 60 months using the “IPMT” formula in Excel, as following:

The EMI can be calculated by the following:

 

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