Having a house is one of the most-cherished dreams for us, and acquiring one is among the biggest financial decisions in life. Easier availability of loans has made it possible for many to achieve the dream, but it remains a distant one for the majority.
There are both central and state schemes to help you find an abode. These include payment of a certain amount for the economically weaker sections, and subsidy linked to the interest component of the home loan for the low- and middle-income groups.
But many who are eligible to get the benefits aren’t utilizing the facilities because of lack of awareness. It isn’t also unusual for banks to turn away customers because they don’t want to do the paperwork.
Remember, if you qualify for financial support under these programs, no one can deny it to you. Having knowledge of the schemes and the eligibility criteria will help you approach banks and authorities confidently and demand what is rightfully yours.
From the Center and the state
The Pradhan Mantri Awas Yojana seeks to ensure a house for all by 2022.
In Kerala, we have a Life Mission project with the same objective and a five-year deadline.
There are several categories and segments under these schemes and support isn’t limited only to the low-income group. Bank and government employees are eligible, too, under the central scheme, provided they met the other conditions.
Even if you had built or bought a house or apartment two years ago, you may still qualify for availing of the benefits.
Use this opportunity to fulfill your dream at the lowest cost. But before setting off to claim it, understand what suits you the best and proceed accordingly.
No waiting till end, subsidy comes early
Under the central program, beneficiaries get up to Rs 2.67 lakh in interest subsidy on home loans.
The interest subsidy is available to those who want to build or purchase a house or an apartment on a home loan. If you had taken the loan on or after June 17, 2015, you can still apply.
The subsidy reaches the bank in the beginning itself. That straightway reduces the EMI you pay on the loan.
What is PMAY (Urban)
The Pradhan Mantri Awas Yojana (Urban) is a central government scheme aimed at ensuring housing for all by 2022 in urban areas. It is a credit-linked scheme — the subsidy is given on the loan interest. The three municipal corporations and all municipalities in Kerala come under this program. But those in panchayats will not get the benefit.
People who earn between Rs 3 lakh and Rs 18 lakh can apply under this scheme. If the request is accepted, up to Rs 2.67 lakh will reach the loan account.
If your income is in the Rs 12 lakh to Rs 18 lakh range, the subsidy will be Rs 2.3 lakh.
Conditions to avail of the benefit
- Annual income must be between Rs 3 lakh and Rs 18 lakh
- Shouldn’t already own a house anywhere in the country
- The house being built or bought should be in cities or towns
Under this scheme, beneficiaries are classified into four groups
Up to Rs 3 lakh – Economically weaker section (EWS)
Rs 3 lakh to Rs 6 lakh – Low-income group (LIG)
Rs 6 lakh to Rs 12 lakh – Middle-income group – I (MIG-I)
Rs 12 lakh to Rs 18 lakh – Middle-income group – II (MIG-II)
Loan amount can be more than the limit set under the subsidy scheme, but normal bank rates will apply on the excess portion.
For the MIG-II group (income of Rs 12-18 lakh), the deadline under the scheme has been extended to 2019 March from 2017 December. For all other groups, it is open till 2022 March.
But banks aren’t eager…
Banks don’t show much enthusiasm to lend under the scheme that the government had announced with much fanfare.
One of the common complaints is about bank officials who pretend lack of knowledge about such schemes.
There is some truth here, agrees the state-level bankers’ committee.
Many managers aren’t genuinely aware of such schemes. Another problem is the notion that subsidy schemes are only for the weaker sections.
But these often aren’t the main problem here.
It is the responsibility of banks to file the online application for the borrower to get the subsidy. Some 87 data points need to be provided under this and it is a bit cumbersome, especially in places where Internet connectivity is an issue. It may take hours to upload just one application. Some bankers want to avoid the headache. They discourage the applicant by claiming that there weren’t any such schemes.
There have also been instances of villagers asking banks about the scheme. PMAY (Urban) isn’t applicable in rural areas.
Subsidy can be availed of on loans taken from all scheduled banks, housing finance institutions and other non-banking finance companies, Kerala Gramin Bank and rural banks, state cooperative and urban cooperative banks, and small finance banks. The onus is on you to demand the subsidy.
What you should do:
The subsidy isn’t small. Moreover, it comes early, reducing your EMI substantially. Utilize it.
Check your eligibility first. If you are eligible, approach the bank and demand that you want to claim the subsidy.
If the bank’s response isn’t satisfactory, you could complain to Kudumbasree, which is mandated for the roll out of the PMAY scheme in Kerala. You may also approach senior officials of the bank or the state-level bankers’ committee. Grievances can be raised at HUDCO, which is the nodal agency to carry out the program nationally, and the National Housing Corporation as well.
Even if it takes some time to settle the issues, don’t let go of a benefit that the government is offering you.
Where to complain:
Contact HUDCO if you have a grievance to raise.
Address (Kerala): Third Floor, Saphalyam Complex, Palayam, Thiruvananthapuram
Phone: 0471 2339746 – 17
Banks stand to gain, too
The subsidy will substantially lessen the pressure on the borrower. That reduces the chances of a default, at a time when bad loans have become the biggest worry for the country’s banking sector.
In Kerala, Punjab National Bank and ICICI Bank are the most active in ensuring credit-linked subsidy to customers under this scheme. Canara Bank is also up there among the top. Most of the complaints are about State Bank of India.
PF money to pay your share
You can withdraw up to 90% of the accumulated provident fund to buy a house. Banks demand the borrower to put in a portion — usually 20% — of the cost of the property before they release the loan amount. The PF money comes handy here. Utilize it to contribute your share while taking the home loan and claiming the subsidy on that.
How much will it reduce EMI?
The middle-income group gets the benefits under two categories based on their annual income: Rs 6-12 lakh and Rs 12-18 lakh (see table).
Apply if you have an income:
If you are a major (age 18+) and have an income, you can apply for the credit-linked subsidy under PMAY. You are eligible even if you are living with your parents in a house that belonged to them.
If couples are seeking to take the benefit, only one of them — husband or wife — can apply.
Stages of application and disbursal:
- Demand subsidy when you approach a bank for a loan
-If you are eligible, the bank will send the application to the national nodal agency
-The nodal agency will approve the applications and release the money to the bank
-The bank will credit this in you loan account; the loan amount will reduce by that much
-Accordingly, the bank will reduce your EMI
-You may pay only this EMI for the rest of the loan tenure
It isn’t a small house:
If you think that you can buy only a small house under this scheme, you are mistaken. A 150-square-meter house, which an applicant with an Rs 18 lakh annual income (MIG-II) is eligible to buy, isn’t that small.
If you do the math, 150 square meters become 1614.59 square feet.
This is the carpet area. The outer wall, common area, etc., aren't included in it. If these are clubbed together, the built-up area will be 1,489 square feet (MIG-II). That is big enough for a comfortable two-bedroom flat.
Can be extended later
If you are building a house, you may get the project approved based on the specifications under the subsidy scheme and avail of the benefit. The house can be extended at a later stage, for instance by adding an upper floor. If the building plan is made accordingly, this won’t create much hassles.
Life Mission: Helping hand to the underprivileged
The Kerala government offers financial support to the economically weaker class to have a house of their own. The state has already identified the potential beneficiaries under this housing-for-all program.
Under this, up to Rs 4 lakh is given to a family that makes Rs 3 lakh or less a year.
For up to 6 lakh people:
According to a government survey, about 2.5 lakh people in Kerala don’t own a house or land. Another 2 lakh own land but don’t have a house. There are also more than 50,000 people who couldn’t finish construction despite being beneficiaries under previous schemes.
The Life Mission has conducted a survey with the help of Kudumbasree to identify potential beneficiaries. Work is in the last stages to finalize the list after resolving complaints at the local level and district collectors verifying the details. Officials said the list could be published in November.
Are you eligible?
Check your eligibility based on the conditions set by the state government. If you are eligible but your name is missing from the list of potential beneficiaries, approach Kudumbasree or your local body like panchayat or municipality.
Under the state scheme, people who have their own land would get up to Rs 4 lakh to build a house.
Residential complexes will be built to accommodate those who don’t own land. The plan is to build a complex each in the 14 districts of the state in the first phase.
Financial support will also be given for completion and repair work.
If you have already got support…
If you were a beneficiary under a previous scheme, but couldn’t compete construction of the house, you may still get support under the new program. But it will depend on how much funds you had received under the previous scheme.
If you had been allotted Rs 2 lakh, but had received only half of that, you would get the remaining Rs 1 lakh of the previous program and another Rs 2 lakh under the new scheme, taking the total to Rs 4 lakh — the limit set under the Life Mission.
The case of people who had taken the entire allotted money, but couldn’t complete the work, would be considered separately. If they have a genuine reason, a committee comprising local-body representatives could decide on allotting more funds.
Under the state program, the government will oversee the construction of houses for the elderly, widows, mentally or physically challenged, those who are suffering from illness and where women head the family.
Tribal people will get the actual cost of construction.
Scope for more:
There is scope for more schemes targeting the middle-income group in Kerala. This is because the benefits under the affordable housing scheme under the Pradhan Mantri Awas Yojana aren’t yet available in the state.
The scheme seeks to provide houses under the public-private-partnership model to even those who don’t own any land.
Under this, private builders will construct houses based on set standards and the government will offer financial support to people who buy those: Rs 2 lakh for those who take a housing loan and Rs 1.5 lakh for those who are paying from their own hand.
Builders in Kerala haven’t yet shown interest in this scheme because of high cost and shortage of land in the state. But such projects may come up in the future.