9/12/2017 Pradhan Mantri Awas Yojana: You can still get benefit under PMAY even if your parents

ur parents own a home - The Economic Times

You can still get benefit under PMAY even if your

parents own a home
By Sunil Dhawan, ECONOMICTIMES.COM | Apr 04, 2017, 03.33 PM IST
If you are looking to own a home of your own,
under the Pradhan Mantri Awas Yojana (PMAY) scheme, there are
only nine months left for you to arrange the amount for down
payment, decide the location, builder and the home loan lender.

The recently introduced Credit Linked Subsidy Scheme (CLSS) for

Middle Income Group (MIG) to be called CLSS for MIG will be for a
An adult earning family member
period of one year starting 1.01.2017.
irrespective of marital status can be
treated as a separate household, Let's see who all are eligible for the MIG category, who all within a
provided that he or she does not own a
family can apply, how much is the subsidy in rupee terms and how
pucca house
does the subsidy impact the loan amount.

The middle-income earners

The new category MIG, introduced recently, will further comprise of two slabs. The Middle Income
Group (MIG) - I will comprise of households having an annual income between Rs.6,00,001 up to
Rs.12,00,000.

And, the Middle Income Group (MIG) - II will comprise of households having an annual income
between Rs.12, 00,001 up to Rs.18, 00,000. So, effectively anyone earning between Rs 6 lakh and
Rs 18 lakh per annum can avail the benefits of subsidized loans provided other conditions are
met.

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9/12/2017 Pradhan Mantri Awas Yojana: You can still get benefit under PMAY even if your parents own a home - The Economic Times

Who are all eligible?

The scheme is primarily aimed at providing housing for all. Therefore, understandably, all those
who already own a home or any of their family member own a home, are kept out of the benefits of
PMAY.

The rule says, "The beneficiary family should not own a pucca house and the beneficiary family
should not have availed of central assistance under any housing scheme from Government of
India." A beneficiary family will comprise of husband, wife, unmarried sons and/or unmarried
daughters. To avoid duplication, beneficiary family members have to provide their Aadhaar
numbers while applying for the loan.

But, as per the guidelines, "An adult earning member (irrespective of marital status) can be treated
as a separate household, provided that he/she does not own a pucca (an all weather dwelling unit)
house in his / her name in any part of India."

So, even if children (married or unmarried) are staying with their parents in a house owned by the
parents (or on rent, in the same or another city), they can opt for PMAY provided they are earning
and don't own any other home.

For a married couple living on rent and even if their parents own a home, will anyhow is treated as
a separate household. However, if they wish to avail PMAY benefits, they will be eligible for a
single house, bought by either of the spouses or both together in joint ownership.

Subsidy
In the MIG - I category, individuals will get 4 per cent interest subsidy on a loan amount up to Rs 9
lakh, and in the MIG - II slab category individuals will get a 3 percent subsidy on a loan amount up
to Rs 12 lakh. If one needs an additional loan, the lender will prove it but the additional loans
beyond the subsidised loan amount will be at a non-subsidised rate.

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How does it work

Say, someone in the MIG II category, wishes to buy a house costing Rs 60 lakh. After the
mandatory minimum down payment of 20 percent i.e. Rs 12 lakh, the balance of Rs 48 lakh can be
arranged through a loan. But under PMAY, a subsidy of 3 percent would be applicable till Rs 12
lakh, hence, the lender's home loan interest rate will be applicable on the balance of Rs 36 lakh.

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9/12/2017 Pradhan Mantri Awas Yojana: You can still get benefit under PMAY even if your parents own a home - The Economic Times

How is the subsidy adjusted

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 percent. 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 to comes down.

Suppose on a home loan of Rs 12 lakh, the NPV of the 3% interest subsidy comes to Rs 2.30 lakh.
So, out of the loan amount of Rs 12 lakh, the amount of Rs 2.30 lakh will get deducted and the
borrowers has to pay EMI on the balance i.e. Rs 9.7 lakh at a rate at which the lender is providing
loans, which could be 8.75 or 9 percent or whatever the MCLR based home loan rate is the bank.

The interest subsidy will be credited upfront to the loan account of beneficiaries resulting in
reduced effective housing loan (deducting it from the principal loan amount) and Equated Monthly
Installment (EMI). The borrower will pay EMI as per agreed document rates on the remainder of
the principal loan amount.

Loans under PMAY

The PMAY benefits can be availed if one wishes to acquire a new house from the developer or the
builder and even for buying a house from the secondary market through repurchase. One may also
take a loan for the construction of the house.

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9/12/2017 Pradhan Mantri Awas Yojana: You can still get benefit under PMAY even if your parents own a home - The Economic Times

Interestingly, if someone already owning a home wants to avail PMAY benefit, there's still a
possibility. The government has clarified that the Mission (Housing for All by 2022) also provides
for enhancements/incremental housing to the existing 'pucca' house under the CLSS component.
So, a home loan provider cannot decline or not entertain an applicant seeking a home loan for the
addition of a room, kitchen etc to the existing dwellings solely on the ground that the applicant is
already possessing a pucca house.

Home area
Under PMAY, the area of the house is different for all categories but it's the carpet area that is to be
looked at. For MIG I, the carpet area is to be 90 sq mt (968.752 sq ft) and 110 sq mt (1184.03 sq ft)
for MIG II category. Carpet area is the area enclosed within the walls i.e. actual area to lay the
carpet. This area does not include the thickness of the inner walls. If you add up outer walls,
balcony and other common areas, it's the built-up area.

Further, when space for lobbies, stairs, elevators etc is added, the super built-up area is arrived at.
Builders as of today are charging buyers on the super built-up area, a practice which the RERA is
going to remove by making the buyer pay only on the basis of carpet area.

A 110 sq mt (1184.03 sq ft.) carpet area is close to 1480 sq ft of the built-up area as nearly 25
percent or even higher, is the difference between them. A 2 BHK could look feasible in several
locations. This new move has made affordable housing scheme accessible to many people living
in urban areas now.

Subsidised loans from where

One can avail PMAY linked loans from any primary lending institutions such as scheduled
commercial banks, housing finance companies, Regional Rural Banks s), State Cooperative
Banks, Urban Cooperative Banks, Small Finance Banks, Non Banking Financial Company etc.
There will not be any processing charge for eligible housing loan amount as per income criteria
under the Scheme. For additional loan amounts beyond the eligible loan amounts for interest
subsidy lenders can charge the normal processing fee.

The impact
PMAY scheme for MIG buyers may not push up the demand for residential housing much. The
benefit of Rs 2.3 lakh/Rs 2.35 lakh may not appeal much considering the cost of houses in the
urban areas. The government may consider doing away with the area restriction of 90/110 sq mt to
pep up the demand.

Conclusion
Affordable housing has been given infrastructure status in Budget 2017, which should aid
developers in takings its associated benefits. But for a common man, the timely delivery of the
house still remains a distant dream. For availing the benefits, the builders had to complete the
affordable housing projects in 3 years but now ( Budget 2017) have to complete in 5 years. Tread

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9/12/2017 Pradhan Mantri Awas Yojana: You can still get benefit under PMAY even if your parents own a home - The Economic Times

carefully and evaluate all the options before venturing out to explore the affordable housing
segment, even if you are a first-time home buyer.

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