Credit Linked Subsidy Scheme (CLSS) is aimed at providing financial benefits to the middle-income and lower-income group. Under the scheme, home loans of up to Rs 9 Lakhs are eligible for a 4% subsidy for those whose annual income is up to Rs 12 Lakh. Housing loans up to Rs 12 Lakhs are eligible for a 3% interest subsidy provided that the borrower’s income is up to Rs 18 Lakhs per annum. The scheme has been made effective from 1st January 2017, although the guidelines came out later. Home loans sanctioned since Jan 1 will be eligible for the subsidy. However, the applicant earlier should not have a house registered in his name since the scheme is only for first-time homebuyers.
Highlights of Credit Linked Subsidy Scheme
CLSS, sponsored under Pradhan Mantri Awas Yojna (Urban), has come out as a big relief for the mid-segment homebuyers. At the same time, it encourages private builders to launch affordable housing projects in prime locations. Let us look at the key highlights of CLSS-
1. The CLSS is meant for the first-time home buyers, so those who already have a house registered in their name would not be able to get benefits of this scheme.
2. Though the operative guidelines were announced only in March 2017, loans that were sanctioned and are in process since 1st January 2017 will also be considered.
3. To get benefits under CLSS, beneficiaries will have to apply for the same with their lenders.
4. All commercial banks, regional rural banks, housing finance companies, urban and rural cooperative banks and other financial institutions giving out housing loan are eligible to provide benefit to their customers under the scheme.
5. The amount of interest subsidy provided will be reimbursed to the lender bank from the National Housing Bank (NHB) and the Housing and Urban Development Corporation (HUDCO).
Process of Credit Linked Subsidy Scheme
To understand the process of how to get benefit under Credit Linked Subsidy Scheme, one has to know the following points first-
· Interest subsidy is provided for the purchase/construction of the house with carpet area of up to 90 square meters for beneficiaries earning up to Rs 12 Lakhs per annum. For those earning between Rs 12 Lakhs and Rs 18 Lakhs, this limit is 110 square meters.
· The tenure for this loan is taken as 20 years or that preferred by the beneficiary, whichever is lower.
If the beneficiary meets the income and loan eligibility criteria, he/she should apply for the interest subsidy under CLSS with the lender. The lending bank or financial institution will verify the details and if satisfied, it will grant the subsidy. The entire amount of interest subsidy is transferred to the beneficiary’s account in one go and the same amount is reimbursed to the bank from the National Housing Bank or HUDCO.
Extent of EMI Reduction under Credit Linked Subsidy Scheme
To be precise, CLSS reduces the beneficiaries’ EMIs by Rs 2,000 per month.
According to the MD and CEO of National Housing Bank (NHB), an interest subsidy of 4% on a loan of Rs 9 Lakhs will bring down the monthly EMI by Rs 2,062. Similarly, interest subsidy of 3% on a loan of Rs 12 Lakhs will reduce the EMI by Rs 2,019 per month. This calculation has been done with an average interest rate of 8.65%.
About Pradhan Mantri Awas Yojna (PMAY)
Pradhan Mantri Awas Yojna is a scheme catering to the housing needs of mid-income, low-income and economically weaker sections of India. PMAY consists of four important aspects- building homes for slum dwellers, providing financial assistance to homebuyers in the form of credit linked subsidy, providing financial assistance to private developers who wish to develop affordable housing projects and extending direct financial assistance to the EWS.
Credit Linked Subsidy Scheme is a major step towards encouraging people to buy their dream homes and giving an overall boost to the real estate sector.
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