How the Credit Linked Subsidy Scheme (CLSS) Works
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How the Credit Linked Subsidy Scheme (CLSS) Works

  • Highlights

  • Get up to 6.5% subsidy on home loan interest under CLSS

  • Pradhan Mantri Awas Yojana reduces your home loan EMIs

  • PMAY aims at affordable housing for all by 2022

  • Households with lower incomes get preference

In 2015, the Government of India launched a scheme that would help the financially-deprived population living in urban areas get a roof over their heads. Known as the Pradhan Mantri Awas Yojana, it envisages ‘affordable housing for all’, by giving borrowers the financial means necessary for purchasing a home via a subsidy on the home loan interest rates. CLSS is a component of PMAY under which, not only economically weaker sections, but also middle-income groups can avail of home loans at reduced EMIs. Here’s what you need to know about CLSS and its functioning.

What is credit linked subsidy scheme and who is eligible?

As one of the components of the PMAY, the CLSS (or Credit Linked Subsidy Scheme) offers interest concessions to the following categories of people.

- CLSS for weaker sections and low-income groups

Homebuyers in this category are eligible for interest rate subsidy of 6.5% for a period of 20 years or for the entire tenor of the home loan, whichever is lower. If you belong to this category and subsequently approach a bank or NBFC for a home loan, this incentive is initially credited to your account by the lender from whom you avail the loan.

The lender then lowers the EMIs for you as per the credited value. The credit so extended can be utilised not only to build a new house, but also to make additions or renovations to existing houses. Here, those who have a household income up to Rs.3 lakh a year are clubbed under the economically weaker category while those households having an annual income of above Rs.3 lakh to Rs.6 lakh are classified as a low-income group. In both categories, preferential treatment will be given to women, SC/STs, backward classes, minorities and persons with disabilities.

- CLSS for middle income groups

This category of beneficiaries is split into two sections. The first section, labelled as MIG I, includes people whose household income per year ranges from Rs.6 lakh to Rs.12 lakh. The second section, named MIG II, includes those whose household income is Rs.12 lakh to Rs.18 lakh a year. The MIG I section gets an interest discount of 4%, while their MIG II counterparts can avail a reduction of 3%. The home loan tenor for both can extend up to 20 years. However, the MIG II group gets to go home with a higher home loan amount of Rs.12 lakh as compared to Rs.9 lakh for the MIG I group.

Once you have understood the category under which you qualify for the CLSS scheme, here is how you can calculate the subsidy component on your loan.

Six Things to Remember Before Taking a Home Loan

How interest subsidy is calculated under CLSS

Let us say you fall under the MIG II group and you take a home loan of Rs.32 lakh for a tenor of 20 years. The EMI works out to be Rs.30,881. Out of this total amount of Rs.32 lakh, the loan amount eligible for subsidy is Rs.12 lakh. When you include the 3% interest rate subsidy and calculate the EMI via the PMT formula on Excel, you will find that the EMI gets reduced to a little more than Rs.6,600 per month.

To find out how much EMI you will have to pay regardless of this scheme in action on your Home Loan use the Home Loan EMI Calculator on lender websites, such as Bajaj Finserv. This lender allows you to conveniently get a Home Loan sanction of up to Rs.10 crore for a tenor of 25 years on nominal interest. Not only can you avail PMAY facilities as applicable on your loan sanction with Bajaj Finserv, but you also get additional benefits on your loan such as a 3 EMI holiday to make repayment more affordable.

Finally, once you are sure of the Pradhan Mantri Awas Yojana eligibility, here’s how you can avail of the Pradhan Mantri Awas Yojana Credit Linked Subsidy Scheme.

How to avail of this subsidy scheme

Begin by contacting the financial institutions covered under the PMAY scheme about your intention to avail a loan. They will then hand you the loan subsidy application, which you have to duly fill and submit along with the relevant documents. Upon verification, the housing loan amount will be disbursed to your bank account. Once this is done, your lender approaches the nodal agencies to start the process of injecting your bank account with the subsidy you are entitled to.

Pradhan Mantri Awas Yojana has been brought to action to add fuel to your home purchase so as to ensure that you become the homeowner on easy, flexible terms. So, find a home of your choice to get benefit from the scheme until March, 2019.

Bajaj Finserv brings you pre-approved offers for personal loans, home loan, business loans and a host of other financial products. Not only does this simplify the process of availing financing, but also helps you save on time. All you have to do is share a few basic details and check out your pre-approved offer.
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