All you need to know about the government’s subsidy on home loan

Home Loan Subsidy

When entire India was fearing Prime Minister Modi’s speech on December 31, expecting another bombshell after demonetization, PM Modi came up with announcement of subsidized interest on home loan. The scheme is set to be implemented.

‘Roti, Kapda and Makaan’ has been the vision of past several governments. Not only the lower income, but middle income groups too dream of their own house. Subsidized home loan is one way of achieving that dream. New Credit Linked Interest Subsidy Scheme for Middle Income Groups (CLSS-MIG) is the government’s step towards a developed India.

Those earning above Rs 6.00 lakh and up to Rs 18 lakh per annum, are now eligible for interest subsidy for home loan under the new Credit Linked Interest Subsidy Scheme for Middle Income Groups.
Icing on the cake is that even those who have been sanctioned home loan and whose applications are under consideration since January 1 this year are also eligible for interest subsidy.

The Prime Minister has announced an interest subsidy of 4% on home loan of up to Rs 9 lakh of those with an income up to Rs 12 lakh a year and of 3% on home loan of up to Rs 12 lakh of those earning up to Rs 18 lakh per annum.


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 lakh and interest subsidy of 3% will bring down EMI by Rs 2,019 on a loan of Rs 12.00 lakh, taking normal housing loan interest rate as 8.65%.
The tenure of the loan has been stipulated to be 20 years or that preferred by the beneficiary, whichever is lower. The total interest subsidy accruing on these loan amounts will be paid to the beneficiaries up front in one go, thereby reducing the burden of Equated Monthly Instalments (EMIs).

Subsidy for Economically Weaker Sections/Lower Income Group

Under CLSS (EWS/LIG), interest subsidy of 6.50% is being provided on a loan of up to Rs 6.00 lakh. 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 lakh.

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Who will grant it?

70 lending institutions have signed Memoranda of Understanding with National Housing Bank (NHB) for implementation of the CLSS (MIG) component of PMAY (Urban).

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