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Credit Linked Subsidy Scheme (CLSS)
Under Pradhan Mantri AWAS YOJNA (URBAN)*
Posted On: 2019-01-30 Author : R.S. Garg, Chairman, Pioneer Housing Finance Academy & former Executive Director, National Housing Bank, New Delhi

Several initiatives have been undertaken by the Central Government either on its own or in collaboration with the State Governments to provide housing for all its citizens by 2022, when India completes 75 years of its independence. Two important Schemes by the name Pradhan Mantri Awas Yojna (URBAN) and Pradhan Mantri Awas Yojna (Rural) have been launched. Under Pradhan Mantri Awas Yojna (URBAN ), a target of construction of 20 million units in urban areas have been fixed. Again under Pradhan Mantri Awas Yojna (Rural) a target of 30 million houses have been kept.

Pradhan Mantri Awas Yojna (Urban) have 4 verticals.

  • “In Situ” Slum Redevelopment or Rehabilitation : Under this component, it is proposed to develop conditions of slums to provide housing for all eligible slum dwellers. The proposal is to undertake slum re-development with private participation. Land underneath the slum is to be taken as a resource. To make the projects financially viable, the developers can be given additional FSI/TDR. Central government will give grant of Rs. 1 lakh per house built for eligible slum dweller. Grant under the Scheme to be given to State Government /Urban Local bodies.
  • Affordable Housing in Partnership : Under the Scheme financial assistance is granted for development of public housing by State Governments with public or private developers. Central Government shall provide grant of Rs. 1.5 lakh per EWS house. State Government are required to cap sale price of EWS house in terms of rupees per square meter of carpet area.
  • Subsidy for Beneficiary-led Construction : This scheme is for individuals of EWS category requiring individual house. Under the scheme support is extended for self construction (new / incremental housing) on land owned by beneficiary. State is required to prepare a separate project city –wise for such beneficiaries. No isolated /splintered beneficiary are covered under this component. Central will extend grant of Rs. 1.5 lakh per beneficiary.
  • Credit Linked Subsidy Scheme : This is the Scheme under which Central Government extends interest subsidy to the individuals constructing houses by availing loan from banks/ housing finance companies. For disbursement of subsidy, National Housing Bank and HUDCO have been appointed as nodal agencies. These agencies are required to execute a Memorandum of Understanding with the nodal agency.

    The target segment under the Scheme include Women, irrespective of case and religion, Economically weaker section of Society, Scheduled Tribes, Scheduled Casts, Low Income Group and Middle Income Group people.

    Subsidy is available for purchase, construction and improvement/extension of house in 4700 notified urban area.

    The extent of subsidy depends on whether the beneficiary is a EWS borrower or a LIG borrower or a MIG borrower.

    For a person having household income upto Rs. 3 lakh and where the car pet area of the dwelling unit is not exceeding 30 sq. meter, a subsidy of 6.5% on a loan upto Rs. 6 lakh for a period of 20 years is given. As the subsidy is granted upfront, to find out the net present value, interest rate of 9% is applied. Thus the total subsidy works out to Rs. 2.67 lakh for a loan of Rs. 6 lakh for a period of 20 years. This is the maximum amount of subsidy which is admissible to a EWS borrower. In case the loan is for lesser period, the subsidy will be commuted @ 6.5% for the period of the loan. No processing fee is required to be charged under the Scheme from the borrower if he avails loan upto Rs. 6 lakh. Purchase of house from builder/ developer, purchase under resale, renovation of self owned /inherited property and self construction are covered under the Scheme.

    For a person having household income upto Rs. 6 lakh, the subsidy rate is the same i.e. 6.5% for a period of 20 years on a loan of Rs. 6 lakh. In case the loan is for lesser period, the subsidy will be commuted @ 6.5% accordingly. However, the carpet area applicable for a LIG borrower is 60 square meter as against 30 square meter in the case of EWS borrower. The maximum amount of subsidy in case of LIG borrower also works out to Rs. 2.67 lakh. The subsidy will be computed for actual period where the loan is less than 20 years. No processing fee is required to be charged under the Scheme from the borrower if he avails loan upto Rs. 6 lakh. Purchase of house from builder/ developer, purchase under resale, renovation of self owned /inherited property and self construction are covered under the Scheme.

    MIG borrower have been divided into two categories i.e. one having household income upto Rs. 12 lakh and buying a dwelling unit with carpet area not exceeding 160 sq meter. In his case the subsidy is given at 4% on a loan upto Rs. 9 lakh for a period of 20 years. The maximum amount which has worked out in his case @ 9% is Rs. 2.35 lakh. . In case the loan is for lesser period, the subsidy will be commuted @ 4% for the tenure of the loan. No processing fee is required to be charged under the Scheme from the borrower if he avails loan upto Rs. 9 lakh. Only fresh purchases are allowed for MIG category.

    The other category of MIG borrower is whose household income does not exceed 18 lakh. He can avail interest subsidy of 3% on a maximum loan of Rs. 12 lakh when he purchases a house having carpet area of not more than 200 square meter. The maximum upfront subsidy in his case works out to Rs 2.30 lakh. In case the loan is for lesser period, the subsidy will be commuted @ 3% for the tenure of the loan. No processing fee is required to be charged under the Scheme from the borrower if he avails loan upto Rs. 12 lakh.Only fresh purchases are allowed for MIG category.

    The Central Board of taxes have clarified that the interest subsidy, to be received by an individual assessee shall not be taxable as his income. However, in cases where the interest paid is claimed as deduction in computation of income from house property, the amount of deduction shall be restricted to the amount of interest paid as reduced by the amount of subsidy received, so as to prevent double benefit to the taxpayer.
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