PMAY Affordable Homes Make Way For Big Savings
Affordable housing is the flavor of the season in the real estate sector in India thanks to the government's massive push for it with various sops and offers. Under Pradhan Mantri Awaas Yojana- mainly targeted at the Economically Weaker Sections (EWS) and the Lower Income Group (LIG)- those earning up to Rs 12 lakh and up to Rs 18 lakh are also able to enjoy some benefits. Although guidelines are yet to be released, the government subsidy is fixed.
Check out the table:
Up to 12 lakh
Loans beyond the subsidised loan amount will be at a non-subsidized rate. Your loan amount reduces drastically and so does the interest on it. The interest subsidy amount will be its Net Present Value (NPV) calculated at a discount rate of nine per cent.
How much do you pay?
NPV in business is calculated to understand whether an investment is worth the money put in. So, if you want to know the NPV of the interest subsidy, here is an example. If you want to know your EMI for a home loan of Rs 6 lakh, log on to PropTiger EMI Calculator. Feed in the details. At a rate of 9 per cent, the EMI will come to Rs 5,398. So, you end up paying Rs 5,398*12 (months)*20(years) which is equal to Rs 12, 95,520 over the years. The interest burden in this case is Rs 12,95,520-6,00,000 which is Rs 6.95 lakh.
At 6.5 per cent (subsidy), the NPV of the interest subsidy amount comes to Rs 2,67,000 which is your saving when you buy a house under the PMAY scheme. For those of you who are good with an excel sheet, use the Fx function to calculate the NPV. For others, the PMAY website can help you with an NPV subsidy calculator.
Almost all the income categories will save up to Rs 2.4 lakh, at a 9 per cent rate of interest. This means, you save Rs 2,200 per month on EMIs. The nodal agencies that will implement these schemes include National Housing Bank and Housing and Urban Development Corporation.
Lack luster response from private builders?
While affordable housing remains the buzz word within Indian realty- amongst developers and buyers, Urban Development Minister, Venkaiah Naidu expressed disappointment over the fact that not a single private builder had shown interest in coming up with low-cost homes. He also urged private developers to promote affordable housing especially now that their long-standing demand for infrastructure status has been met.
So far, 16,51,687 homes under the PMAY (Urban) scheme has been sanctioned. The total investment in this regard is marked at Rs 89,072 crore and Central assistance towards the mission is Rs 25,819 crore.
Newly married? Here's the advantage
There are certain conditions on who can own a house under this scheme. Besides the income level, you should not be owning a pucca house anywhere in India, nor should your parents. Calculate your total household income (your would-be spouse's annual income), if you are anywhere close to getting married. Post your marriage, the 'household' signifies only you, your spouse and unmarried children. Although loans are disbursed only after the couple get married, such loans can be sanctioned before the wedding too. It has been suggested that the PMAY should be amended to allow such loan sanctions to confirm the eligibility of the couple for a sum of Rs 2.4 lakh which is credited upfront. SEBI registered investment advisor and CA, Harsh Roongta says that while this is a 'wedding gift' the other gifts from the guests would be a treat since it is not categorised as 'income' by the tax department.