CLSS Scheme Extension – A Boost to Affordable Housing

You might have seen or heard how farmers and low-income families receive subsidies from the government. And guess what? You can now get a subsidy too on affordable housing provided you meet the eligibility requirements via the CLSS Scheme.

 The Pradhan Mantri Awas Yojana-Credit linked subsidy (CLSS) scheme which was operationalized in March 2017 is now being extended to 21st, March 2021 giving a more breathable situation to the middle-class first-time homebuyers.

The scheme had already benefited over 3.3 lakh middle-class families until now and the extension will help in creating demand for affordable housing and will lead to Rs 70,000 crore investment in the housing sector’ said Nirmala Seetharaman during her press conference.

What is CLSS Scheme and its Features?

Credit linked subsidy scheme is a scheme under Pradhan Mantri Awas Yojana which is an initiative taken by the Government through which it aims at increasing the credit flow in institutions to meet the housing needs of the urban poor population in our country. The CLSS is the only plan directly administered by the Centre under the PMAY (Urban). The Centre gives direct subsidies on house loans taken out by urban buyers of affordable homes with incomes below certain limits via this plan. Individuals from the economically disadvantaged sections (EWS), the lower income group (LIG), and the middle income group are eligible for the benefits (MIG). Individuals acquiring a new affordable house can receive interest reductions of 3-4 percent on the amount financed under this plan, subject to certain restrictions. The subsidy is computed as the current value of interest savings on house loans over the loan’s whole term, up to a maximum of 2.35 lakh.

The vision of this scheme is ‘HOUSING FOR ALL BY 2022’.

The Pradhan Mantri Awas Yojana is available to 4 income categories:

• Economically Weaker Sections (EWS) – income less than 3 lakh per annum
• Lower Income Group (LIG) – income between 3-6 lakh per annum
• Middle Income Group 1 (MIG-1) – income between 6-12 lakh per annum
• Middle Income Group 2 (MIG-2) – 12-18 lakh income per annum

The interest subsidy, loan amount and other details are listed for each class below:

Source: Pradhan Mantri Awas Yojana- Urban

If the house you want to buy satisfies the above-mentioned details, you can claim the subsidy by directly applying on the PMAY website or indirectly through Prime Lending Institutions (PLIs) by providing the required documents. PLIs would be the financial institutions such as cooperative banks, NBFCs, regional rural banks, and others who’ve associated with the central nodal agencies to give subsidized rates on housing loans.

What is the significance of the CLSS Scheme?

While having a home is everyone’s ambition, rising property costs in India have pushed homes out of reach for many consumers. With the affordable housing sector gaining popularity among developers and house buyers alike, and the CLSS assisting in the process, the gap between home buyer expectations and what’s available in the market may be closing. So, a house buyer who obtains a housing loan from any financial institution, be it a bank, a housing finance business, or any such institution, is entitled for an interest discount of up to Rs 2.67 lakh under the CLSS plan.

When is the Scheme Deadlines Extension?

The MIG-1 and MIG-2 sections under the CLSS scheme have a deadline extended up to March 31st, 2021. For EWS and LIG sections, it is extended up to 31st March,2022.

Scheme Deadlines Extension Enabling Affordable Housing

The Union Budget 2020 has approved the PMAY Rs. 27,500 crores as against Rs. 25,328 crores in 2019-20, an increase of 8.5%. Moreover, affordable housing has been given great infrastructure status, which means that developers can now get cheaper loans. This will also increase the demand in the sector

Nirmala Seetharaman declared an extension in the extra income tax deduction of Rs 1.5 lakhs for interest on home loans for a house valued up to Rs. 45 lakhs. While this period has been extended by one year, the total tax deduction on the interest rate is Rs 3.5 lakhs. This move is anticipated to impact the demand for affordable housing in India positively.

Under PMAY-Urban, the government has already sanctioned over 81 lakh houses and under PMAY-Rural, an additional 1.95 crore houses are to be provided.

As a catalytic effect of increased demand for affordable housing, it will further push demand for raw materials like cement, steel, transport, and other construction material. Hence, contributing to the overall development of allied fields as well.

How does the CLSS Scheme impact Real Estate?

India’s Credit Linked Subsidy Scheme is precisely the push required to inspire first-time homebuyers to take that leap of faith, and so offer much-needed help to the real estate market, which has been suffering from one terrible year after another for over a decade. As a result, a substantial leap is expected in Residential real estate especially. This is because many families will now come forward to avail benefit of this scheme and become first-time homebuyers. Owing to this, there will be immense cash flow in the sector and thus will result in favorable market conditions for investing and buying a house. The CLSS interest subsidy has been a key driver of demand for residential housing units, particularly those priced under Rs 50 lakh in big city outskirts or tier II and tier III towns.

The lucrative amount of subsidy i.e 2.3-2.67 lakh is definitely not something any working or middle-class people would take granted for. Thus, enabling the housing sector to take off in the few years that are to come.

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