Pradhan Mantri Awas Yojana
The Pradhan Mantri Awas Yojana is the brainchild of the Central Government which seeks to redress the ills of a modern India, where the basic need of housing remains unfulfilled for most. Thus through this scheme the government hopes to provide a helping hand to the backward and poor classes to enable them to finally own houses and begin living a life of dignity.
However the original scheme was too narrow in its scope and the sops provided by it were not meaningful for those wishing to buy a housing unit in metropolitan areas, thus with the new announcements made for the year of 2017, the government seeks to address this problem. The government is also hoping that the new features shall entice buyers into buying new homes and help pull the real estate sector out of its dormancy, which has been plaguing it post the demonetisation drive conducted in November. Central also supports EPFO Housing Scheme.
Conditions for eligibility
The Pradhan Mantri Awas Yojana has a number of criteria that has to be fulfilled before a person can be a beneficiary under this scheme. Moreover this scheme can be implemented in various ways, thus the criteria for each way may slightly differ however the primary criteria are listed below:
- The families who intend to utilize the benefit of this scheme are termed as beneficiary families and there are certain set conditions that these families need to meet to become beneficiaries. The families can comprise of a husband and wife and any unmarried children, and none of the members can own any ‘pucca’ house in any part of India.
- Out of the various ways in which the benefits are to be provided under this scheme, one of the more popular measures is the Government’s decision of capping the interest rates on home loans taken by the beneficiaries. However those who wish to get this interest subsidy need to fulfill the following criterion, those who fall under the EWS category cannot have an annual household income of more the Rs. 3 lacs and their household unit cannot have a carpet area which exceeds 30 square metres, while for those who belong to the LIG category the limits are Rs. 6 lacs for annual income and 60 square metres for the housing unit respectively.
- The housing unit so obtained under the scheme has to be in the name of the female head of the family, if the family has a male head then the housing unit shall be in the name of the male head and his spouse. Thus the only situation where the housing unit can be in the name of the male head solely is if the family does not have any adult females. It should be noted that this eligibility criterion is only applicable in case the housing units are being purchased rather than constructed or repaired and expanded.
Key features of Pradhan Mantri Awas Yojana
The new announcements made may have added a new dimension to the schemes, but their core values remain the same, which is to assist the poor and the needy. Some of the key features of this scheme are:
- The scheme has been designed keeping in mind the daily travails faced by senior citizens and the differently abled, so when the housing units are being allotted, for units on the ground floor, differently abled and senior citizens shall be given higher preference.
- The scheme also seeks to empower the woman of India, by making it mandatory for the housing units so allotted under this scheme to be in the name of the female head of the family either singly or jointly with her husband.
- The scheme also aims to make sustainable development mainstream by using eco friendly materials and techniques to construct the affordable housing units. Thus these are also projects that shall introduce green construction practices that help minimise the impact of construction on the ecology.
Carpet area under the Pradhan Mantri Awas Yojana
First we understand what exactly does carpet area mean, the carpet area is literally that floor area over which a carpet can be laid, thus it is clear from the definition itself that the clear floor space is the carpet area and factors such as thickness of walls etc. are not to be considered while calculating the carpet area of the house. Thus based on carpet area it has been declared under the scheme that housing units up to 30 square metres shall be allowed for applicants who fall under the EWS or economically weaker sections, while the same limit is increased to 60 square meters for those belonging to the LIG or lower income group. These housing units shall come with all basic civic amenities like water, sanitation, proper sewerage systems, full time electricity etc.
PM Awas Yojana Phases I, II & III
The Pradhan Mantri Awas Yojana aims to cover all the statutory towns that exist in India as per the census of 2011. These statutory towns number at 4041 at last count. Out of these towns the scheme shall mainly focus on the 500 cities which are classified as class I cities and the scheme shall be implemented in a series of three phases. The tentative dates of these phases are given as below:
During this phase any 100 cities from the list of 500 shall be developed. The choice of the cities depends solely on whether the States or Union Territories to which they belong to are willing to participate in this phase, or not. This phase which began in April 2015 shall finish in March 2017.
Another 200 cities from the list of 500 shall be developed under this scheme. This phase shall begin in the month of April 2017 and extend up to March of 2019.
The last phase shall bring all the cities that are left over from the previous phases into the purview of this scheme. This phase is to begin in April 2019 and last up to March 2022.
It should be noted that the number of cities so mentioned are not set in stone, thus additional cities can always be considered in any phase even if including them exceeds the stated limits.
To prevent the misuse of this scheme by unscrupulous individuals and to ensure that the benefits reach the intended beneficiaries, those seeking to register under this scheme must be ready to furnish a host of documentary evidence regarding their identity, their address and their nationality. The list of documents required is laid out below:
The applicants have to furnish a copy of their identity proofs, which include documents like the Aadhar Card or the PAN card, a valid Driving License etc.
- They shall also be required to submit address proofs. Electricity or telephone bills, voter ID cards etc. all of these shall be accepted.
- For applicants who belong to any category other than general, or who belong to any minority category have to submit the official certificate which states the same.
- The applicants shall also be required to submit a proof of their nationalities, which essentially has to be Indian. Passport, Aadhar Card or a Birth Certificate is sufficient for the purpose.
- Since the scheme has restrictions based on the annual income of assessees, the income certificate has to be furnished mandatorily. The applicants whose income does not exceed the exemption limit under the Income Tax Act, have to furnish an affidavit stating the same.
- If the applicants are owners of any properties, then they need to get those properties valued by an official valuer and the statement of the same needs to be submitted along with the form. All bank account statements relating to accounts that are opened under the applicant’s name need to be furnished also.
- Along with the declaration that no member of the beneficiary family owns any ‘pucca’ house anywhere in India, the applicants are also required to furnish a letter of allotment, certificate of fitness, or an undertaking by the builder or any other document of similar nature which is accepted as proof that the housing unit actually belongs to the applicant.
Requirement of Self Declaration
The beneficiaries are required to give two undertakings or self declarations in the form of an official affidavit. One declaration is required to state that neither the applicant nor any member of his/her family own any ‘pucca’ house in India. The other declaration is regarding the applicant’s income, in case the income falls within the exemption limit in the tax slabs.
How to apply for the scheme
The facility for online application under the Pradhan Mantri Awas Yojana has been started from the beginning of November 2016. This has made the whole application process extremely smooth and easy, however the applicants are advised to read the entire scheme document carefully to ensure whether they are actually eligible for the scheme or not. Having done that the applicants shall be required to keep their Aadhar numbers and details of annual income handy while applying online. They should make sure doubly that their income details are accurate.
The first step for the applicants would be to make sure that they are connected to the internet, once online they are required to go to the website http://pmaymis.gov.in/. Once there they should click on the citizen assessment tab. On clicking the tab they shall be required to choose between ‘For slum dwellers’ or ‘Benefits under the other 3 components’. If the applicants are currently living in slums then they should choose the former option, otherwise everyone else should choose the latter.
Once this is done the applicants shall be taken to a page containing the online form, this form needs to be filled in very carefully by the applicants, all their details including their Aadhar numbers and income details shall be filled in this form. After ensuring the details so given are accurate, they can save and submit the application and take a printout of the same.
Once the submission is over, the applicant has no further role in the application process, all they need to do is keep the application number that is generated by the system handy as this can be used to track the application status from time to time. This is all there is to apply for the scheme online.
Subsidies available in PM Awas Yojana
When the scheme was announced in 2015, the subsidy was only provided to households with an income of less than 6 lacs. The subsidy provided on the interest rate stood at 6.5%, which meant that the beneficiary would pay 6.5% lesser interest rate regardless of what was normally charged for the loan. Another stipulation was that the loan amount could not exceed Rs.6 lacs, even if the loan amount was more, subsidy was available only to the extent of Rs. 6 lacs, the remaining amount would be charged at the normal rate of interest.
However in the new announcements that have been made for the year 2017, a new income group called the Middle Income Group or the MIG has been included in the scheme. This has been done to make the scheme beneficial for a wider base, and consequently additional slabs of the subsidy have also been added and in these additional slabs, unlike the original proposal, these subsidies have been provided in the form of reducing normal interest rates by a fixed amount. Thus the new subsidy scheme is:
- The original subsidy that was declared remains as is, i.e. for those with annual incomes of Rs. 6 lacs or less the subsidy stands at 6.5% interest rate for a principal amount of Rs. 6lacs. For anything in excess of this the non subsidised interest rate shall be applicable.
- A couple of new benefits have been announced, and one among those is a subsidy that has been declared on a loan amount of up to Rs. 9 lacs. The benefit has been provided for people with an annual income which is not more than Rs. 12 lacs. The benefit that has been provided is that the interest rate charged on the loan of up to Rs. 9 lacs shall be reduced by 4%.
- The other benefit is for loans amounts of up to Rs. 12 lacs, and is available to those who have annual incomes of upt o Rs. 18 lacs. The benefit is the reduction of the interest rates applicable on the loan up to an amount of Rs. 12 lacs, by 3%.
EMIs and interest rates under PM Awas Yojana
The subsidies have been divided into 3 slabs, and each slab has a different principal amount and a different subsidy percentage. This may get a tad confusing for ordinary people who are not familiar with the mathematics of the same, thus to put them at ease, we shall provide them the subsidy amount in rupees for each slab.
For loans of up to Rs. 6 lacs, where interest subsidy is 6.5%, the beneficiary is looking at an subsidy of Rs. 2.2 lacs on that loan, whereas for loans of up to Rs. 9 lacs where subsidy to the tune of 4% is being provided, this translates to a subsidy of Rs. 1.94 lacs. Similarly the last slab, where a 3% subsidy is being given for loans of up to Rs. 12 lacs, the subsidy in monetary terms stands at Rs. 1.91 lacs for a Rs. 12 lacs loan.
The way this scheme works is the the bank which provides the loan shall obtain the subsidy from the National Housing Bank (NHB) and once that subsidy is obtained the bank automatically reduces the same from the total loan amount, thus the assessee then has to pay lesser EMIs for the loan.
Tax benefits under this scheme
A scheme is just a piece of paper unless there are people who are actively working to achieve it, thus to make this scheme a success the government requires developers to construct the affordable housing units. These units may not be as profitable to developers as other ventures thus to lure them the government has announced a host of tax breaks for those developers who engage with the government to make this scheme bear fruit.
Some of these tax benefits are:
- All entities belonging to the private sector and who are engaged in construction of housing units of 30 sq. mts. carpet area in the big four metropolitan cities of the country or are engaged in construction of 60 sq. mts. units in any part of the country shall not have to pay any income tax. However there is a rider to this benefit, any project that they take up has to be completed within 3 years. Please note that the assessees shall still be liable to MAT or Minimum Alternate Tax provisions.
- Going further the government has also exempted all the services related to the construction of these affordable housing projects from the payment of service tax in a bid to attract developers and builders from the private sector.
- Similarly as for services, the government has done the same for goods by exempting the payment of excise duty on the materials purchased for the construction of these projects. This shall bring the cost of construction further down and thus become more lucrative in the eyes of the developers.
Repayment period of loans taken under the Pradhan Mantri Awas Yojana
The loans that are provided under this scheme shall have a maximum duration of 15 years and moreover the beneficiary should not be more than 70 years of age at the completion of the loan repayment period. To make it easier on the persons taking the loans, banks often allow these loans to have a period of moratorium; a period of moratorium is the period where the person taking the loan does not need to pay EMIs or any other amount towards loan repayment. Once the moratorium period is over, the payments begin. This period is very helpful and allows people some time to get their finances in order before they have to start with the payments. Similarly loans under this scheme may include such moratorium periods; however these moratorium periods shall be included when calculating the limit for repayment period of 15 years.
The Benefits and Disadvantages of the Pradhan Mantri Awas Yojana
No scheme is perfect, and no matter how noble its intentions there are bound to be some drawbacks. This remains true for this scheme too, and so we shall lay out some relevant benefits and drawbacks of the Pradhan Mantri Jan Dhan Yojana for you.
- The biggest benefit of this scheme is the subsidy on interest rates. The interest rates on housing loans are generally north of 10%, consequently the EMIs are too steep for the poor to afford. By providing this subsidy the scheme has helped slash the EMIs by up to 20%, this has proved to be a boon for many and made the loans affordable for them.
- The scheme has put great emphasis on empowering women, in addition to the backward classes in general. The scheme ensures that the adult women of a family own the houses in their names, this provides a sense of security and stability to the women as they are no longer at the mercy of the whims of the males of the family. The scheme has also given due consideration to needs of the differently abled and senior citizens. Thus it is clear that this scheme focuses on a more holistic approach to development.
- The premise of the scheme is extremely noble, which is to provide housing for all the backward and repressed classes, so that no one in the country has to live without a roof over their heads. If this plan is a success it shall help countless millions to live a secure and dignified life and give them the opportunity to strive to be better and better, and break the cycle of poverty by hard work and determination. This in turn can only help the country in the long run, thus what the country invests today through this fund, it shall reap manifold its value in the coming years.
Now we shall highlight some of the criticisms that have been levelled at the scheme over the years and which we feel are pertinent:
- One of the major criticisms made about the scheme is that the subsidies are linked to the loan amounts, and any variations in those amounts shall make the amounts ineligible for subsidy. This rigidity is quite problematic for the beneficiaries who are essentially poor and need these subsidies.
- The scheme has set limits on the carpet areas of the housing units, and this limit of 30 sq. mts. or 60 sq. mts., which depends on the category of the beneficiaries, is being said to be insufficient to meet the housing needs of many families, as it is difficult to fit even a marginally big family in such a small space.
- The loans provided under this scheme have a repayment period of 15 years. The subsidy on interest rates has definitely helped reduce the EMIs, however a provision for extending the repayment period would have helped reduce the EMIs even further, thereby attracting more people to the scheme.
- As mentioned above, the way this scheme works is that the subsidy amount is directly reduced from the principal amount of the loan and the beneficiary pays EMIs on the reduced loan. However as per the scheme, if there is any delay or stoppage of construction work etc. then the government shall debit the entire subsidy amount from the account of the beneficiary. Since the beneficiary cannot be held responsible for any natural disasters, acts of God or other circumstances beyond his control, this provision does seem a bit unfair on behalf of the beneficiary.
Government Funding in 2017-18 Budget
Originally the Pradhan Mantri Awas Yojana had been allocated Rs. 15000 crores in last year’s budget, however the scheme has undergone some changes resulting in the increase in the number of people who shall be able to take the benefit of this scheme. The changes include a two fold increase in the loan amount that are eligible for subsidy under this scheme, this was done because the original scheme was widely criticized for being impracticable, especially in relation to housing in metropolitan cities, where prices are normally sky high. Thus keeping all these factors in mind, the Finance Minister has announced an additional allocation of Rs. 8000 crores in this year’s Union Budget, thus this takes the total allocation of funds under this scheme to a massive Rs. 23000 crores.
Kerala Government has also supported poor fishermen with the Coastal Housing Scheme in Kerala Fisheries Department.