Roti, Kapda, Makaan these three basic necessities define every individuals existence and their importance in our lives. From these 3, Makaan that is housing is of primary importance for the safety and security of our families and their comfort. Given the overall need for good quality and affordable housing in the country, it is given that there will be an equally huge demand for affordable housing loans in India.
In India, about 95% of the housing shortage is in the low income group, which basically is the EWS (Economically Weaker Section) having annual income up to Rs. 3 lakhs and LIG (Low Income Group) having an annual income of Rs 3-6 lakhs. Low income, along with an almost non-existent credit history is the primary reason people from these sections are unable to avail a housing loan. The need of the hour therefore, was a focus on this sector, along with an aim to make housing and housing loans more affordable for them.
Recognising this need, the government of India launched its “Housing for All” vision to make it easier for people from low income groups to have their own house. This vision to make housing more affordable was welcomed by all government authorities, builders, regulators and banks / housing finance companies. To further strengthen this vision, the government also launched the Pradhan Mantri Awas Yojna, (PMAY) a credit linked subsidy scheme.
Through the PMAY, housing loan housing loan applicants from EWS & LIG can avail a subsidy up to Rs. 2.67 lakhs on their home loans. Under this scheme, individuals in the Middle Income Group (MIG), will be provided with an interest subsidy on their housing loans for acquisition / construction of houses (including repurchase). For Economically Weaker Section (EWS) / Lower Income Group (LIG), the interest subsidy will be provided on housing loans for acquisition, construction of house etc. The subsidy can also be availed for new construction, addition of rooms, kitchen, toilet etc. to existing dwellings as incremental housing.
Who can benefit under the Pradhan MAntri Awas Yojna Scheme?
The scheme is presently being offered to;
Families i.e. Husband, wife and unmarried children
Individuals, earning an income, irrespective of their marital status, as a separate household in the MIG category
An important point to be noted while applying for the PMAY is that the individual or family should not own any pucca house in their or any family member name, anywhere in India. Further, they should have not received any financial assistance under the “Housing for all by 2022” mission.
Features of the PMAY
The interest subsidy is received upfront, on the balance principal amount.
Aadhaar numbers of the beneficiary individuals / family are compulsory for those belonging to the MIG category.
Interest subsidy is available only for a loan tenure upto 20 years or lower.
There is no cap on the loan amount or value of the property being purchased.
This mission by the government was further strengthened and made attractive, thanks to the RBI extending the scope of priority sector loans upto 35 lakhs. This priority sector lending tag helped reduce the EMI (Equated Monthly Instalments) on loans while also easier access to bank credit facilities, especially for the economically weaker sections and lower income groups.
To further facilitate the off take of loans and ensure it reaches all the needy sections, the housing loan companies packaged their affordable housing loans products under different brand names. This made their offerings presentable and easy to understand for their customers. Huge amounts have also been spent by the banks and financial institutions to make these affordable housing loans popular and ensure that all the people who can benefit from it, are made aware of it. Dedicated customer service teams backed by robust back end operations, helped banks increase their business in this segment and also ensure maximum off take of the scheme.
One big factor that all the banks & financial institutions rely on, to make their products more secure and accessible is technology. It is one of the key growth drivers, especially for this segment as technological developments have helped these institutions to provide fast, cost effective and customised products and services to customers with very quick turnaround times. It has also helped the institutions reach out to larger geographic areas without the need of setting up physical offices / sites for customer interaction. Deployment of technology has also helped the institutions conduct proper risk assessment of the potential customers through data analytics, thus reducing their risk exposure.
Affordable housing is here to stay, and poised for further growth thanks to the government’s efforts and schemes such as the Pradhan Mantri Awas Yojna along with the dedicated efforts and deployment of technology by banks & financial institutions.