Pradhan Mantri Awas Yojana: Credit Linked Subsidy

What Is Pradhan Mantri Awas Yojana?

Following the directive principles of state policy (DPSP) from Indian constitution, the Indian government has introduced ‘Pradhan Mantri Awas Yojana’ (PMAY). Along with food and clothing, housing is considered as a basic need of human being. To fulfill the basic need of strong and sustainable housing, Prime Minister Narendra Modi introduced Pradhan Mantri Awas Yojana on 1st June 2015. The scheme is supposed to help the urban poor population of India to get their own secured and well built house.

‘Housing For All’ is the tagline of the scheme which is made to give affordable housing to India’s urban poor population by the year 2022. This scheme focuses on slum rehabilitation, giving subsidy on home loan interest rate, construction of better houses, renovating houses with basic needs like toilets etc.


What Is Credit Linked Subsidy?

The credit link subsidy is one of the types of schemes under Pradhan Mantri Awas Yojana. The credit link subsidy is provided on the home loans taken by the urban poor population to build, purchase or renovate houses. The subsidy is given to 3 types of income groups: economically weaker sections, low income groups and middle income groups. Amongst these the middle income groups is further divided into two on the basis on annual income of the individual.

Particulars Economically Weaker Section Low Income Group Middle Income Group 1 Middle Income Group 2
Annual Income Up to Rs.3 lakh* Rs. 3 lakh to Rs. 6 lakh* Rs.6 lakh to Rs.12 lakh* Rs. 12 lakh to Rs.18 lakh*
Maximum Loan Tenure 15 to 20 years* 15 to 20 years* 20 years* 20 years*
Revised Carpet Area 30 square meters* 60 square meters*  

120 square meters*


150 square meters*

Interest Subsidy 6.5%* 6.5%* 4%* 3%*
Loan amount eligible for subsidy Up to Rs. 6 lakh* Up to Rs. 6 lakh* Up to Rs. 9 lakh* Up to Rs. 12 lakh*


Features And Benefits Of Credit Linked Subsidy:

The loan taken under this scheme is supposed to be paid off in EMI i.e. equated monthly installment.

The loan preference in this scheme is given to women, manual scavengers, scheduled tribes, scheduled castes, backward classes, minorities, people with disabilities and transgender.

Interest subsidy is calculated on NPV (net percent value) basis at 9%* discount rate.

To avail a loan subsidy under this scheme the applicant or any immediate member from the applicant’s family should not own a well built or pucca house in any part of India.

The applicant require to present self certificate or affidavit to avail interest subsidy on loan.

HUDCO (Housing and Urban Development Corporation) and NHB (National Housing Bank) has been decided as CNAs (Central Nodal Agencies) to channelize subsidy under this scheme to the loan lending institutions and to monitor the whole lending process.

The primary lending institutions to give loan under this scheme include Small Finance Banks and Non Banking Finance Company-Micro Finance Institutions, Scheduled Commercial Banks, Housing Finance Companies, Regional Rural Banks, State and Urban Cooperative Banks. These primary lending institutions are not supposed to charge any additional fees to the applicant to process their loan application.

Beneficiaries eligible for interest subsidy under credit linked subsidy scheme can directly apply to primary lending institutions.

Primary lending institutions can sanction loans after proper verification of application and after that applicant can claim subsidy from central nodal agencies.

Credit linked subsidy is available to build or rebuild houses, add necessities such as kitchen, toilet etc.

To avoid any duplication or fraud, the state/ union territories/ urban local body/ primary lending institutions will be taking Aadhar card/ voter ID card/ any other unique identification/ a certificate of house ownership from revenue authority of beneficiary’s native district to link beneficiary identification.

The EMI amount under credit linked subsidy is maximum Rs. 2000*.

The loan subsidy is limited to Rs. 6 lakh* where as there is no loan amount limit specified. But the loan amount will be given considering applicant’s profile.

The credit linked subsidy under Pradhan Mantri Awas Yojana offers fixed interest rate for 15 years*.

The houses in rural area cannot benefit from the credit linked subsidy in interest rate.

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