Govt Extends Credit-Linked Subsidy Scheme For Middle-Income Group By One Year
Finance Minister Nirmala Sitharaman on Thursday extended the benefit of interest subsidy on home loans under the Credit-Linked Subsidy Scheme (CLSS) for households by one year. While announcing the second tranche of PM Narendra Modi’s Rs 20 lakh crores economic package for a coronavirus-hit Indian economy, she said that this move will benefit those households with annual incomes between ₹6 lakh and ₹18 lakh.
The Finance Minister said that it will lead to an investment of ₹70,000 crores in the housing sector and also create jobs. Expressing the hope that besides creating a significant number of jobs, this move will also generate demand for steel, cement, transport and other construction material to boost the housing sector.
According to a government estimate, the housing sector has been badly affected by the coronavirus outbreak and lock down. The move will give a boost to the housing sector through a one-year extension of subsidised loan for affordable houses for the middle-income group with an annual income of ₹6 lakh to ₹18 lakh.
While announcing at a press conference, FM Nirmala Sitharaman said the CLSS has benefited 3.30 lacs middle-income families so far and the extension of one more year is likely to benefit another 2.50 lacs families in FY 2021.
In the nationwide lock-down from the month of March onward, all non-essential economic activity had been stopped. The ban on construction activity also affected lakhs of migrant workers and daily labourers whose livelihood depended on construction industries.
The Credit-Linked Subsidiary Scheme (CLSS)
The CLSS was introduced in May 2017 and last extended till 31 March 2020. Now, the scheme for the middle-income group for acquisition or construction of houses has been extended till March 31, 2021. The Credit-Linked Subsidiary Scheme under Pradhan Mantri Awas Yojana–Urban varies by the category of borrower, amount and tenure of the loan and the interest rate.
Under this scheme the government gives an interest subsidy of 4% and 3% on loan amounts up to Rs 9 lakh and Rs 12 lakh to beneficiaries in the MIG-I and MIG-II categories respectively.
Under the CLSS, middle-income beneficiaries with annual household income between ₹6 lakh and ₹12 lakh (MIG-I) get an interest subsidy of 4% up to a loan amount of ₹9 lakh and those with annual household incomes of more than ₹12 lakh and up to ₹18 lakh (MIG-II) get interest subsidy of 3% up to a loan amount of ₹12 lakh for a period of 20 years even if the total loan amount is higher than that. Additional loans beyond the specified limit, if any, are at non-subsidized rates.
This scheme is available for buying or constructing a house with a carpet area of up to 160 square meters for the MIG-I category and the limit has been extended to 200sq.m for the MIG-II category respectively. Besides, the house must have basic civic infrastructures such as water, sanitation, sewerage, and access to road and electricity. Moreover, the scheme is applicable only to those families where none of the family members own an all-weather dwelling unit (pucca house) in their names in any part of India.
According to a report of Annarock, there are currently 1.56 million under-construction housing units across the top seven cities of India. Of these, approximately 39 percent of the housing units are in the affordable segment priced below ₹40 lakh.
The affordable housing would gain momentum with the Government extending the Credit-Linked Subsidiary Scheme till March 2021. This move will help increase demand for affordable housing in urban middle-class Indians and subsequently, it will positively push demand for raw materials like cement, steel, transport, and other construction materials. So, the Finance Minister’s announcement is likely to bring some cheer to the housing sector that has seen all activity coming to a grinding halt as a result of the coronavirus lockdown.