What Is Credit Linked Subsidy Scheme? How Does It Work?

Let’s face it! Skyrocketing property prices in India often keep homes out of buyers’ reach. As a result, the affordable housing sector has risen in popularity these past years, providing economical housing options for house-hunters.

Add to it the introduction of the Pradhan Mantri Awas Yojana (PMAY) scheme, which seeks to make housing affordable to all and aims to build two million houses by the end of 2022. Among the various sub-schemes that PMAY features, the Credit Linked Subsidy Scheme offers subsidies not only to economically weaker sections (EWS) but to low-income groups (LIGs) and middle-income groups (MIGs) as well.

If you are wondering what is credit-linked subsidy scheme? Read on to find out.

What is the CLSS Scheme?

The CLSS or Credit Linked Subsidy Scheme is the only scheme under the PMAY (Urban) directly implemented by the central government. Under this scheme, the government provides a direct subsidy on housing loan interest rates to the various beneficiaries of this scheme.

Who are the beneficiaries of the scheme?

Based on the annual household income, the following four categories can avail the CLSS scheme:

• EWS or Economically Weaker Section: Households with annual income under Rs. 3 lakhs
• LIG or Low Income Group: Households with annual income between Rs. 3 lakhs and Rs. 6 lakhs
• MIG I or Middle Income Group I: Households with annual income between Rs. 6 lakhs and Rs. 12 lakhs
• MIG II or Middle Income Group II: Households with annual income between Rs. 12 lakhs and Rs. 18 lakhs

How does CLSS work?

Pondering over how a credit-linked subsidy scheme works? We have you covered.

This scheme allows homebuyers to get interest rate concessions of 3-6.5% on the loan amount, depending on the category of the beneficiaries they fall under. This subsidy is calculated over the entire period of the loan and is capped at Rs. 2.67 lakhs.

The concession offered is directly deducted from your loan’s outstanding principal amount. As the principal amount reduces, so does the size of EMIs. To avail of the subsidy, all eligible borrowers must declare their income and submit the title of the property they wish to buy. Once your lender verifies the details, the subsidy is credited to your loan account, lowering your EMIs.

Credit Linked Subsidy Scheme for EWS/LIG

Beneficiaries of the Economically Weaker Section (EWS) and Low Income Group (LIG) seeking housing loans from Banks, Housing Finance Companies and other such institutions would be eligible for an interest subsidy at the rate of 6.5% for a tenure of 20 years or during the tenure of loan whichever is lower. They receive the direct subsidy, which is the key PMAY CLSS benefit.

The credit-linked subsidy scheme meant forthese groups will be available only for loan amounts upto Rs. 6 lakhs. But any additional loans beyond Rs. 6 lakhs will be at a nonsubsidized rate.

The credit-linked subsidy will also be applicable for housing loans taken for new construction and the addition of toilets, rooms etc. to existing homes.

The carpet area of houses being constructed under the CLSS should be upto 30 square metres and 60 square metres for EWS and LIG, respectively. While the beneficiary can build a house in a larger area, the subsidy would be limited to the first Rs. 6 lakh only.

Credit Linked Subsidy Scheme for MIG

In the MIG-I, an interest subsidy of 4% is provided for loan amounts up to Rs. 9 lakhs. On the other hand, in MIG-II, an interest subsidy of 3% is provided for a loan amount of Rs. 12 lakhs.

The interest subsidy is calculated at a rate of 9% NPV over the tenure which can be a maximum of 20 years. Housing loans above Rs. 9 lakh and Rs. 12 lakhs will be at non-subsidized rates.

CLSS for MIG I and MIG II supports a carpet area of 160 square meters and 200 square meters carpet area as per income eligibility

What are the eligibility criteria?

Here are the PMAY eligibility criteria that one must fulfil to enjoy the scheme’s benefits:

• An applicant/household must not own a pucca house in any part of India, either in their name or any of their family member’s name
• An applicant must not be registered under any central/state housing scheme
• A female member of the family must be a co-owner of the property
• The property must be located in one of the towns or adjacent areas listed in the 2011 census

Affordable housing with Tata Capital

Now that you know what is CLSS scheme you can enjoy its rewarding benefits and own your dream home with ease. If you are an eligible beneficiary, you can apply for home loan with Tata Capital. Along with the subsidised rate, you also get repayment flexibility, structured EMI plans, a seamless application process, and quick loan disbursals.

Contact us to know more!