PMAY 2.0: Can government withdraw your loan subsidy if lapses are found?

Before taking advantage of a credit subsidy, it is important to check with your bank or lending institution regarding the conditions under which the subsidy may be revoked

The second phase of the Pradhan Mantri Awas Yojana (PMAY) was recently launched. PMAY, through its Credit Linked Subsidy Scheme (CLSS), assists individuals in purchasing or constructing homes. However, many beneficiaries or prospective users of the PMAY 2.0 subsidy may not be aware that the government reserves the right to reclaim the interest subsidy provided under the scheme in specific circumstances.

What is PMAY-U 2.0

The PMAY-U 2.0 aims to provide affordable housing for all in urban areas, focusing on economically weaker sections (EWS), lower-income groups (LIG), and middle-income groups (MIG). The mission, covering five years from September 1, 2024, offers central assistance for constructing, purchasing, or renting homes through four key verticals: Beneficiary Led Construction (BLC), Affordable Housing in Partnership (AHP), Affordable Rental Housing (ARH), and an Interest Subsidy Scheme (ISS). The scheme prioritises female ownership, with houses built under the program typically registered in the name of the female head or jointly in the couple’s names.

 

 

The income criteria for eligibility are as follows:

 

EWS households: Annual income up to Rs 3 lakh.

 

LIG households: Annual income from Rs 3 lakh to Rs 6 lakh.

 

MIG households: Annual income from Rs 6 lakh to Rs 9 lakh.

 

The disbursal is supervised by HUDCO, NHB and SBI. The manner of disbursal is that the subsidy amount is deducted from the principal amount upfront and right at the beginning so that no interest accrues in the first place over subs amount of subsidy. 

 

When can the government withdraw the subsidy?

 

“For instance, if a borrower defaults on their loan, leading to a non-performing asset (NPA) status, the subsidy may be withdrawn during the repayment process,” Pramod Kathuria, Founder and CEO of Easiloan.

 

“If the construction of the house is stalled then the amount already disbursed requires to be credited back to the government,” said Jasmine Damkewala, Senior Partner at Circle of Counsels and Advocate-on-Record, Supreme Court of India.

 

“The scheme allows only one subsidy per family unit, defined as the husband, wife, and unmarried children. If, during the verification process, it is found that more than one member of a family has availed of the credit-linked subsidy, the government reserves the right to revoke the additional claims,” Adhil Shetty, CEO of Bankbazaar.com.
 

What happens when EMI is withdrawn

 

When the subsidy ends, the borrower has to revert to the original interest rate, which leads to an increase in the EMI.

 

Can you avail PMAY subsidy if you already have a home loan?

 

You cannot avail of the PMAY subsidy on an existing home loan. The PMAY is specifically designed for individuals looking to purchase a new property or construct a new home. The scheme is not applicable to existing loans, as it is intended for first-time homebuyers who do not own a pucca house anywhere in India.