As the year 2016 has witnessed many ups and downs, the year was not a good one in view of reality segment. On one hand huge stocks of unsold inventory were pilled for under-construction projects jolting with low demand, the demand for ready-to-move in apartments observe a little hike on the other side. But year 2017 is expected to bring good news with a view of affordable housing.
Prime Minister Narender Modi has announced subsidies on the home loans for lower income and weak sections to bring ownership within the reach of larger section of the society. On the eve of New year, this important announcement was made under Prime Minster Awas Yojana (PMAY) in which for loans upto Rs. 9 lakh shall attract a subsidy of 4% and for loan upto Rs. 12 lakh will attract a subsidy of 3%. Hence, obtaining a loan of say Rs. 8 lakh at 9% shall cost the borrower at 6% by receiving a subsidy of 3%.
Central government is already providing subsidy to 6.5% points on a home loan of upto Rs. 6 lakhs under PMAY. This scheme leads to a net benefit of Rs. 2.21 lakh on a loan of Rs. 6 lakh to be paid back in 15 years. As these benefits shall be reaped by the borrowers of annual income upto Rs. 6 Lakhs i.e., Rs. 50,000 per month, this new subsidy scheme will boost up the demand in housing sector with a support to the economically-weaker section and lower-income groups.
As the benefit under PMAY has been refrained to the individuals with annual income upto 6 Lakhs who is eligible to apply for a housing loan upto Rs. 24 lakhs, around 65% of the housing loans of the 26 Public Sector Banks are in the loan slabs under Rs. 25 lakh.
With an emphasis on boosting the low-cost housing in a medium to long term, the benefit of the scheme can be availed on the part of loan as well. Say, if a borrower seeks a loan of Rs. 30 lakh with an annual income of Rs. 6 lakhs, he shall be provided subsidy on the interest rate for Rs. 24 lakh and the rest of Rs. 6 lakh of loan will attract the normal amount of interest.
A benefit of Rs. 1,98,300 can be derived on a principal amount of Rs. 9 lakh for 15 years with a net subsidy of 4% point. The EMI has come down by 22% from Rs.9,128 to Rs. 7,117 bringing down the effective loan amount to Rs. 7,01,700.
While 3% points subsidy on a home loan of Rs. 12 Lakhs for 15 years brings the EMI down by over 17%, amounting to Rs. 10,126, as against previous amount of Rs. 12,171. Thousand of crores of subsidy has already been disbursed under the Credit Linked Subsidy Scheme. NHB is the nodal agency appointed for the disbursement of these subsidies to the borrowers via bank.
Not from the view of borrowers, this decision will bring an equal positive effect on developers by reducing their unsold inventory which will further generate the shorter revenue cycles and improved project efficiencies.