Credit-Linked Subsidy Scheme (CLSS) is an initiative introduced by the government to promote affordable housing by providing interest subsidies on home loans. These schemes are typically part of broader housing and urban development programs.
The primary objective is to make housing more accessible and affordable for a larger segment of the population, particularly for economically weaker sections and low-income groups.
In India, the Pradhan Mantri Awas Yojana (PMAY) is a central sector scheme that offers credit-linked subsidies to eligible beneficiaries.
The scheme has four components, each targeting a specific income group:
Economically Weaker Section (EWS) and Low Income Group (LIG): This component provides interest subsidies on loans up to Rs. 6 lakhs for new construction or the addition of kitchen, toilet, etc., to existing dwellings as incremental housing. The carpet area of houses being constructed under this component should be up to 30 sqm.
Middle-Income Group (MIG) I: This component covers households with an annual income between Rs. 6-12 lakhs and offers an interest subsidy of 4% per annum on loans up to Rs. 9 lakhs. The carpet area of houses being constructed under this component should be between 60-160 sqm.
Middle-Income Group (MIG) II: This component covers households with an annual income between Rs. 12-18 lakhs and offers an interest subsidy of 3% per annum on loans up to Rs. 12 lakhs. The carpet area of houses being constructed under this component should be between 160-200 sqm.
To avail of the CLSS benefits, individuals must fall into any of these income groups and apply for a loan from a financial institution covered under the PMAY scheme. The interest subsidy is credited upfront to the loan account, resulting in reduced effective housing loans and Equated Monthly Installments (EMI).
The schemes have been discontinued for EWS/LIG and MIG I and II as of March 31, 2022, and March 31, 2021, respectively.
Ahead of the Union Budget, the Confederation of Real Estate Developers’ Associations of India (CREDAI) has approached the Finance Ministry to suggest the reintroduction of the credit-linked subsidy scheme (CLSS) for the middle-income group, reduced stamp duty, streamlined approval processes, and subsidies for developers investing in affordable housing projects.
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