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Pradhan Mantri Awas Yojana: How To Choose The Right Home Loan? Research Team | Posted On Thursday, September 06,2018, 11:31 AM

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Pradhan Mantri Awas Yojana: How To Choose The Right Home Loan?



Pradhan Mantri Awas Yojana (PMAY) was launched with a mission to provide “Housing for All” by 2022.

The Credit Linked Subsidy Scheme (CLSS) is one of the most prominent schemes under PMAY. CLSS aims to give Economically Weaker Sections (EWS) and Lower Income Groups (LIG) households earning income up to Rs 6 Lakhs a year, a house.  With effect from 1st Jan 2017, a new CLSS scheme for the “Middle Income Group (MIG)” has been launched. Under this scheme, MIG households with annual income greater than Rs 6 Lakhs can benefit from the PMAY subsidy.

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MIG has 2 categories:

1. MIG-I: Annual income between Rs 6,00,001 to 12,00,000.

2. MIG-II: Annual income between Rs 12,00,001 to 18,00,000.


  • Subsidy is available for self-construction, renovation or improvement loans, only for EWS and LIG categories.
  • Only first-time home buyers are eligible to get this subsidy
  • You or family members must not own a Pucca house. If you stay with parents in a house owned by them, you can enjoy this subsidy.
  • Women are given preference under this scheme.
  • Older citizens and the disabled are given preference while applying for a house on the ground floor
  • A family should comprise of you, your spouse and unmarried children
  • The loan applicant should not have availed housing benefits under Central or State Government PMAY subsidy
  • The property should be in urban areas as mentioned in 2011 Census
  • The maximum term of the home loan can be up to 20 years
  • The loan tenure cannot exceed retirement age or 60 years.

Documents Required For PMAY

  • Aadhaar Card
  • Salary slip or salary certificate, updated bank statement for salaried applicants.
  • Last 2 years ITR and bank statement for self employed.
  • Declaration on not owning a pucca house
  • If you don’t have income proof, submit an affidavit declaring annual family income.

PMAY subsidy details:

Income Group

Annual Household Income


Upto Rs 3,00,000


Rs 3,00,001 to Rs 6,00,000


Rs 6,00,001 to Rs 12,00,000


Rs 12,00,001 to Rs 18,00,000

Income Group

Maximum loan amount

Interest subsidy

Maximum subsidy tenure (yrs)

Maximum subsidy amount


Rs 6 Lakhs



Rs 2.67 Lakhs


Rs 6 Lakhs



Rs 2.67 Lakhs


Rs 9 Lakhs



Rs 2.35 Lakhs


Rs 12 Lakhs



Rs 2.30 Lakhs

PMAY gives upfront relief in the form of a reduction in the overall loan liability. EWS and LIG enjoy a subsidized interest at 6.5% on the maximum loan amount of Rs 6 Lakhs for 20 years.

Say you belong to LIG and apply for a loan of more than Rs 6 Lakhs. The maximum amount of subsidy is still restricted to Rs 6 Lakhs. The additional loan over and above Rs 6 Lakhs is charged at regular home loan rates of the bank.

Banks willing to offer PMAY subsidy must get registered with NHB or HUDCO. If you apply under PMAY, you will be given a lump sum of Rs 3,000 to cover the cost of processing the home loan for an amount up to Rs 6 Lakhs. For loans availed beyond the stipulated limits, the bank will recover the normal processing fees.

SEE ALSO: All You Need To Know About Home Loan Down Payment And EMI

How to choose the Right Home Loan?

Selecting the right Home Loan is essentially selecting a Home Loan offered by the right lender. Selecting the right lender is an important decision. There might be many lenders ready to offer Home Loans. Nevertheless, that doesn’t mean they are offering the best deals. Home Loans are loans of long tenure, which might be around 20 years. Therefore, it is crucial that you do proper research before finalizing the bank or Lender.

Following are few things to consider while choosing a lender:

1.  Evaluate your financial capacity: Think like a lender and evaluate yourself, based on the eligibility criteria set by them: income, credit history and repaying capacity. The thumb rule: Don’t spend more than 30% of income on Home Loan repayment.

2.  Interest rates: Choosing from fixed and fluctuating interest rates is crucial. This determines EMI and the overall interest to be paid on the Home Loan.

3.  Read the fine print carefully: Home loan is a long-term commitment. Therefore, reading the terms and conditions, and the loan agreement carefully is of utmost importance. You may also get it reviewed by a lawyer.

4.  Amount to be borrowed: Based on the property value, arrange down-payment and borrow only that which you can repay.

5.  Lender’s service and reputation: Yes, lower rates are attractive and tempting. But remember, Home Loan is a long term affair. You’ll have to deal with the lender for the entire tenure. Do background checks on lenders and consider a lender who has good reputation and whose services are good. You might consult past clients and read reviews.

6.  Compare lenders: Compare two or three lenders, and only then shortlist the lender that offers a loan that suits you. Don’t get carried away with convincing words. They are trained to present themselves well. This is not a guarantee of quality services.

7.  Ask more questions: Ask lenders all the questions, you may have. Never hesitate. This will help clear your doubts. You’ll also know the kind of services that they offer, which will be grounds for a comparison. If a lender doesn’t answer your questions and ignores them, take it as a warning sign.

8.  Be sure of what you want: You should know what you’re expecting of a Home Loan. Know the type of property (new purchase or existing property), type of lender (small or large), interest rate type (fixed or floating), LTV and so on.

9.  Charges: Check out the fees and charges applicable on a home loan. One of them is the processing fees which range from 0.25- 2% of the loan amount. Check the terms and conditions of prepayment.

10. Turn Around Time: If your documents are adequate, banks take around 5 days to sanction a Home Loan. Their Turn Around Time can also be the indication of the quality of services.

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