Individuals often find themselves wondering about which financing option to choose while purchasing a residential property of their choice. With property prices taking the upward curve and savings dipping, it is most beneficial to avail housing credit while procuring a real estate property. Several government initiatives for affordable housing target Indians from all income groups.

Therefore, it becomes a difficult choice when it comes to conventional home loans and government schemes for affordable housing. Nonetheless, a comparative study between the features and advantages of both financing options will prove helpful in directing an individual to make the right choice.

How does government affordable housing scheme benefit borrowers financially?

The most prominent and popular government housing scheme in existence today is Pradhan Mantri Awas Yojana (PMAY). This scheme aims to bridge the gap between the demand for affordable housing and their attainability. Besides, this particular scheme is inclusive of individuals who belong to the Economically Weaker Sections (EWS) and Low Income Group (LIG).

However, the reasons why Pradhan Mantri Awas Yojana is financially beneficial are –

  • Subsidy on home loan interest – PMAY has provisions for subsidy on the interest component of a home loan based on the income group of individuals. Therefore, EWS/LIG categories are eligible to receive a subsidy of up to 6.5%. For MIG, the subsidy is about 4%. Moreover, these subsidies are applicable only in case of home loans for a tenor of a minimum of 20 years.
  • Pucca houses for the underprivileged – PMAY is a Credit Linked Subsidy Scheme (CLSS) that provides the opportunity for providing ‘pucca’ houses to beneficiaries. This welfare affordable housing scheme only targets individuals who are owners of ‘kutcha’ residential properties.

However, PMAY has certain associated restrictions that put it behind conventional mid-range home loans in terms of popularity. The interest subsidy is only valid for up to a certain portion of the loan amount. Besides, individuals who already own ‘pucca’ houses cannot avail this CLSS on their home loans. Additionally, PMAY is applicable only for residential properties with specified carpet areas.

What are the advantages of mid-range home loans?

Mid-range home loans have emerged as a dependable source of housing finance assistance for millions of Indians. However, the benefits of mid-range housing credit that encourage individuals to opt for a home loan are as follows –

  • Affordable rate of interest – Individuals are eligible to get the most competitive rate of interest on home loans from leading lending agencies. Besides, the ones with higher CIBIL score or an additional source of income can avail housing credit at even lower interest rates.
  • Customizable tenor – Unlike PMAY Gramin, mid-range home loans have customizable tenors that suit the financial planning of individuals. Besides, individuals have the option to follow a few ways to reduce home loan tenor and EMIs under conventional housing credit to limit the repayment burden further. 
  • Residential property of one’s choice – Home loans do not carry any restrictions on the carpet area or dimensions of the residential property. Therefore, people from all economic backgrounds can avail home loans to finance the purchase of their desired property. Besides, the ones who already own ‘pucca’ houses are also eligible to access this mid-range housing finance option.

Additionally, reputed lenders in the housing credit market issue home loans up to Rs.3.5 crore so that individuals can buy any residential property of their choice.

The choice between affordable housing schemes and conventional home loans depends on a borrower’s perspective. However, mid-range home loans take into account the factor of choice and flexible financial implications that help individuals finance any real estate property of their preference.

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