31 OCTOBER, 2019

After the incorporation of Pradhan Mantri Awas Yojana (PMAY), Indian Government is constantly upgrading the scheme in order to attract more beneficiaries. Recently, major changes have been made in the affordable housing scheme PMAY, which brought good news for home buyers. The Housing and Urban Affairs (HUA) Ministry has announced an increase of 33% in carpet area of houses that are entitled for interest subsidy under PMAY-U.

The amendment is incorporated in order to encourage more people to take advantage of the interest subsidy provided on PMAY. The credit linked subsidy in PMAY is a very beneficial scheme for home-buyers belonging to four income slabs. There are four income slabs under PMAY,

Name of the group

Annual Income

Economically Weaker Section (EWS)

Up to Rs. 3 lakh

Lower Income Group (LIG)

Between Rs. 3 lakh to Rs. 6 lakh

Middle Income Group I (MIG I)

Between Rs. 6 lakh to Rs. 12 lakh

Middle Income Group II (MIG II)

Between Rs. 12 lakh and Rs. 18 lakh

The interest subsidy enables eligible users to buy a house under PMAY scheme. Let’s understand how the subsidy is calculated for different income slabs.

  • Middle Income Group II:

Let us assume that Mr. Raman belongs to MIG II income group and he has borrowed Rs. 35 lakh for the tenure of 20 years at the interest rate of 9%. Therefore,

Home loan amount

Rs. 35 Lakh

The interest rate of the lender



20 years

Now, under PMAY, for MIG-II, 3% max. interest Subsidy is given considering a maximum loan of Rs. 12 lakh. In this case, 3% interest subsidy on 12 lakh loan amount comes out to be Rs. 2,30,156.

  • Lower Income Group:  

Mrs. Shaila has borrowed Rs. 6 lakh at the interest rate of 9% for 20 years. Therefore,

Home loan amount

Rs. 6 lakh

Interest rate of the lender



20 years


Now, at 6.5% subsidised interest rate applicable for Mrs. Shaila, the Net Present Value (NPV) of the interest subsidy comes to Rs. 2,67,000. Therefore,

You can check exact subsidy applicable in your case through our PMAY subsidy calculator available on our website.

PMAY subsidy was incorporated to rectify the dire need of affordable housing units in India. HUA has planning to construct one crore new residential units until 2022 to achieve the goal of ‘Housing for all by 2022’ in our country. So, the newly incorporated changes are anticipated to attract more buyers willing to take advantage of the PMAY subsidy facility.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.