Affordable housing in India has become a key focus for the government to help low- and middle-income families achieve their dream of owning a home. Through schemes like PMAY (Pradhan Mantri Awas Yojana), eligible homebuyers can benefit from a home loan subsidy that reduces the interest burden significantly. These initiatives not only promote housing for all but also offer subsidy on home loan interest, making homeownership more accessible and affordable.
What Is Affordable Housing in India?
Affordable housing refers to homes priced to be accessible for individuals in Economically Weaker Sections (EWS), Low Income Group (LIG), and Middle Income Groups (MIG). These homes typically fall within:
- Carpet Area: 30–160 sq. m (depending on category)
- Property Cost: Up to ₹45–60 lakh (city-specific)
- Loan Amount: Up to ₹6 lakh for subsidy, more for loan extension
It is supported through central schemes like PMAY (Pradhan Mantri Awas Yojana) and state-level housing boards.
What is a Home Loan Subsidy?
A home loan subsidy is a government-backed financial benefit that helps eligible homebuyers reduce their home loan interest burden. Under schemes like the Pradhan Mantri Awas Yojana (PMAY), borrowers from economically weaker sections (EWS), low-income groups (LIG), and middle-income groups (MIG) can avail an interest subsidy on home loan, which directly reduces the total loan amount and lowers the EMI.
This subsidy on home loan is credited upfront to the borrower’s loan account by the lender, making housing more affordable and promoting first-time home ownership across India.
Also Read: Credit-Linked Subsidy Scheme
Key Government Schemes Offering Home Loan Subsidies
- Pradhan Mantri Awas Yojana (PMAY) – Credit Linked Subsidy Scheme (CLSS)
- Rajiv Awas Yojana
- Affordable Housing in Partnership (AHP)
1. Pradhan Mantri Awas Yojana (PMAY) – Credit Linked Subsidy Scheme (CLSS)
Objective: PMAY-CLSS aims to provide affordable housing to the urban poor by 2022. This is part of the broader mission to ensure that everyone has access to pucca (permanent) homes with basic amenities.
Eligibility for PMAY ( Pradhan Mantri Awas Yojana ):
- Economically Weaker Sections (EWS): Families with an annual income up to INR 3 lakh.
- Lower Income Groups (LIG): Families with an annual income between INR 3 lakh and INR 6 lakh.
- Middle Income Groups (MIG-I and MIG-II): Families with annual incomes between INR 6 lakh and INR 18 lakh.
Subsidy Details Based on User Persona
| Criteria | EWS/LIG | Revised EWS/LIG | MIG – I | MIG – II |
|---|---|---|---|---|
| Woman Ownership Required | Yes | Yes | N/A | N/A |
| Yearly Household Income | EWS – Up to Rs.3 lakh LIG – Rs.3 lakh to Rs.6 lakh | EWS – Up to Rs.3 lakh LIG – Rs.3 lakh to Rs.6 lakh | Rs.6.0 lakh – Rs.12 lakh | Rs.12.0 lakh to Rs.18 lakh |
| Maximum Loan Amount Eligible for Subsidy | Up to Rs.6 lakh | Up to Rs.6 lakh | Up to Rs.9 lakh | Up to Rs.12 lakh |
| Subsidy Percentage | 6.50% | 6.50% | 4% | 3% |
| Maximum Subsidy Amount Available | Rs.2.20 lakh | Rs.2.67 lakh | Rs.2.35 lakh | Rs.2.30 lakh |
| Net Present Value (NPV) | 9% | 9% | 9% | 9% |
| Maximum Loan Term for Subsidy Calculation | 15 years | 20 years | 20 years | 20 years |
| Allowable Carpet Area | EWS – 30 sqm LIG – 60 sqm | EWS – 30 sqm LIG – 60 sqm | 160 sqm | 200 sqm |
| Scheme Validity | 2022 | 2022 | 31/3/2020 | 31/3/2020 |
| Scheme Applicability | Loans approved on or after 17/6/2015 | Loans approved on or after 01/01/2017 | Loans approved on or after 01/01/2017 | Loans approved on or after 01/01/2017 |
| Applicable Locations | All statutory towns as per 2011 census and the towns added subsequently | All statutory towns as per 2011 census and the towns added subsequently | All statutory towns as per 2011 census and the towns added subsequently | All statutory towns as per 2011 census and the towns added subsequently |
| Property Ownership Condition | Family’s 1st home | Family’s 1st home | Family’s 1st home | Family’s 1st home |
Subsidy Details for PMAY ( Pradhan Mantri Awas Yojana ):
- EWS and LIG beneficiaries can avail of an interest subsidy of 6.5% on a principal amount up to INR 6 lakh.
- MIG-I beneficiaries receive a subsidy of 4% on a loan up to INR 9 lakh.
- MIG-II beneficiaries get a 3% subsidy on a loan up to INR 12 lakh.
- The subsidy is credited upfront to the loan account of beneficiaries, reducing the total loan liability.
Duration: The subsidy is available for a maximum tenure of 20 years or the tenure of the loan, whichever is lower.
| Scheme | Objective | Intended Beneficiaries | Documentation Requirements |
|---|---|---|---|
| PMAY-G (Gramin) | Monetary support for building houses in villages and hamlets. | People residing in rural regions | – Aadhar card – MGNREGA job card – Proof of income |
| PMAY-U (Urban) | Aids in acquiring housing through subsidized interest rates on loans in cities. | Urban residents, particularly those in the economically disadvantaged segments | – Aadhar card – Income verification – Voter identification card |
| CLSS | Provides interest subsidies on home loans for economically weaker sections. | – Economically Weaker Section (EWS) – Low Income Group (LIG) – Middle Income Group (MIG) | – Aadhar card – Income proof – Voter ID |
| ARHCs | Extends affordable rental accommodations for the urban underprivileged and migratory population in urban areas. | – Economically disadvantaged city dwellers – Migrant workers | – Aadhar card – Income certificate – Ration card |
2. Rajiv Awas Yojana
Objective: Originally aimed at making India slum-free by replacing slum dwellings with organized housing for slum dwellers, this scheme was subsumed under PMAY to consolidate efforts towards affordable housing.
Eligibility for Rajiv Awas Yojana:
- Slum dwellers with squalid and unhygienic conditions, requiring proper infrastructure and planning.
Benefits from Rajiv Awas Yojana:
- Provides subsidies for slum rehabilitation.
- Promotes the formalization of slum dwellings into lawful housing.
- Encourages the participation of private sectors in the development of low-cost housing.
3. Affordable Housing in Partnership (AHP)
Objective: To promote public-private partnerships to increase affordable housing stock for EWS/LIG.
Eligibility for Affordable Housing in Partnership (AHP):
- EWS/LIG families eligible under PMAY.
- State government, Central government, local bodies, or any other public sector undertaking may be the primary stakeholders alongside private developers.
Benefits from Affordable Housing in Partnership (AHP):
- Financial assistance of INR 1.5 lakh per EWS house is provided by the Central Government.
- Encourages private sector participation by lowering risks and increasing incentives.
- Promotes the use of cost-effective construction technology.
Suggested Read: How to Check PMAY Beneficiary List?
“As a first-time homebuyer with a modest income, I thought owning a house in a city like Pune would remain a dream. But through the PMAY scheme, I received a home loan subsidy of ₹2.67 lakhs, which brought down my EMI significantly. The affordable housing project I chose was PMAY-approved, and the documentation process was simple. I’m now a proud homeowner, thanks to this government initiative. Highly recommend exploring affordable housing plans with subsidy if you’re eligible!”
-Meera Kulkarni, Pune
Eligibility Criteria for Home Loan Subsidy
- First-time home buyer (no pucca house in applicant/spouse’s name).
- Family includes self, spouse, and unmarried children.
- Home must fall under the eligible carpet area and city tier.
- Property should be within municipal limits.
- Income should fall within the specified EWS/LIG/MIG bands.
- The loan should be from an approved financial institution.
How to Apply for Home Loan Subsidy?
Follow these steps to apply for a home loan subsidy:
- Check Eligibility using a PMAY calculator or on pmaymis.gov.in
- Apply for Home Loan at an authorized bank or HFC
- Bank verifies your PMAY subsidy eligibility
- Once approved, the subsidy amount is credited to your loan account, reducing EMI
Credit Linked Subsidy Scheme Helpline Number
The toll-free helpline numbers for the Credit-Linked Subsidy Scheme are listed below:
- National Housing Bank (NHB): 1800-11-3377, 1800-11-3388
- State Bank of India (SBI): 1800-11-2018
- Housing and Urban Development Corporation (HUDCO): 1800-11-6163
Benefits of Home Loan Subsidies
- Reduced EMI: Interest subsidies ensure that your monthly outgo towards the home loan is significantly reduced.
- Increased affordability: Subsidies make it financially easier for lower and middle-income families to own a home.
- Encouragement to first-time homebuyers: These subsidies aim to make ‘Housing for All‘ a reality by 2022.
“PMAY and affordable housing schemes have made homeownership truly accessible for first-time buyers in India. With interest subsidies and relaxed eligibility, even low and middle-income families can now afford a home. It’s a game-changer for inclusive housing finance.”
-Sanjay Bharti, Housing Finance Advisor
Conclusion
Affordable housing schemes and home loan subsidies like PMAY have made homeownership possible for both salaried and informal sector workers. With reduced interest rates, lower EMIs, and government support, it’s the perfect time to buy your first home.
Check your eligibility and apply for a home loan subsidy through Credit Dharma — compare offers from top banks and take the next step toward owning your dream home.
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Frequently Asked Questions
Savings on home loan interest through the CLSS under PMAY depend on your income category and the principal amount. EWS and LIG beneficiaries can get an interest subsidy of 6.5% on a principal amount up to INR 6 lakh. MIG-I beneficiaries receive a 4% subsidy on a principal amount up to INR 9 lakh, while MIG-II beneficiaries can avail of a 3% subsidy on a principal amount up to INR 12 lakh. This subsidy is credited upfront, reducing the principal loan amount and effectively decreasing the interest burden and EMI.
The time taken to process a subsidy claim under PMAY can vary. Once your home loan has been sanctioned and disbursed, and all necessary documentation has been submitted, the subsidy claim is forwarded to the National Housing Bank (NHB) or the Housing and Urban Development Corporation (HUDCO). Processing typically takes about 3 to 6 months, after which the subsidy amount is credited directly to the loan account, reducing the total loan liability.
Individuals with no pucca house in their name, falling under the income limits of EWS (up to ₹3 lakh), LIG (₹3–6 lakh), or MIG (₹6–18 lakh), and applying for their first home loan from an approved lender are eligible.
Pradhan Mantri Awas Yojana (PMAY) is a government housing scheme that provides interest subsidies on home loans to eligible first-time buyers from EWS, LIG, and MIG categories, helping them afford homes under the Housing for All mission.
No, PMAY is only available to first-time homebuyers. You or your immediate family should not own a pucca house anywhere in India to qualify.
Yes, as of 2025, the EWS and LIG categories under PMAY-Urban are still active. MIG components were phased out, but many state-level affordable housing schemes continue to offer similar benefits.
Homes with carpet areas up to 60 sq. m (EWS/LIG) or 160 sq. m (MIG), priced within ₹45–60 lakh depending on the city, and developed under government-approved projects qualify as affordable housing.
Individuals with no pucca house in their name, falling under the income limits of EWS (up to ₹3 lakh), LIG (₹3–6 lakh), or MIG (₹6–18 lakh), and applying for their first home loan from an approved lender are eligible.
PMAY offers an interest subsidy of up to ₹2.67 lakh on home loans, reducing your EMI and total loan burden. This makes housing affordable for low and middle-income families.
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