Pradhan Mantri Awaas Yojana: Do you know government can take subsidy back in ‘these’ circumstances

The PMAY scheme offers credit-linked subsidies to support individuals in acquiring or building their homes.

The initial phase, Pradhan Mantri Aawaaz Yojana (PMAY 1), was notably successful, prompting the government to introduce a second phase, PMAY 2, set to launch in 2024.

It is likely that the conditions for reclaiming subsidies in PMAY 1.0 and 2.0 will be similar.

Three main central nodal agencies are tasked with the distribution of subsidy funds to banks. These agencies are the National Housing Bank (NHB), the Housing & Urban Development Corporation Ltd. (HUDCO), and the State Bank of India (SBI).

It is essential to recognize that many individuals who have benefited from the scheme or intend to utilize the subsidy through PMAY 2.0 may not be entirely informed that the government has the authority to reclaim the interest subsidy offered under the PMAY Scheme under specific conditions.

The interest subsidy awarded at the onset of the home loan repayment will be added to the remaining principal balance. Consequently, the borrower will face an increased equated monthly installment (EMI) based on this revised loan amount for the entire term of the home loan.

Under certain circumstances, the government can take back the subsidy. “There are three conditions under which credit linked subsidy can be clawed back. Firstly, in the event of default in repayment of the loan by the borrower to the bank and the loan becoming an NPA. Secondly, when the credit subsidy has already been disbursed but due to certain reasons, the construction of the house is stalled. In such a case, the subsidy shall be recovered and refunded to the nodal or implementation agency. Third, non-submission of utilization/end-user certificate can lead to subsidy clawback,” says an official.

The lending institution is required to present a utilization or end-user certificate to the nodal agency, verifying the completion of the housing unit, within one year, or a maximum of 36 months, from the date the initial loan installment is released. Should this certificate not be submitted, the bank is obligated to reimburse the subsidy to the appropriate nodal agency.