Affordable Housing Through Credit Linked Subsidy – GST Perspective

CS Megha Kakrania

Housing and Urban Affairs minister Hardeep Singh Puri, has assured that the government is committed to ensuring a decent habitat for people in urban areas and schemes like the Pradhan Mantri Awas Yojana are key to achieving this objective.

As per Department of Economic affairs vide notification No. 13/06/2009 dated 30th March, 2009, “Affordable Housing” is defined as a housing project using at least 50% of the Floor Area Ratio (FAR)/Floor Space Index (FSI) for dwelling units with carpet area@ of not more than 60 square meters.

Where, as per Clause (k) of section 2 of the Real Estate (Regulation and Development) Act, 2016, “carpet area” means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.

Floor Area Ratio (FAR) (also Floor Space Ratio (FSR), Floor Space Index (FSI), site ratio and plot ratio) is the ratio of a building’s total floor area (gross floor area) to the size of the piece of land upon which it is built. The terms can also refer to limits imposed on such a ratio.

Save as otherwise determined by the Mayor-in-Council, with regard to any specification made in this behalf under the West Bengal Town and Country (Planning and Development) Act, 1979, the Floor Area Ratios shall be as specified in Table 3 below:

Table – Maximum Permissible Floor Area Ratio

Provided that the width of means of access mentioned under Table 3 is to be taken as the average road width abutting the entire length of the plot.

CLSS (CREDIT LINKED SUBSIDY SCHEME)

Beneficiaries of Economically Weaker section (EWS) and Low Income Group (LIG) seeking housing loans from Banks, Housing Finance Companies and other such institutions would be eligible for an interest subsidy. The Net Present Value (NPV) of the interest subsidy will be calculated at a discount rate of 9 %.

The buyers can be eligible for subsidy upto Rs 2.67 lac from the government on their home loans under Pradhan Mantri Awas Yojana (PMAY).

No processing fee will be charged by banks or housing finance companies from the applicants under CLSS.

1. People who have applied on or after 1st January 2017 and who’s loan has been sanctioned on or after 1st Jaunaray 2017 are eligible for the scheme.

2. Under the scheme, the tenure of loan has been stipulated to be 20 years or that preferred by the beneficiary, whichever is lower.

3. Not all major banks are the part of the scheme only limited housing finance company, cooperative bank and very limited banks has been involved.

4. The total interest subsidy accruing on these loan amounts will be paid to the beneficiaries up front in one go, thus reducing the burden of Equated Monthly Instalment (EMI).

5. The effective interest subsidy on loans over 20 years for Rs. 9 lakh and Rs. 12 lakh comes to around Rs. 2.30 lakh per beneficiary (the present value of interest subsidy provided to beneficiaries over the tenure of 20 year loan at a discounting rate of 9 per cent.)

6. Under the guidelines, preference is to be given to women. Widows, single working-women, persons belonging to scheduled castes and scheduled tribes, backward classes, differently abled and transgender people will be given preference.

7. All adults under the income strata of Rs 18 lakh annual income will be able to avail the benefits of the Aawas Yojana, with the benefit extending to the families with unmarried children only.

8. Sriram Kalyanaraman, MD and CEO of National Housing Bank, said that interest subsidy of 4 per cent will bring down EMIs of beneficiaries by Rs. 2,062 per month on a housing loan of Rs. 9 lakh and interest subsidy of 3 per cent will bring down EMIs by Rs.2,019 on a loan of Rs.12 lakh, taking normal housing loan interest rate as 8.65 per cent.

9. Beneficiaries eligible for interest subsidy under the CLSS scheme have to apply to their lenders for availing the subsidy benefit.

10. List of Banks providing home loans under CLSS PMAY Home Loan Banks Under CLSS for EWS/LIG

PROVISIONS BEFORE APPLYING FOR PMAY SUBSIDY (CLSS)

1. Ensure that you should not have availed of central assistance under any housing Scheme from Government of India including PMAY – Housing For All by 2022 mission.

2. Ensure the Bank/Housing Finance Company/Financial institution from which you are obtaining loan has executed MOU with either National Housing Bank (NHB) or Housing & Urban Development Corporation (HUDCO).

3. In case you already have a home loan, then check that the same is sanctioned and disbursed after June 17, 2015 for entitlement under EWS/LIG category.

GST PERSPECTIVE

On January 18, the GST Council had extended the concessional rate of 12 per cent GST for construction of houses under the Credit Linked Subsidy Scheme (CLSS) to promote affordable housing, which has been given infrastructure status in 2017-18 budget.

25th January onwards, the effective GST rate, however, comes down to 8 per cent after deducting one third of the amount charged for the house, flat, towards land cost.

“All inputs used in and capital goods deployed for construction of flats, houses, etc attract GST of 18 per cent or 28 per cent. As against this, most of the housing projects in the affordable segment in the country would now attract GST of 8 per cent.

As per the recommendations of the council, for the housing sector, there will be less incidence of GST for homes purchased under the Credit Linked Subsidy Scheme (CLSS). For under-construction homes that form a part of CLSS will now be charged GST at 8 percent instead of 12 percent, a cut of 4 percent. However, people who are not eligible for CLSS will continue to pay higher GST.

The concessional rate of GST of 12 percent (effective rate of 8 percent after deducting one-third of the amount charged for the house towards the cost of land) will henceforth (from January 25) be applicable for houses constructed or acquired under the CLSS for:

1. Economically Weaker Sections (EWS)

2. Lower Income Group (LIG)

3. Middle Income Group-1 (MlG-1)

4. Middle Income Group-2 (MlG-2),

under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY Urban).

Under CLSS, the interest subsidy would be provided on home loans taken by eligible urban poor (EWS/LIG/ MIG-I/ MIGII) for acquisition or construction of house.

EWS

The economically weaker section (EWS) will comprise of households having an annual income upto Rs, 3,00,000 and 30 sq mt carpet area.

LIS  

The economically weaker section (EWS) will comprise of households having an annual income upto Rs, 6,00,000 and 60 sq mt carpet area.

THE MIDDLE-INCOME EARNERS

The new category MIG, introduced recently, will further comprise of two slabs.

MIG –I

The Middle Income Group (MIG) – I will comprise of households having an annual income between Rs.6,00,001 up to Rs.12,00,000 and the existing carpet area of 90 sq mt (968.752 sq ft) will be increased to 120 sq mt (1291.668 sq ft).

MIG –II

And, the Middle Income Group (MIG) – II will comprise of households having an annual income between Rs.12, 00,001 up to Rs.18, 00,000 and the existing carpet area of 110 sq mt (1184.03 sq ft) for MIG II category, it will now be 150 sq mt ( 1614.585 sq ft).

So, effectively from Jan 1, 2017, anyone earning between Rs 6 lakh and Rs 18 lakh per annum can avail the benefits of subsidized loans provided other conditions are met.

1. For MIG, the loan shall be sanctioned on or after January 01, 2017.

2. Ensure that all adult members of household have Adhaar. Without Aadhar of any of the household members, case cannot be processed for subsidy.

3. Affidavit cum undertaking/self certification as per practice of Primary Lending Institution (PLI)/Financial Institution (FI) may be required.

4. Shortlist the Financial Institution having good track record in providing Subsidy through Market sources.

5. You may fall within any of the three schemes based on your annual household Income and avail subsidy, accordingly.

EWS/LIG SCHEME ELIGIBILITY CRITERIA

1. Annual Household Income shall be less than Rs. 6 Lakhs.

2. Female ownership in property to be purchased is mandatory.

3. Exception: In case where there is no adult female member in the household and in case the household already owns a residential plot prior to June 17, 2015 and intends to construct a dwelling unit/house, female ownership is not mandatory.

4. Household/beneficiary family shall not own a pucca house anywhere in India.

5. Property shall fall within Urban Area as specified by the govt. A list of 4315 towns has been identified as per 2011 census.

MIG I & MIG II SCHEME ELIGIBILITY CRITERIA

1. Annual Household Income shall be Rs. 6-12 lakhs for MIG I & Rs. 12-18 lakhs for MIG II.

2. Female ownership is not mandatory, however, advisable which means that in case female is not an owner or co-owner in the property, then also the case would be eligible for subsidy subject to fulfillment of other conditions.

3. Household/beneficiary family shall not own a pucca house anywhere in India. Household/Beneficiary Family means and includes husband, wife and unmarried children. An adult earning member (irrespective of its marital status be considered as separate household).

4. Carpet Area of property purchased or to be purchased shall not exceed 120 sqmtrs in case of MIG 1 and 150 sq mtrs in case of MIG II.

5. Property shall fall within Urban Area as specified by the govt. A list of 4315 towns has been identified as per 2011 census.

6. List of all such PLIs executed MOU for implementation of MIG schemes may be accessed from below link. http://www.mhupa.gov.in/writereaddata/MIG_PLIs_aug.pdf.

Table – Summary of Affordable Housing Through Credit Linked Subsidy

NOTE: The effective Home Loan rate is calculated after deducting subsidy of Rs. 2.67 Lac under PMAY – CLSS on a loan amount of Rs. 20 Lac for 20 years loan tenure.