Affordable Housing Paves Path For Saving
May 25, 2017 Home Trading Steps
We all are well aware how the real estate sector was in a bad situation from the past few years. However, there seem to be many rays of hope with the announcement of a budget. For the real estate sector of India, the affordable housing seems to be a great push for this industry and the credit goes to the government. The Pradhan Mantri Awas Yojana which mainly targets the Lower Income Group (LIG) and the Economically Weaker Sections (EWS), also the people who earn up to Rs 12 lakhs and Rs 18 lakhs are able to take advantage of certain benefits.
However, the guidelines for the same are still to be published but the subsidy for government is fixed.
For the income up to Rs 12 lakhs, the amount of loan is six lakhs; the subsidy is 6.5 percent with the tenure of 20 years. For the people with income of Rs 12 lakhs, the loan available is nine lakhs, the subsidy is four percent and the tenure is 20 years. And for the people, who earn Rs 18 lakhs, amount if loan available is Rs 12 lakhs.
The Loans above the subsidised loan amount would be at the non-subsidized rate. The loan amount decreases at a fast pace and the same happens with the interest applied on it. The amount of interest subsidy would be the NVP i.e. the Net Present Value calculated on a discounted rate of 9 percentile.
Amount to be Paid
NPV in any business is calculated in order to comprehend whether the investment is worth the money that is paid for it. So, if one wants to calculate the NPV of interest subsidy, mentioned below is an example to help you calculate the same.
Suppose one needs to know the EMI on a house loan of amount Rs 6 lakhs. At 9 percent rate, the EMI will come out to be 5,398. A person will have pay 5,398 multiplied by 12 and further multiplied by 20 (tenure). This amounts to 12, 95,520. Therefore the interest burden will amount to Rs 6.95 lakhs, which calculated by subtracting 12, 95,520- 6 lakhs.
We know that for a loan of Rs 6 lakhs, the subsidy is 6.5 percent. Hence the NPV of interest subsidy amount is Rs 2,67,000. This amount is the savings that one does when he purchases the house under the scheme of PMAY. Mostly all income categories would be saving around Rs 24 lakh, at the rate of interest of 9 percent, so one saves Rs 2,200 in a month on the EMIs.
Low Participation of Private Entities
Even though, there is a lot of buzz about the affordable housing and its schemes in the real estate industry. There is a disappointment of the fact that the private builders are not showing any interest in this scheme of affordable housing. Not even one builder showed his interest and came up with low cost houses.
A Benefit for the Newly Weds
There happens to be some terms and conditions on who all can own a home under this scheme. Well, besides the income level, one cannot own a ‘pucca’ house anywhere else in India. Calculate the total household income, which includes ones would-be spouse’s annual income, in case they are going to get married soon. After the marriage, the term ‘household’ implies to the person, his/her spouse and their unmarried children.
Even though loans are sanctioned after the couple is married but such loans can be granted before the wedding as well. It was suggested that this amendment should be made in PMAY wherein it should be allowed to sanction loans to confirm eligibility of the concerned couple for the sum of Rs 2.4 lakh which will credit in advance. What better wedding gift than this!
However, the guidelines for the same are still to be published but the subsidy for government is fixed.
For the income up to Rs 12 lakhs, the amount of loan is six lakhs; the subsidy is 6.5 percent with the tenure of 20 years. For the people with income of Rs 12 lakhs, the loan available is nine lakhs, the subsidy is four percent and the tenure is 20 years. And for the people, who earn Rs 18 lakhs, amount if loan available is Rs 12 lakhs.
The Loans above the subsidised loan amount would be at the non-subsidized rate. The loan amount decreases at a fast pace and the same happens with the interest applied on it. The amount of interest subsidy would be the NVP i.e. the Net Present Value calculated on a discounted rate of 9 percentile.
Amount to be Paid
NPV in any business is calculated in order to comprehend whether the investment is worth the money that is paid for it. So, if one wants to calculate the NPV of interest subsidy, mentioned below is an example to help you calculate the same.
Suppose one needs to know the EMI on a house loan of amount Rs 6 lakhs. At 9 percent rate, the EMI will come out to be 5,398. A person will have pay 5,398 multiplied by 12 and further multiplied by 20 (tenure). This amounts to 12, 95,520. Therefore the interest burden will amount to Rs 6.95 lakhs, which calculated by subtracting 12, 95,520- 6 lakhs.
We know that for a loan of Rs 6 lakhs, the subsidy is 6.5 percent. Hence the NPV of interest subsidy amount is Rs 2,67,000. This amount is the savings that one does when he purchases the house under the scheme of PMAY. Mostly all income categories would be saving around Rs 24 lakh, at the rate of interest of 9 percent, so one saves Rs 2,200 in a month on the EMIs.
Low Participation of Private Entities
Even though, there is a lot of buzz about the affordable housing and its schemes in the real estate industry. There is a disappointment of the fact that the private builders are not showing any interest in this scheme of affordable housing. Not even one builder showed his interest and came up with low cost houses.
A Benefit for the Newly Weds
There happens to be some terms and conditions on who all can own a home under this scheme. Well, besides the income level, one cannot own a ‘pucca’ house anywhere else in India. Calculate the total household income, which includes ones would-be spouse’s annual income, in case they are going to get married soon. After the marriage, the term ‘household’ implies to the person, his/her spouse and their unmarried children.
Even though loans are sanctioned after the couple is married but such loans can be granted before the wedding as well. It was suggested that this amendment should be made in PMAY wherein it should be allowed to sanction loans to confirm eligibility of the concerned couple for the sum of Rs 2.4 lakh which will credit in advance. What better wedding gift than this!
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