Interest Subsidy Scheme under Pradhan Mantri Awas Yojana - Urban 2.0 (PMAY-U 2.0 ISS)

What is it?

The Interest Subsidy Scheme is one of the verticals of Pradhan Mantri Awas Yojana - Urban 2.0. It is meant for households in towns and cities taking a home loan to buy, build or extend a house, and it works by cutting down the interest paid on that loan.

Three income groups are covered. EWS (Economically Weaker Section) means a household with annual income up to Rs 3 lakh. LIG (Low Income Group) means annual income up to Rs 6 lakh. MIG (Middle Income Group) means annual income up to Rs 9 lakh.

The published limits are that the house bought or built must be worth not more than Rs 35 lakh, the home loan must be not more than Rs 25 lakh, and the carpet area can be up to 120 square metres. The subsidy is 4% on the first Rs 8 lakh of the loan, for a loan tenure of up to 12 years. The home loan tenure must be more than 5 years.

The maximum subsidy stated is Rs 1.80 lakh, released in 5 yearly instalments through Direct Benefit Transfer. In practice the lender credits the subsidy to the loan account upfront by deducting it from the principal amount, and EMI is then paid only on the reduced balance - so the monthly instalment is smaller from the start.

Application starts by registering demand on the scheme's unified web portal. The application is then forwarded to a Primary Lending Institution - a bank or housing finance company - which processes it against the eligibility criteria. A common misunderstanding: this is not a cash payment and it is not a free house. It is a reduction in the interest burden on a home loan that still has to be taken from a lender and repaid.

Potential benefit

Up to ₹1,80,000 one time, released in 5 yearly instalments

An interest subsidy of 4% on the first Rs 8 lakh of a home loan, for a loan tenure of up to 12 years. The maximum subsidy stated is Rs 1.80 lakh, with a maximum Net Present Value of Rs 1.50 lakh calculated at an 8.5% discount rate. The subsidy is released in 5 yearly instalments through Direct Benefit Transfer; the lender credits it upfront to the loan account by deducting it from the principal, so EMI is paid only on the reduced amount.

Who can apply?

Other conditions stated by the government

• EWS households: annual household income up to Rs 3 lakh.
• LIG households: annual household income up to Rs 6 lakh.
• MIG households: annual household income up to Rs 9 lakh.
• The value of the house must not exceed Rs 35 lakh.
• The home loan amount must not exceed Rs 25 lakh.
• Carpet area of the house can be up to 120 square metres.
• The home loan tenure must be more than 5 years.
• No age limit is stated on the official page checked.

Eligibility information is provided for informational purposes only. Final eligibility and approval are determined by the relevant government authority.

How to apply

Demand is registered on the PMAY-U 2.0 unified web portal. The application is forwarded to a Primary Lending Institution - a bank or housing finance company - which checks it against the eligibility criteria and processes the home loan. On approval the subsidy is credited to the loan account and released in five yearly instalments by Direct Benefit Transfer.

Where to apply: online and bank

Deadline

No fixed deadline. Applications are accepted on a rolling basis.