You can lose PMAY subsidy if you balance transfer loan or prepay

By Chaitali Dutta

I had taken a loan from HDFC for which I received PMAY subsidy of Rs 2.35 lakh. Now, I have observed that HDFC is not transparent in transferring the reduction in repo rate benefits immediately. So I decided to transfer my loan to SBI. But HDFC says the subsidy has to be returned to the government if I balance transfer my loan. What should I do now?
—Ganesh Satpute
The premise of PMAY is availing of this benefit for the first pucca house, ever owned by the family, and can be availed only once. It is true that you will not be eligible to apply for a subsidy if you transfer your loan to another provider. Please understand that the subsidy is calculated on the eligible loan amount (Rs 9 lakh in your case) for the full tenure of your loan (maximum 20 years). A balance transfer means you are basically repaying the loan fully before the tenure of 20 years. Here I presume you took the loan from HDFC in 2018, so your eligibility will be only for two years subsidy on Rs 9 lakh. Therefore, your subsidy eligibility will be significantly lower. Hence you will have to repay not only the loan outstanding but also the unutilised subsidy for the remaining tenure of 18 years.

I had taken a housing loan (land purchase and construction) of Rs 28.30 lakh in 2017 from LIC HFL under Griha Prakash Scheme and rate of interest type is Griha Siddhi. In 2018, I applied for PMAY subsidy. In February 2020, it said it had submitted my documents. Each time I check, it says it is not sure when the government will process it. I wanted to pay an additional Rs 10,000 to reduce the principal whenever possible, but it is saying that if I repay, less amount may be given as subsidy or the application itself rejected. What should I do?
—Paul Bright
My suggestion is that you accumulate this Rs 10,000 per month in a bank Recurring Deposit (RD) or a liquid scheme of a mutual fund. That way your surplus money will not sit in your savings bank account earning a low-interest rate. Also, if the money is available in the bank, you may be tempted to use it elsewhere. Let the surplus earn more while you wait for the subsidy application to get approved.

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