Meaning of Affordable Housing Schemes for Middle Class

India is going through a severe housing crisis. Recent estimates show that there is a shortage of around 18 million houses, 99% of which is faced by the economically weaker sections of the economy.

Such massive influx is because of a mass migration of population to the urban hubs of the country. A 2010 McKinsey report estimates that 48% of the country’s population will distribute amongst 68 cities by 2030 and effectively increase the demand for affordable housing to 38 million units.

Several affordable housing schemes were introduced to tackle the upcoming housing crisis. They are specifically designed to aid financially backward families in the country, and encourage the middle class to procure living quarters feasibly.

What Is Affordable Housing?

Affordable housing schemes offer better accommodation and a safer environment to the low income and economically weaker section of the community. Several government home loan schemes have been introduced to relieve individuals from the financial stress of purchasing a housing unit. These include –

1. Pradhan Mantri Awas Yojana.
2. Prioritizing low-value home loans in the lending sector.
3. Private-public partnership in projects.

Such initiatives are expected to boost the availability of housing units in the 4 metro cities and other towns significantly. It is targeted at LIG (Low Income Group) and EWS (Economically Weaker Section), especially if they are SC, ST, and women.

Financial products that can help benefit from affordable housing

Several financial products fall under an affordable new housing scheme. For example, home loans, loans to purchase a plot, to construct a residential property, loans against property, etc. all fall under such housing schemes.

Eligibility Criteria for Such Schemes

The Ministry of Housing and Urban Poverty Alleviation has set individual benchmarks to segregate conditions for the different income groups.

• EWS – Economically Weaker Sections can opt for a minimum of 300sq.ft of a super built-up area and a minimum of 269sq.ft of carpet area.
• LIG – Low Income Group can opt for a minimum of 500sq.ft of super built-up area and a maximum of 517sq.ft of carpet area.
• MIG – Middle Income Group can avail a minimum of 600 to 1200sq.ft of super built-up area and a maximum of 861sq.ft of carpet area.

In all of the above-mentioned cases, EMI or rent will not exceed 30% to 40% of the gross monthly income of the buyer under an affordable housing scheme. Note that you should opt for a home loan that complies with such housing schemes.

Credits That Comply with These Housing Schemes

Several financial institutions offer advances that comply with these schemes. For example, Bajaj Finserv offer of up to Rs. 3.5 Crore with affordable home loan interest rates to eligible applicants along with several additional features and benefits.

First-time homeowners can enjoy considerable advantages with assistance from the Pradhan Mantri Awas Yojna as well. It reduces the interest rate to almost 6.93% and helps save almost Rs. 2.67 Lakh on EMI. Borrowers can also enjoy a balance transfer facility where they can refinance their existing loan with minimum documentation and get a top-up loan at an affordable interest rate.

An applicant can enjoy a flexible tenor of up to 240 months to ease up repayment and enjoy zero charges on part-prepayment or foreclosure on the debt. Most financial institutions also offer insurance schemes that protect the borrower against any unforeseen incident.

Affordable housing schemes are predicted to ease out the housing crisis significantly. An eligible applicant can get a better home loan interest rate to reduce their EMIs significantly, and avail better housing without burdening their personal finances.