Thursday, March 10, 2016

Pradhan Mantri Awas Yojna, Scheming in the Right Direction!

We've been hearing advertisements on radio about Pradhan Mantri Awas Yojna last few days. Interesting to note about it is 6.5% p.a. subsidy on interest for home loans of less than Rs. 6 lakhs.

Home Loan

The scheme mentions this as:
The current rate of housing loan in India is at 10.50 per cent.  If someone buys a property currently on a loan of Rs 6 lakh for a tenure of 15 years today, he/she would have to pay an EMI of Rs 6,632 per month currently.  However, with 6.5 per cent subsidy under the scheme, the beneficiary would have to pay just Rs 4,050 per month as EMI.  Thus, there is a significant reduction of Rs 2,000 in the EMI itself.
 This is interesting on multiple grounds. Economically a no-brainer, it prevents bloating an unnecessary leveraging of the economy and support micro-spending.

But from a policy perspective it is a level of spending based subsidy. So, the subsidy goes to the right set of people irrespective of caste, creed or religion. Objective policy making. Think, if this gets extrapolated to the current reservation debates! Will it not be a wow for our country?

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