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What The Increase In Repo Rate Means For Home Buyers?


The repo rate or the rate at which the RBI lends money to financial institutions has been increased by 25 basis points. This increase has been after a period of 4 years and today stands at 6.25%. The direct impact of this will be for loan seekers as now lenders will will increase the interest rate on home loan. Likely, the increased rates will impact the subsidy scheme of PMAY or Pradhan Mantri Awas Yojana as well. Let us know in what sense -

  • Use of CLSS: the Credit Linked Subsidy Scheme or CLSS provides an interest subsidy of 6.5% for applicants who fall under the EWS and LIG category. This The rate of subsidy is reduced to 4% and 3% respectively for applicants under the MIG1 and MIG2 categories. So, even when applicants apply for home loan from leading lenders such as NBFCs or financial institutions they can enjoy the subsidised CLSS rates on the home finance when they opt for this scheme. Which means, they will be able to save up to Rs. 2.67 lakhs (for EWS and LIG), Rs. 2.35 lakhs (for MIG1) and Rs. 2.30 lakhs (for MIG2).
  • Boost affordable housing: though, RBI has increased the repo rate which makes home loan costly but it has also revised the home loan limit for Priority Sector Lending (PSL). From the earlier Rs. 28 lakhs the limit is up to Rs. 35 lakhs for metropolitan cities. While, for other centers the increased limit is now Rs. 2 lakhs from Rs. 20 lakhs for regions having a population of 10 lakh.

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