How PMAY 2.0 and tax incentives are lowering EMIs for first-time homebuyers

As housing affordability remains a key concern amid elevated property prices and interest rates, a mix of government support and lender-led initiatives is making it easier for first-time homebuyers to manage monthly EMIs and opt for longer repayment tenures.

According to Pankaj Gadgil, Managing Director & CEO of Aditya Birla Housing Finance, first-time buyers today have access to multiple levers that can substantially reduce both their initial repayment stress and overall cost of ownership.

A central pillar of this support framework is the Pradhan Mantri Awas Yojana (PMAY) 2.0, the government’s flagship affordable housing scheme. Under PMAY 2.0, eligible borrowers can receive an interest subsidy of up to Rs 1.8 lakh on home loans of up to Rs 25 lakh. The subsidy is disbursed in five annual instalments and credited directly to the borrower’s loan account, lowering the outstanding principal and, in turn, the EMI.

The scheme targets defined income categories. Economically Weaker Section (EWS) households earning up to Rs 3 lakh per annum, Low Income Group (LIG) borrowers with incomes between Rs 3 lakh and Rs 6 lakh, and Middle Income Group (MIG) buyers earning Rs 6–9 lakh annually are eligible, subject to other conditions.

Beyond direct subsidies, tax incentives continue to play a significant role in easing repayment pressure. Under Section 24(b) of the Income Tax Act, borrowers can claim a deduction of up to Rs 2 lakh per year on home loan interest. Additionally, Section 80C allows a deduction of up to Rs 1.5 lakh on principal repayment, helping reduce the effective cost of borrowing over time.

Lenders are also offering more flexible loan structures tailored to first-time buyers. Step-up home loans allow borrowers to start with lower EMIs that gradually increase as income rises. Longer loan tenures—extending up to 30 years—are increasingly common, helping spread repayments and reduce monthly outgo. Many institutions also provide special concessions, including preferential rates for women borrowers or limited-period offers linked to specific housing schemes.

By combining PMAY subsidies, tax benefits and customised loan products, first-time buyers can significantly lower EMIs and make homeownership more accessible, Gadgil said, even in a challenging affordability environment.

All about PMAY 2.0

Pradhan Mantri Awas Yojana–Urban (PMAY-U) 2.0 is the second phase of India’s flagship urban housing mission, aimed at achieving “Housing for All” in cities and towns. Launched in April 2022 and running till December 2025, the scheme supports eligible families in buying, constructing or upgrading homes through financial assistance and interest subsidies. It covers Economically Weaker Sections (EWS), Low-Income Groups (LIG) and Middle-Income Groups (MIG), offering interest subsidies of up to ₹1.80 lakh under the Credit Linked Subsidy Scheme (CLSS).

PMAY-U 2.0 places strong emphasis on inclusivity, prioritising widows, single women, senior citizens, persons with disabilities, transgender persons, and SC/ST and minority communities. The scheme promotes affordable housing with basic amenities, allowing states flexibility in house size norms. It also includes the Affordable Rental Housing Complexes (ARHC) sub-scheme for urban migrants and encourages modern construction technologies through Technology Innovation Grants.

Applicants must not own a pucca house anywhere in India and must fall within the prescribed income limits. Applications can be submitted online through the PMAY-U portal until September 30, 2025.

Government support

Under the scheme, the Centre provides financial assistance of up to Rs 2.50 lakh per housing unit under the Affordable Housing in Partnership (AHP) and Beneficiary-Led Construction (BLC) components. The state or Union Territory share varies by region, such as 90:10 for UTs with legislatures and 60:40 for states. States and urban local bodies may also offer additional top-up support to improve housing affordability.

How to apply and track application status

Eligible beneficiaries can apply for PMAY-U 2.0 online through the official portal, pmaymis.gov.in, or via authorised banks and housing finance companies. Applicants must submit Aadhaar details, income proof, address proof and declarations related to property ownership. The last date to apply under PMAY-U 2.0 is September 30, 2025.