The central government offers a home loan interest subsidy under PMAY-U 2.0 (Pradhan Mantri Awas Yojana – Urban 2.0), called the Interest Subsidy Scheme (ISS). It helps lower- and middle-income families with a new home loan. This guide explains who qualifies, how much you can get, how it is paid, and what it means for an existing loan. Everything here is taken from the scheme's official guidelines and portal, as of October 2026.
What is the PMAY-U 2.0 interest subsidy?
PMAY-U 2.0 is the Ministry of Housing and Urban Affairs' housing scheme for urban areas. Its guidelines, issued in September 2024, say the scheme runs for five years from 1 September 2024. It has several parts. The ISS is the part that helps with a home loan: the government pays part of your interest, through your lender.
It is different from the older Credit Linked Subsidy Scheme (CLSS) under the first PMAY-U. The limits and amounts are not the same, so do not rely on older articles about CLSS.
Who is eligible for the PMAY-U 2.0 interest subsidy?
According to the operational guidelines and the official ISS page:
- Income: your household's yearly income must be up to ₹9 lakh. The groups are EWS (economically weaker section, up to ₹3 lakh), LIG (lower income group, ₹3 lakh to ₹6 lakh) and MIG (middle income group, ₹6 lakh to ₹9 lakh). You give a self-certificate or affidavit of income.
- No pucca house: your family must not own a pucca (all-weather) house anywhere in India. "Family" means husband, wife, unmarried sons and unmarried daughters.
- No recent housing benefit: you are not eligible if you were allotted a house under any central, state or local government housing scheme in the last 20 years.
- New loans only: the subsidy is for home loans sanctioned and disbursed on or after 1 September 2024, for buying, re-purchasing or building a house.
- Size limits: loan up to ₹25 lakh, house value up to ₹35 lakh, and carpet area up to 120 square metres.
The guidelines also say houses built or bought with central assistance under the scheme should be in the name of the female head of the family, or jointly with the male head. Ask your lender how this applies to your ISS application.
How much subsidy can you get?
| Feature | PMAY-U 2.0 ISS (as per guidelines) |
|---|---|
| Subsidy rate | 4% a year |
| On how much loan | The first ₹8 lakh of the loan |
| Loan tenure counted | Up to 12 years (loan tenure must be over 5 years) |
| Maximum subsidy released | ₹1.80 lakh |
| How it is paid | Five equal yearly instalments, into your loan account |
| Conditions for each instalment | The loan must be active, and more than 50% of the principal must still be outstanding |
Five equal instalments of a ₹1.80 lakh maximum work out to up to ₹36,000 each (₹1,80,000 ÷ 5). The guidelines also say the lender may not charge you a processing fee on the eligible loan amount, because the scheme pays the lender ₹4,000 for each sanctioned application instead.
What does ₹1.80 lakh do to your home loan?
The subsidy goes into your loan account and reduces the amount you owe. Here is an illustration only. Take a ₹25,00,000 loan for 20 years (240 months) at 8.25%. EMI uses the standard formula:
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the loan amount, r is the monthly rate (yearly rate ÷ 12 ÷ 100) and n is the number of months.
- EMI: ₹21,302. Total interest over 20 years without any subsidy: about ₹26,12,394.
- Now assume ₹36,000 reaches the loan account at the end of each of the first five years, and the EMI stays the same. The loan then ends in about 210 months instead of 240, and total interest falls to about ₹21,32,051.
- That is about ₹4,80,343 less interest, on top of the ₹1.80 lakh credited. The extra saving comes from paying interest on a smaller balance for many years.
Your actual result depends on your rate, tenure, the timing of each release and how your lender applies it. The official portal has an ISS subsidy calculator.
How do you apply for the PMAY-U 2.0 interest subsidy?
- Check eligibility and register on the official PMAY-U 2.0 portal at pmaymis.gov.in. As of October 2026, it shows "Apply for PMAY-U 2.0" and "Track Application Status" options. Use only the official portal.
- Choose your lender. The scheme calls lenders Primary Lending Institutions. They include scheduled commercial banks, housing finance companies, regional rural banks and co-operative banks.
- The lender verifies you, checks for duplicate claims, links your Aadhaar and uploads your claim.
- You get an SMS when subsidy is credited. The guidelines say the lender credits your account within 7 days of receiving the funds.
Can you get the subsidy on an existing home loan?
Only if that loan was sanctioned and disbursed on or after 1 September 2024 and you meet every other condition. Loans taken before that date are not covered.
A balance transfer means moving your loan to a new lender, usually for a lower rate. Be careful here. The guidelines say a borrower who moves the loan to another lender cannot claim the subsidy again. And if you did not claim it from your first lender, you are also not eligible after the transfer. So if you have, or may have, an ISS claim, ask both lenders in writing how a switch affects it before you move.
The subsidy is also available only once per property. The guidelines also set a five-year lock-in, counted for ISS from the disbursal of the first home loan instalment, during which you cannot sell or transfer the house.
Is the subsidy guaranteed?
No. Your lender checks your eligibility, and release depends on the scheme's rules and funds. A false income declaration can lead to legal action. Keep copies of everything you submit.
Do it in 10 minutes, free
Whether or not you qualify for the subsidy, your interest rate matters more over 20 years. Use the EMI calculator on LowerMyEMI to see your EMI and total interest at different rates. If you already have a home loan, enter it once and we draft a letter to your own bank and one email per lender asking for a lower rate, which you send from your own email.