Rajiv Rinn Yojana (RRY)

The Government of India has initiated the “Rajiv Rinn Yojana” under the Ministry of Housing and Urban Poverty Alleviation (MHUPA). This scheme is a Central Sector Scheme that aims to address the housing needs of the Economically Weaker Sections (EWS) and Low Income Groups (LIG) segments in urban areas. Under this scheme, the Government ensures to provide a supportive environment for the credit flow to the housing sector and increasing homeownership in the country. Let us look in detail about the Rajiv Rinn Yojana (RRY) in this article. To know about Pradhan Mantri Awas Yojana (PMAY)

Objectives of the Scheme

The objectives of the Rajiv Rinn Yojana (RRY) are given below:

To channelize institutional credit flow to the poor people.
To increase the homeownership and to address the housing shortage in the country.
To enhance the affordability of the housing loans.
To prevent the proliferation of the slums and squatter settlements.
Utilizing the network of the banks and Housing Finance Companies (HFCs) for making the credit available to the urban poor households.
To enhance the private investment in the housing sector for that demand-led growth in the housing stock.

Purpose of the Scheme

The purpose of the RRY Scheme is to provide a home loan with Central Government interest subsidy to EWS and LIG persons who do not hold a house in his name or his spouse or any dependent child. This scheme envisages the provision of a fixed interest subsidy of 5% on the interest charged on the admissible loan amount to buy or construct a new house or for carrying out additions to the existing building. RRY scheme has enhanced scope, coverage and intended impact at balancing the housing needs of the targeted segment of urban society. The overall target is periodically fixed and conveyed to the concerned departments where the target for the particular plan period is 1 million or 10 lakhs people across the country including slum and non-slum dwellers. Also read, Section 80EEA: Deductions for Affordable Housing

Eligibility Criteria

The economic parameter of the EWS is defined as households having an average annual income up to INR 1 lakh are eligible under this scheme.

The economic parameter of the LIG is defined as households having an average annual income between INR 1 lakh up to INR 2 lakhs.
An individual who owns land/property in any urban area but does not hold any pucca house in his name or in the name of his spouse or any dependent child will be covered under this scheme.
The assistance amount under the scheme would also be available such beneficiary of the EWS and LIG with less than 40 Sq. m who intend to make additions to their house of existing dwelling units by extending the same are eligible under this scheme.
Women, SC/STs, Minorities and persons with disabilities to be given preference under this scheme. However, both individuals, as well as Group Housing borrowers, are equally eligible under the scheme.

Note: These criteria will be subject to the revision by the Steering Committee of the RRY Scheme that changes from time to time.

Quantum of Loan

The RRY scheme will grant an interest subsidy for a maximum amount of Rs.5 lakhs for an individual under the EWS for a house at least of 21 sq.mts. There must be a provision for the toilet wherever the new construction of the house is contemplated. Additional loans, if required would be at the unsubsidized rates. The loan tenure can be between 15 to 20 years. Under this scheme, a maximum loan amount of Rs.8 lakhs will be admissible for the LIG individual. However, the assistance amount will be provided for the loan amount up to INR 5 lakhs only. The additional loan amount that is between INR 5 lakhs and INR 8 lakhs, if taken would be at unsubsidized rates. A beneficiary can construct or purchase a house with a minimum carpet area of 28 Sq.mts as per their convenience. To know about Mahila Adhikarita Yojana (MAY) - click here

Terms for Loan Application

The subsidy will be provided at 5% per annum on the interest charged on the loan amount that is admissible for the EWS and LIG. The subsidy will be processed on as follows:

The Housing Finance Companies (HFCs) and the Scheduled Commercial Banks will sign an MOU with any of the Central Nodal Agencies based on the agreed target number of the beneficiaries that the Bank and HFI would be servicing.
The Primary Lending Institutions (PLIs) will sanction the loans after the due diligence and disbursement of the loan amount would be as per the borrower's requirements
The beneficiaries will be imposed an interest rate of the net of fixed subsidy of 5% (basis points of 500) from the prevailing rate of interest of the PLI. The Primary Lending Institutions will deduct the interest subsidy cost from the Equated Monthly Installment (EMI) of the borrower and then debit the net EMI.

Subsidy Reimbursement

Once the eligible loan is sanctioned, the PLI will claim reimbursement of subsidy from the Central Nodal Agencies (CNAs) namely HUDCO and NHB by submitting their claim forms on the prescribed format based on a quarterly basis.
The Indian Government will release the subsidy amount to the CNAs immediately but not later than 2 months based on the demand for the sanction of the subsidy received from the CNAs.
The Primary Lending Institutions will have to be required to ensure proper utilization of the funds and has to submit the utilization certificates, to their respective departments against the amount of the interest subsidy released to them.
The PLIs will flag all loans that are covered under the RRY Scheme in their books of accounts for the purpose of verification by the specified authority.
The Central Nodal Agencies (CNAs) for this scheme will be the National Housing Bank (NHB) and Housing & Urban Development Corporation Limited (HUDCO). The nodal agencies will not grant directly to the borrower but through the borrower's bank accounts or Housing Finance Companies (HFCs) who accept to be part of RRY Scheme.
The annual interest allowance will be provided by the Government to the lenders through its CNAs. It will be passed on by the bank to the borrower in the form of decreased EMI.
The agreed interest rate would be fixed by the lending banks holding in view the RBI guidelines that are given from time to time.
The Beneficiary borrowers would choose the floating or fixed rates (the outcomes clearly explained to the borrowers by the PLIs). An additional 1% per annum maximum will be authorised to be charged by the banks and HFCs if fixed-rate loans are increased which will be subject to the reset after a minimum term of 5 years.
Mortgage of the dwelling unit would be accepted as primary security. However, their won't be collateral security or third party guarantee for the loans that are under RRY up to INR 5 lakhs. No levy of the prepayment charges will be permitted.
The RRY scheme will be monitored and concurrently evaluated independently at the end of every specific plan.

Selection of Beneficiaries

The borrowers under this scheme must belong to the EWS/LIG and must have a land/property for the construction or have recognised a purchasable residence as part of a group quarters/apartment scheme or a current house where the addition to the living space is intended to be made. The borrowers would be free to address and negotiate a loan under this scheme directly with the lender. However, it is conceived that such borrowers would be very few. Most of the borrowers and lenders would be needed the intercession of the Governments/Urban Local Bodies (ULBs) to identify borrowers with land/property, help them with the preparation of papers and liaise for them with the lenders.
The banks will offer loans to such beneficiaries on priority.
In order to incentivize the assigned staff of ULBs and NGOs a sum of INR 100 per sanctioned application will be paid out of RRY funds.
The one-time lump sum amount of INR 500 per sanctioned application would be paid to the Banks towards their investment in handling such loans.
The preference under this scheme (subject to beneficiaries being from EWS or LIG segments) must be given to the following beneficiaries:
- Women
- Scheduled Caste
- Scheduled Tribe
- Minorities and
- Persons with disabilities
The State would link the beneficiary identification in the RRY to Aadhar Card (UIN) enrolment as a pre-condition wherever Aadhar has been issued.
The voluntary NGOs would also be involved by the State Governments/ULBs in building awareness about this scheme among the urban people. The applications that are duly filled through the NGOs would also be accepted by the Banks and HFCs.
In identifying the beneficiaries, the ULB or the local agency recognised by the State should as far as possible identify clusters in which area has been allotted and home can be supported through RRY scheme within such clusters.

Application Procedure for the Scheme

Follow the below application procedure to avail the benefits under the RRY Scheme:

If the Housing co-operative societies address the bank for availing the benefits under this scheme, then the liability for the loan applied can be joint and/or several.
The borrowers selected by the State Governments/ULBs/banks must as far as possible be in the equal ratio for EWS and LIG categories.
The application for the loan can also be made directly or through the ULB or any local agency recognised by the State for the purpose, or through the voluntary NGOs who will ensure that it is finished with the obligatory certification.
The documentation under this scheme will be as per the procedural requirement of the lender. However, the lenders would prescribe simpler forms (in own languages) and relaxed standards keeping in view the risk guarantee given by the Credit Risk Guarantee Fund scheme to facilitate better access for the borrowers.
The lenders will approve the loan as per their own risk assessment and procedural specifications.
In the case of beneficiaries availing the loan for the construction of their houses, the release of the loan will be associated with the speed of construction, which ideally is to be completed in 2 years. The lending bank will monitor the process of house construction. This is equally applicable when the beneficiary proposes to buy the house from a private builder/developer as part of a group housing or apartment complex.