PMAY Urban 2.0 - Government Boosts Affordable Housing with INR 10 Lakh Crore Allocation

Mumbai:

In a significant move to accelerate affordable housing in India, the government has more than doubled the fund allocation to ₹10 lakh crore under the Pradhan Mantri Awas Yojana (PMAY) Urban 2.0 plan. This increased financial commitment is expected to greatly enhance the affordable housing segment, particularly benefiting those migrating to cities in search of better livelihoods by providing them with access to reasonable accommodation.

PMAY Urban 2.0: Progress and Impact

PMAY-U is one of the government's major flagship programs, designed to provide all-weather pucca houses to all eligible beneficiaries in urban areas. To date, over 11.8 million homes have been sanctioned under this scheme, with nearly 9 million houses already constructed and delivered to beneficiaries. This initiative not only addresses the current housing deficit but also sets a new standard for future urban development.

Evolving Strategy for Greater Impact

The nature of the housing scheme has evolved in its new iteration. The government has introduced a broader mix of strategies, ranging from interest subsidies to credit guarantees. While the amount of interest subsidy per beneficiary has been reduced, the increased capital support aims to reach a larger segment of the needy population. This dual approach is intended to enhance capital productivity and accelerate the timelines for achieving the 'Housing for All' mission.

Catalyzing Economic Growth and Development

The government's decision promises to uplift the quality of life for millions of citizens, while also stimulating growth in the real estate sector, creating jobs, and fostering economic resilience. By providing financial assistance through states, union territories, and public lending institutions, PMAY-U 2.0 strengthens the collaborative framework between the government and the private sector, which is crucial for realizing the goal of inclusive urban development.

Expanding the Scope of Affordable Housing

One of the key changes under PMAY-U 2.0 is the expansion of the Middle Income Group (MIG) category to include housing units up to 120 sq meters, which is expected to increase the absorption of available units and encourage greater developer participation in urban areas. Additionally, the introduction of an interest subsidy scheme, similar to the Credit Linked Subsidy Scheme (CLSS), will provide much-needed relief in the context of current high loan rates of 8.5% to 9%.

Encouraging Participation from Lending Institutions

The increase in the corpus fund under the Credit Risk Guarantee Fund Trust (CRGFT) from ₹1,000 crore to ₹3,000 crore is likely to attract more lending institutions to participate, particularly those that have been traditionally hesitant to lend in the affordable housing sector. This is expected to further boost the availability of affordable housing finance.

Focus on Affordability and Accessibility

In a move to make urban housing more accessible, the government has halved the annual income limit for MIG households to ₹6-9 lakh from the previous ₹12-18 lakh. According to NAREDCO’s Sharma, this focus on affordability and accessibility ensures that urban housing is within reach for those who need it most.

Challenges and Considerations

While the new direct subsidy mechanism through Redeemable Housing Vouchers is innovative, it could introduce complexities, particularly in cases of defaults or cancellations. Stakeholders will need to navigate these challenges carefully to ensure the scheme's success.