A rapid rise in population in India over the past decades has increased the demand for housing. Despite several public housing programmes, the housing shortage remains.
According to government estimates, in 2015, about 40 million families faced housing shortages − including the homeless and households in sub-standard or congested dwellings and those without basic amenities.
The housing shortage is more prominent in rural areas, with almost 30 million people living in poor-quality housing. Between 2012 and 2017, Urban housing shortage across India was at 18.78 million houses, and low-income households constituted 95% of the gap.
In this article we will tell you more about the Pradhan Mantri Awas Yojana (PMAY) and how it aims at addressing the above challenges. Let’s begin.
What is PMAY?
Launched in June 2015, PMAY (Pradhan Mantri Awas Yojana) is the flagship housing program of the Government of India. Implemented and monitored through the Ministry of Housing and Urban Affairs (MoHUA), the scheme aims to achieve affordable housing for the urban poor with a target of building 2 crore (20 million) affordable houses by 31 March 2022.
The houses given under this scheme were to be owned solely by females or jointly with males.
PMAY has two segments:
- Pradhan Mantri Awas Yojana – Urban (PMAY – U)
- Pradhan Mantri Awas Yojana – Gramin (PMAY – G)
Pradhan Mantri Awas Yojana – Urban (PMAY – U)
PMAY – U is targeted towards eligible beneficiaries from EWS/ LIG who do not own a pucca house (an all-weather dwelling unit) in any part of India.
Who is eligible for PMAY – U?
a. Age: Beneficiary should be maximum 70 years of age.
b. Family Income: The beneficiary could belong to any of the following family income categories.
- EWS (Economic Weaker Section) – Family income limit of ₹3 lakhs per annum
- LIG (Lower Income Group) – Family Income limit of ₹6 Lakhs per annum
- Middle Income Group (MIG-I) – Family income between ₹6 lakhs to ₹12 lakhs per annum
- Middle Income Group (MIG-II)- Family income between ₹12 lakhs to ₹18 lakhs per annumc. Property Ownership: The beneficiary or any of their family members (including dependents) should not own a dwelling unit in any part of India.d. Previous Loans: The applicant should not have availed any central/state government subsidy or benefit for buying a home under the PMAY scheme.
e. Loans for Renovation and Self-Construction: Loans for home renovation or improvement, and those for self-construction will be allocated only for EWS and LIG categories.
Against the 123 lakh houses sanctioned, 103 lakh have been grounded or are under construction. Out of these, 62 lakh houses have been completed.
Out of the total sanctioned 123 lakh houses, the proposals of 40 lakh houses were received late (during the last 2 years of the scheme) from the states/UTs, which would require another two years to complete.
Therefore, based on the request of states and Union territories, the Union Cabinet, chaired by Prime Minister Narendra Modi, decided to extend the implementation period of PMAY-Urban till December 31, 2024.
Pradhan Mantri Awas Yojana – Gramin (PMAY – G)
Effective April 2016, the Indira Awas Yojana (launched in 1996) was rechristened to PMAY – G. The scheme addresses gaps in rural housing with a target to achieve 2.71 crore low-cost housing by 2022.
In December 2021, the government extended the scheme to March 2024. The Centre and State Govts share the cost of development in the ratio of 60:40 for plain regions and 90:10 for North-Eastern and hilly regions.
PMAY-G provides cash incentives for the development of “pucca” homes while converging the benefits of other relevant schemes (like MGNREGS) for basic amenities.
Execution Engines of the PMAY Scheme
There are 3 engines under the PMAY Scheme.
“In-Situ” Slum Redevelopment
- “In-situ” slum rehabilitation using land as a resource with private participation for providing houses to eligible slum dwellers is an important component of the “Housing for All” mission.
- This approach aimed to leverage the locked potential of land under slums to provide houses to the eligible slum dwellers bringing them into the formal urban settlement.
- Selection of the Private partners for Slum Redevelopment was done through an open bidding process. State Governments and cities, if required, provided additional Floor Area Ratio (FAR)/Floor Space Index (FSI)/Transferable Development Rights (TDR) for making slum redevelopment projects financially viable.
Affordable Housing through Credit Linked Subsidy Scheme
- Credit linked subsidy was provided on home loans taken by eligible urban poor (EWS/LIG) for acquisition, construction of houses.
- Beneficiaries of the Economically Weaker section (EWS) and Low Income Group (LIG) seeking housing loans from Banks, Housing Finance Companies and other such institutions were eligible for an interest subsidy at the rate of 6.5 % for a tenure of 15 years or during tenure of loan whichever is lower.
- The Net Present Value (NPV) of the interest subsidy was calculated at a discount rate of 9 %.
- The credit linked subsidy wwas available only for loan amounts upto Rs 6 lakhs and additional loans beyond Rs. 6 lakhs, if any, was at non-subsidised rate. Interest subsidy was credited upfront to the loan account of beneficiaries through lending institutions resulting in reduced effective housing loan and Equated Monthly Installment (EMI)
Affordable Housing in Partnership
- Financial assistance was provided to EWS houses being built with different partnerships by States/UTs/Cities.
- To increase availability of houses for EWS category at an affordable rate, States/UTs, either through its agencies or in partnership with the private sector including industries, planned affordable housing projects.
- Central Assistance at the rate of Rs. 1.5 Lakh per EWS house would be available for all EWS houses in such projects.
- The States/UTs would decide on an upper ceiling on the sale price of EWS houses in rupees per square meter of carpet area in such projects with an objective to make them affordable and accessible to the intended beneficiaries. For that purpose, States and cities may extend other concessions such as their State subsidy, land at affordable cost, stamp duty exemption etc.
- Subsidy for Beneficiary-Led Individual House Construction: Assistance was provided to individual eligible families belonging to EWS categories to either construct new houses or enhance existing houses on their own to cover the beneficiaries who are not able to take advantage of other components of the mission. Such families may avail of central assistance of Rs. 1.5 lakh for construction of new houses under the mission. Such beneficiaries should be part of HFAPoA.
Key Steps Taken to Achieve ‘Housing for All’
Administrative Reforms
Availability of encumbrance-free land for construction and a speedy building & layout approval system are critical for the success of affordable housing projects. Therefore, a number of reforms were mandated for States/UTs, which weaved with the implementation ecosystem of PMAY-U.
- Suitable changes in the procedure and rules for eliminating the need for separate NonAgriculture (NA) Permission if a land already falls in the residential zone earmarked in the Master Plan of the city or town.
- States/UTs were required to prepare/amend their Master Plans earmarking land for Affordable Housing.
- States/UTs put in place a single-window, time-bound clearance system for layout approvals and building permissions.
- States/UTs were required to adopt the approach of deemed building permission and layout approval on the basis of pre-approved layouts and building plans for EWS/LIG housing or exempted approval for houses below a certain built-up area or plot area.
- States / UTs provided additional FAR/FSI/TDR and relaxed density norms for slum redevelopment and low-cost housing.
Fiscal Reforms
In the last seven years, Central Government has undertaken various fiscal reforms to boost the real estate sector and to encourage investments, especially in the affordable housing sector. These reforms not only facilitated all the stakeholders of the housing sector but also created a cascading effect by boosting almost 130 allied sectors of economy
- Reduction in GST from 8% to 1% (with no input tax credit) for Affordable housing and from 12% to 5% (with no input tax credit) for other housing projects.
- No tax liability on either Buyer or Builder under Section 56(2) (x) or Section 43CA of Income Tax Act, if the transaction value of the property is upto 20% lower than the circle rate.
- Infrastructure status has been accorded to Affordable Housing by including it in Harmonized List of Infrastructure.
- 100% FDI was allowed under automatic route in Affordable Housing construction projects.
Financial Reforms
Regular release of funds for uninterrupted implementation of the Scheme was critical for success. Therefore, mobilisation of funds to finance construction of such a large number of houses needed special attention.
For construction of 1.12 crore houses under PMAY-U entails an estimated investment of Rs. 8.31lakh crore, comprising Central, State/UT and Beneficiary share.
The total Central government investment made under PMAY(U) so far (till 19th September 2022) is Rs. 1.23 lakh crore out of the committed Central Assistance of Rs. 2.03 lakh crore.
Regulatory Reforms
The real estate sector was largely unregulated, leading to many anomalies resulting in various unfair practices, affecting the homebuyers adversely. Therefore, there was a need to regulate the real estate sector in a way which not only ensures transparency and accountability but also creates a conducive environment for businesses to grow and prosper.
- Real Estate (Regulation and Development) Act, 2016 [RERA] was enacted to ensure regulation and promotion of the real estate sector in an efficient and transparent manner and to protect the interest of the home buyers.
- Ease of doing business: Online Building Permission System has been implemented in 2101 cities. As per World Bank’s Doing Business Report, India’s rank in construction permits improved from 185 in 2017 to 27 in 2020.
Snapshot – Progress and Future Requirements for PMAY
Budgetary Allocation and Funding Trends
| PMAY (Rs cr) | FY2017 | FY2018 | FY2019 | FY2020 | FY2021 | FY2022 (RE) | FY2023 | |
|---|---|---|---|---|---|---|---|---|
| Budget (A) | 20,075 | 29,043 | 27,505 | 25,848 | 40,500 | 47,390 | 48,000 | |
| Actual (B) | 20,952 | 31,163 | 25,813 | 25,323 | 40,259 | NA | NA | |
| Actuals/Budget (B/A) | 104% | 107% | 94% | 98% | 99% | NA | NA |
Progress Dashboard (Jul’22)
| PMAY (Rs cr) | Target Houses (Cr) (Cr)( | Houses Approved | Houses Completed (Lakh Cr) | Funds Approved (Lakh Cr) | Funds Released (Lakh Cr) |
|---|---|---|---|---|---|
| PMAY – U | 1.21 | 1.21 | 0.61 | 2.03 | 1.20 |
| PMAY – G | 2.71 | 2.45 | 1.94 | 3.38 | 2.58 |
| Total | 3.92 | 3.66 | 2.55 | 5.41 | 3.78 |
Source: Union Budget available online; Demands for Grants, PRS Legislative research report
To achieve the PMAY target release of ~Rs. 2 Lakh Crore of Central Assistance is required over next 24-30 months so that the implementation of approved projects can be seamless and the revised deadline of December 2024 is met.
To enable this, the government, the central bank, all other financial institutions & fintechs will need to play a critical role to ensure that credit flows seamlessly.
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