New affordable housing plan likely before 2024 Lok Sabha elections

Govt takes feedback for credit-linked subsidy scheme in urban areas

The government is planning a new affordable housing scheme for households in urban areas, akin to the credit-linked subsidy of the Pradhan Mantri Awas Yojana–Urban (PMAY-U), announced in 2015, three people aware of the development told Business Standard.

The scheme aims to extend subsidies for dwelling units in low- and middle-income households in urban centres and their catchment areas.

Officials involved in the discussions said the new scheme might be announced before the Lok Sabha elections, expected in April-May.

The Ministry of Housing and Urban Affairs (MoHUA) held several meetings with top lenders to draw up the contours of the proposed credit-linked subsidy scheme (CLSS).

Officials who attended these interactions said the ministry suggested the subsidy element might not be as large as the last CLSS. The government sought information on the refinancing needs of individual lenders for the scheme, the finance rate for lenders, and the lending rate for borrowers.

“The officials wanted to know at what rate the finance should be made to the lenders. They also wanted to know at what rate lenders will lend to the borrowers. They said lenders should not make high profit from the scheme that is meant for the poor,” said a source requesting anonymity.

Implemented in 2015, the objective of the Narendra Modi government’s flagship PMAY-U was to provide all-weather pucca houses to eligible beneficiaries in urban areas through states, Union Territories, and central nodal agencies.

In August 2022, the Union Cabinet approved the continuation of PMAY-U until December 31, 2024, excluding CLSS, for the completion of already sanctioned houses until March 31, 2022. In the previous scheme, the subsidy per beneficiary ranged between Rs 2.30 lakh and Rs 2.67 lakh for a 20-year loan.

“The scheme primarily targets urban areas and their catchment areas. More than 20,000 locations were covered in the earlier subsidy scheme,” said another source aware of the discussion.

Sources said the new scheme’s other objective was to generate employment. “After agriculture and micro, small, and medium enterprises, construction is the largest creator of employment in the country. A large number of industries, directly or indirectly, depend on the housing sector,” the second source said.

The interest rate subsidy for CLSS of the existing PMAY–U ranged from 3 per cent to 6.5 per cent.

For economically weaker sections with a household income of up to Rs 3 lakh and the low-income group with a household income between Rs 3 lakh and Rs 6 lakh, the interest subsidy per annum was 6.5 per cent.

For the middle-income group–I (MIG-I) with a household income of Rs 6-12 lakh, the subsidy was 4 per cent. For MIG-II with household income between Rs 12 lakh and Rs 18 lakh, the subsidy stood at 3 per cent. The maximum loan tenure was 20 years.

According to Reserve Bank of India norms on affordable housing loans, eligibility under priority sector lending is Rs 35 lakh in metropolitan centres (with a population of 1 million and above) and Rs 25 lakh in other centres. This is provided the overall cost of the dwelling unit in metropolitan centres and other centres does not exceed Rs 45 lakh and Rs 30 lakh, respectively.