To meet its ambitious target of constructing 10 million houses in urban areas by 2022, the government will have to raise around Rs 1 trillion over the next three years, according to rating agency Crisil.
The rating agency noted that as of November 26, although 6.3 million houses had been sanctioned, only 1.2 million have been constructed, while 2.3 million are under construction.
Among states, Andhra Pradesh, Uttar Pradesh, Maharashtra, Madhya Pradesh and Tamil Nadu together accounted for 55 per cent share of the sanctions, it said.
The government aims to sanction 7.5 million houses and construct 3 million of them by the close of FY19, it added.
The government needs to contribute Rs 1.5 trillion in seven years through 2022, at an average Rs 105,000 per house, however, Crisil said only 22 per cent of this, or Rs 325 billion, has been disbursed so far.
"Our calculations show the government will have to garner around Rs 1 trillion over the next three years to achieve the target of building 10 million houses. This is going to be a tall ask given the current financial year arithmetic," said Prasad Koparkar, senior director, Crisil Research.
The agency noted that for extra-budgetary resources, the government has already initiated fund-raising (in the form of bonds) through entities such as the Housing and Urban Development Corporation.
"As these are typically bonds with 10 years of maturity, with interest and principal repayment to be managed through future budgetary announcements, the provisions in future budgets would be a key monitorable," it said.
Crisil pointed out that the PMAY-U scheme also faces headwinds such as unavailability of land in prime areas, low participation of private developers on account of brand dilution, bidding mechanism, stringent cost and time schedules resulting in low yields and increasing construction cost due to absence of bulk sourcing of materials.
Crisil Research director Rahul Prithiani said 10 million houses would mean an opportunity for over Rs 2 trillion of home loans, and incremental consumption of 80-100 million tonne of cement and 10-15 million tonne of steel.
The construction opportunity is of around four billion square feet over the life of PMAY-U, he said, adding all that would translate into 90-100 million incremental jobs over the execution period, without factoring in some repetitive jobs continuing after the completion of a project.