34-year-old school teacher, Ambarish was single and had put up in a one-room flat on rent when he moved to Kolkata five years ago from a suburban town.
Fast forward to a few months back, his rented one-bedroom apartment proved to be too small now that he is married and has a school-going kid. He desperately felt the need for a new and larger home.
Coming from a humble background, Ambarish belonged to the economically weaker society. Constructing a new home was almost next to an impossible dream. That’s when a friend told him about the PMAY – Pradhan Mantri Awas Yojna. The scheme enabled Ambarish and many like him to avail subsidised housing loans to fulfill their dreams of living a life of dignity.
What is PMAY and Why Was It Initiated?
The growing urbanization is a definite sign of an emerging economy like India with a population of 1.37 billion. In India, the housing shortage is expected to increase from the current level of 19 million units to 25 million by 2021, most of which are amongst the economically weaker sections of the society. According to estimates, around 600 million people are expected to make urban India their home by 2031, a whopping 59% growth over 2011. In the top 8 cities, the demand for urban housing is estimated at 4.2 million units. (Source)
Launched in 2015, Pradhan Mantri Awas Yojna (PMAY) is a flagship initiative by the central government to tackle this growing housing crisis currently unfolding in the country and provide housing for all by 2020 in both urban and rural sectors. The initiative aimed at building 20 million homes by 2020 through the financial assistance of Rs 2 trillion from the central government.
In order to address the problem of affordability of housing in urban and rural areas, PMAY Urban and PMAY Gramin, aim to make housing accessible to specific target groups such as those who are economically weak, women, individuals who belong to the minorities such as Scheduled Castes and Scheduled Tribes, widows of military personnel, transgender people, elderly persons, etc.
The government had started off by identifying 305 cities and towns in nine states to begin the construction of affordable houses. Today, according to the PMAY (U) website, a total of 96.5 lakh houses have been approved for construction under the PMAY (U) across the country. Of these, 56.37 lakh houses have been grounded for construction. 28.60 lakh houses have been completed out of which 26.12 lakh houses have been occupied by the beneficiaries.
The government has, so far, approved Rs 79,716 crore as central assistance under the PMAY (U) of which Rs 57,913 crore has been released under a total investment of Rs 5,70,283 crore.
According to Government sources, PMAY (U) has been successful in creating over 6 crore jobs until 2018. And is expected to create about 9-10 crore incremental jobs by the end of its execution period, experts believe.
PMAY Impact on Real Estate Sector
Experts also believe that the policy has been instrumental in changing the dynamics of the real estate sector. Allocation under the Pradhan Mantri Awas Yojana has infused the sector with refreshed investor sentiment and increased housing finance transactions in low-ticket sizes with many HFCs coming up in affordable housing finance, giving the sector an added thrust.
The scheme has enabled affordable projects to avail benefits such as lower borrowing rates, tax concessions (100% tax immunity for developers) and increased buyers’ interest. States like West Bengal, Uttar Pradesh and Tamil Nadu and others have also benefitted from the thrust that this scheme provided to the housing sector.
The amount released by the Centre for West Bengal was Rs. 354.79 crore under PMAY (U) during 2017-18. West Bengal, as one of the top-performing states under PMAY – Gramin, has completed more than 14.5 lakh units. (source). The government has also announced awards to the best performing states and UTs for PMAY implementation and innovation.
PMAY Benefits for Homebuyers
The most popular vertical of PMAY is the credit-linked subsidy scheme. The interest subsidy is dependent on the income of the borrower and the size of the house to be built. First-time house owners in the lower-income group, with an annual income between Rs 3 lakh and Rs 6 lakhs, can get a maximum interest subsidy of 6.5% on a maximum loan amount of Rs 6 lakhs over a period of 20 years. CLSS is applicable to LIG, EWS, and MIG I and II. First-time buyers and women owners are encouraged under CLSS Senior citizens and differently-abled can ask for ground floor allotment.
The government has converged the Pradhan Mantri Awas Yojana with other schemes that provide electricity, toilet, and LPG gas connections to achieve the idea of holistic living. Though this step is admirable and numbers suggest that PMAY is well on its way to meet the target, it needs concerted efforts to succeed in bringing improved liveability index.