A central government scheme to ensure basic dignity of living for all, the ambitious Pradhan Mantri Awas Yojana (PMAY) was launched in 2015. Meant for rural, as well as urban areas, the scheme is classified as PMAY-Gramin (or PMAY-Rural) and PMAY Urban. The overall agenda of the scheme has been to address the housing deficit in both, rural and urban areas, furthering the vision of ‘Housing for All by 2022’. The program estimated a deficit of two crore homes in India’s urban areas and one crore units in the rural areas.

1. What was the need for affordable housing in urban areas?

Increasing population and rapid urbanisation over the years, have widened the demand-supply gap in the residential sector, resulting in significant housing shortage in the country. The housing shortage in urban areas in India was estimated at 18.78 million units at the end of 2012 and 96% of this stemmed from the economically weaker section (EWS) and low-income group (LIG). This shortage has increased the need for Affordable Housing in the country. Affordable housing has been the buzzword in India for over a decade now, with both, the government and developers, increasing their focus on this segment. However, the term ‘affordable’ is a relative concept and means different things to different stakeholders.

Over the past few years, there have been several attempts to accord a definitive classification to affordable housing in India. In July 2014, the RBI made affordable housing loans eligible under priority sector lending and defined affordable housing as properties costing Rs 45 lakhs or less in metros and Rs 30 lakhs or less in non-metro cities. Similarly, the Ministry of Housing and Urban Affairs (MoHUA) defines affordable housing based on carpet area, which could be between 30 sq metres and 200 sq metres.

These dwelling units can be part of schemes such as the Jawaharlal Nehru National Urban Renewal Mission, the Rajiv Awas Yojana, Pradhan Mantri Awas Yojana (PMAY) or any other housing scheme of a state government or even a project developed by private developers.

2. How is PMAY-G and PMAY-U different?

PMAY-G and PMAY-U differ in some aspects. For example, the PMAY-Urban allows in-situ rehabilitation of slum-dwellers, in collaboration with private builders. It also paves way for homes built under the public-private partnership. If a beneficiary is looking to enhance or renovate his/her home and its premises, they could avail of the subsidy, as well. On the other hand, the Credit-Linked Subsidy Scheme (CLSS) allows the economically weaker sections to avail of the benefit. With PMAY Gramin, the aim was to provide over two crore pucca homes.

3. Who is eligible for PMAY units in urban, rural areas?

If you are looking to apply for a PMAY-U unit, your annual income will decide the category you fall into. If you are from the Economically Weaker Section (EWS and have an income of up to Rs 3 lakhs, you are eligible. Those with annual income between Rs 3 lakhs and Rs 6 lakhs, fall into the LIG category; those with annual income of Rs 6 lakhs to Rs 12 lakhs belong to MIG-I and those with income of Rs 12-18 lakhs, fall under the MIG-II category.

The Socio Economic and Caste Census, 2011 ensures transparency when it comes to identifying beneficiaries in the rural areas. The gram sabhas shortlist beneficiaries, on the basis of those who have not availed of benefits under the PM Rural Awas Yojana or those who were ineligible for other schemes due to various reasons.

4. What about subsidies for PMAY beneficiaries?

Under PMAY-U, the EWS and LIG beneficiaries are eligible for 6.5% subsidy. In the case of MIG-I and MIG-II families, beneficiaries can avail of 4% and 3% interest subsidy, respectively, on home loans. The maximum loan tenure in this case is 20 years.

Under PMAY-G, beneficiaries are allowed assistance of Rs 1.2 lakhs for units in plains and Rs 1.3 lakhs for homes in hilly areas or difficult terrain. Such beneficiaries can also avail of an added benefit of Rs 12,000 for toilet construction, because the PMAY scheme is now in convergence with the Swachh Bharat Mission (SBM) and MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme). The beneficiary is also entitled to a pay under the MGNREGS for a period of 90-95 days.

5. How is the PMAY subsidy released to beneficiaries?

The Central Nodal Agency (CNA) will release the subsidy, based on disbursements made by the primary lending institution (PLI) to the beneficiaries. The subsidy released by the CNA will be credited to the beneficiary through the PLI. Thereafter, the beneficiary will start paying EMI on the remaining amount of the principal.

For example, Arjun avails of a loan of Rs 6 lakhs and the subsidy works out to Rs 2.20 lakhs. The amount (Rs 2.20 lakhs) would be reduced upfront from the loan. That is, the loan would reduce to Rs 3.80 lakhs and Arjun would pay EMIs on the reduced amount of Rs 3.80 lakhs.

6. What is the size of units under PMAY scheme? 

The minimum size of the house under PMAY-G is 25 sq metres (269.098 sq ft) and this includes a kitchen space. On the other hand, the maximum dwelling unit carpet area under PMAY-U is 30 sq metres for EWS families, 60 sq metres for LIG category, 160 sq metres for MIG-I and 200 sq metres for MIG-II categories.

7. What is affordable rental housing?

Due to the high risks and low returns in rental markets in India, landlords would rather leave their properties vacant, than rent it out. As a result, 12% of the total urban housing stock is vacant. The government has now realised that rental housing can help reduce the housing shortage in the country but the current laws are archaic. The government has proposed reform measures, including a model tenancy law, to promote rental housing in the country. This will also help in reducing the vacancy rates in the residential segment across the country. Some states/cities like Maharashtra and Hyderabad have been proactively creating rental housing schemes, to reduce the shortage. Although the industry has been talking about rental housing for quite some time, it was only in 2020 that the centre and the industry stakeholders gave it some direction. On July 8, 2020 the cabinet gave its nod to the Affordable Rental Housing Complexes (ARHC) scheme, meant for the urban poor – labourers, street vendors and hawkers, market or trade associations, industrial workers, etc.

See also: PMAY-U: All about affordable rental housing in India

8. Is PMAY using technology to build units?

Yes, so far 15 lakh homes have been built using new and improved technology. The slow pace of progress of the PMAY-U was also seen in PMAY-G, initially. However, the number of days taken to complete a house has reduced significantly with the use of technology, resulting in more completions in the past couple of years. During 2014-2019, 15.4 million houses were completed (including those carried over from the Indira Awas Yojana (IAY)), of which 9 million houses were completed during 2017-19. As against 314 days taken in 2015-16, the time taken to complete a unit has reduced to 114 days now.

9. What are the challenges affecting the progress of PMAY-U?

Although the initial uptake on the scheme was slow, it gathered steam during the second half of FY19. The progress on the rural front is far better than the urban regions. One of the main concerns is that private developer participation is relatively low in this segment. Traditionally, developing affordable housing, especially for the EWS and LIG categories, has been the government’s responsibility. However, given the quantum of demand in the segment, the government realised that it would not be able to achieve the targets on its own and introduced various incentives, such as giving infrastructure status to affordable housing, lower cost of funds, PPP policy etc., to attract private developers into this segment. In the past few years, developers have also recognised the huge opportunity in the segment and have started exploring it, with a few developers focusing primarily on low-cost housing. However, private developers’ participation is still low, due to the various other challenges that impact the overall profitability of the projects in this segment.

Unavailability of land at affordable rates at prime locations: Affordable housing projects are developed on large land parcels, to take advantage of economies of scale. Land is a limited commodity and availability of low-cost land at prime locations, is the biggest impediment to the growth of the affordable housing segment. Moreover, banks are not allowed to fund land purchases, as per RBI regulations. Developers, therefore, either form JVs with landowners or get funds at higher interest rates through NBFCs. As a result, most affordable housing projects are being developed in the outskirts of cities, where large land parcels are available at lower costs. Occupancy rates in projects at such locations are currently low, due to the lack of adequate physical and social infrastructure. Besides, operational costs and changes in the regulatory environment also pose challenges.

10. Does the rising cost of raw material affect the progress of PMAY?

Soaring raw material prices have increased the construction costs of developers and negatively impacted the profitability of affordable housing projects. As per industry estimates, cement prices have tripled in the past 16 years, while the price of structural steel has doubled during 2005-2017. Raw material costs vary across states but the implementation of the Goods and Services Tax (GST), has increased transparency and helped in streamlining the inter-state taxes on raw materials.

FAQ