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Budget 2022: PMAY Short Of Target As India's Housing Burden Rises

The pandemic has delayed affordable housing scheme targets. The burden is only getting bigger.

<div class="paragraphs"><p>A worker looks down from a house under construction  India. Image used for representational purposes. </p></div>
A worker looks down from a house under construction India. Image used for representational purposes.

Prime Minister Narendra Modi had set the 'housing for all' target for 2022 to coincide with India's 75 years of independence. While the government has already extended the rural affordable housing scheme because of delays, the pandemic has slowed down the execution of the urban leg of the scheme too.

The Pradhan Mantri Awas Yojana-Urban is aimed at providing permanent homes to the economically weak as well as lower-income families living in temporary homes or slums. And it offers interest subsidy on home loans to middle-income earners.

The scheme has, however, run into delays, causing a mismatch between the number of houses sanctioned and built. While the total number of sanctions stands at 114.4 lakh, only 53 lakh houses have been built so far, Prashant Thakur, senior director and head of research at Anarock Property Consultants told BloombergQuint.

He attributed the lag to a “washout in construction during the pandemic”. But he called the progress "satisfactory" and expects it to gain pace.

PMAY-U now also includes affordable rental housing complexes for poor urban beneficiaries.

“I think this will fast-track the objective of the government to provide housing for all," said Thakur, adding that ‘housing for all’ implies not just constructing and handing over houses but rather "a mix of the rental-housing model as well as providing new houses”.

The reason the government has not extended the urban scheme yet is because through the public-private partnership, they are on track, said Thakur. "Whereas if you look at the rural side, there's hardly any public-private partnership. It is the government alone which is responsible to build houses in collaboration with the respective state.”

According to Minister for Information and Broadcasting Anurag Thakur, the cost of the PMAY-rural scheme was expected to be Rs 2,17,257 crore. A total of Rs 1,97,000 crore had already been spent till March 2021 on the project, of which the central government's contribution was Rs 1,44,162 crore, he said during a cabinet meeting briefing on Dec. 8.

PMAY-Gramin

The Pradhan Mantri Awas Yojana–Gramin offers 'pucca' or permanent houses to rural, with both the central and state governments sharing the cost.

The pandemic stalled the progress. The target of building 2.95 crore houses in rural areas was initially due for completion by 2022, but the PMAY-G scheme has now been extended to 2024. The decision was announced following a cabinet meeting in early December last year.

Still, the progress in the PMAY in the rural sector has helped reduce homelessness in rural areas as also aided those living in "kaccha houses", said Bhabesh Hazarika, an economist at the NIPFP who provided research data on PMAY-G to the Ministry of Rural Development.

“We have geo-tagging systems and fund flow through direct benefit transfer and because of these, the speed of construction has significantly gone up,” he told BloombergQuint.

Problems Persist 

Experts, however, do not see the schemes fully addressing India's housing requirement. And problems range from absence of support infrastructure to lack of awareness.

Informal housing colonies welcomed the regularisation of their living spaces and gaining formal entitlement under the PMAY scheme as it opened up formal sources of loans and ownership rights, said Prerna Prabhakar, associate fellow at National Council of Applied Economic Research who conducted research on Delhi's informal housing.

Yet, she said, the long-term issue is the lack of provision for market creation. "Even if they (people residing in informal colonies in urban areas) get one-time ownership rights, what has the scheme provided to determine the later market creation in these colonies?”

According to Prabhakar, the solution is in creating subsequent social infrastructure and public amenities.

The scheme also underestimates construction costs which adds to the subsidy burden, she said. And rising price of land in urban areas impedes long-term feasibility of the scheme, adding a fiscal burden on the government, Prabhakar said.

The government should explore relaxation of the floor space index, a measure of how much space can be built in a particular area. The higher the FSI, the more floors can developers add.

“FSI isn’t relaxed in many cities, except in Mumbai," she said. "If we acknowledge the fact that it is difficult to get horizontal space, we should try and relax the norms and go vertical, banking on the existing area available.”

Hazarika said he encountered local officials who were unaware of credit-linked subsidy provision. “When you find a knowledge gap at the level of local officials, what can you expect from the beneficiary and the banking officials? Therefore, sensitization is very important.”

Other challenges that need to be addressed include last-mile leakage of funds, land clearance and slum resettlement in urban areas.

Hazarika sees even the rural housing target meeting less than half the requirement.

“Our own estimates say we will be short of 7 crore houses at a time when the government aims to build 2.95 crore houses in rural areas," he said. "Maybe, the ministry needs to shift focus from ‘pucca’ houses to some other alternative that will provide additional housing.”