PMAY-U: Budget 2021 Gives A Boost To Affordable Housing In India

After assuming power in 2014 the prime minister Narendra Modi-led National Democratic Alliance government, in its first stint, launched its pet project, the Pradhan Mantri Awas Yojana (PMAY), in order to provide housing to all by 2022. Since its launch in June 2015, the widely-talked about housing scheme received much media attention, often because of its slow progress. Under this scheme, the Affordable Rental Housing Complexes (ARHCs) also received approval from the Union Cabinet on July 8, 2020. 

With Budget 2021-22, Finance Minister Nirmala Sitharaman has proposed to extend the Rs 1.5 lakh benefit on interest paid on affordable housing loans under Section 80EEA by one more year, that is up till March 31, 2022. Moreover, affordable housing projects are given a deduction under Section 80IBA of the Income Tax Act. The minister has proposed to extend the tax holiday on profits under this section by a year, that is, till March 2022.

The motive is to help more and more people to benefit from the scheme.

Rental housing, which is a segment under the PMAY-U scheme also received a boost with Sitharaman providing a tax exemption for notified affordable rental housing projects. 

Here’s a look at the key highlights and developments in the PMAY-Urban scheme.

8 Key Developments In PMAY-U

1. Affordable Rental Housing Complexes

The authorities have gone ahead with the proposal of building affordable rental housing for the urban poor. The ultimate aim is to provide the poor with a dignified living and housing close to their workplaces. Here are some facts you must know about affordable housing complexes:

About the scheme: ARHC is a sub-scheme of the PMAY-U and will receive funding till the last date of the PMAY-U mission, that is March, 2022. 

Scope: The scheme will be implemented in statutory towns, planning areas that are notified, development authorities, special area development authorities and any other area that may be notified by the state or UT government. 

Implementation model: ARHC has two models, a PPP-model working on government-funded land and second, public or private entities developing ARHC on their own land.

Beneficiaries: ARHCs are meant for labourers, street vendors, hawkers, market or trade associations, industrial workers, manufacturing units, long-term tourists, hospitality sector, educational institutions and students, as also health institutions. 

2. Exclusive housing portal

On January 14, 2020, secretary for the Ministry of Housing and Urban Affairs Durga Shanker Mishra launched an e-commerce portal for the realty sector - HousingForAll(dot)com. The aim of the portal is to make available affordable projects that have received occupancy certificates. The ministry hopes that this move will stir a positive sentiment for the real estate industry, contributing to the growth of the economy.

The housing portal will host a 45-day All-India Online Home-Buying Festival for ready-to-move-in homes, with over 1,000 projects expected to be listed. Real estate developers get to register their projects between January 14 and February 13, 2020. The portal will be opened for home buyers with a 45-day sale period, starting February 14. For the initial 15 days, buyers will be able to view offers and shortlist their homes and will be able to start making the purchase of homes from March 1 till the end of the month.

Puri has also launched the Credit-linked Subsidy Services Awas Portal (CLAP) for beneficiaries of this scheme. It is aimed to help such beneficiaries track their applications in a smooth manner.

3. Stress fund

The government has set up a Rs 25,000-crore stress fund which would help lakhs of stuck housing units see completion.

4. Relaxed ECB guidelines

Guidelines for external commercial borrowings (ECB) will also be relaxed to help PMAY homebuyers. This will also greatly help builders who are looking at funds from overseas investors. All of this will be done in consultation with the Reserve Bank of India.

5. New technology

In a bid to develop homes within the schedule, the authorities have also decided that they will now try their hand at technology. Technology has helped the mission sizeably and the centre intends to utilise it to the fullest. About 6,368 units and amenities to be provided therewith, will be developed using six alternate technologies that will be suitable for the geo-climatic conditions of the sites. Request for Proposals (RFPs) have already been published on July 5, 2019.

The agencies that complete the construction of these model units within the deadline (12 months) will be incentivised with a reward of $20,000 each. They will also be called for other opportunities in the future. "These LHPs (lighthouse projects) are envisaged to build an eco-system for the adoption of innovative technologies in the housing construction sector, in a holistic manner and support further research and development in the construction sector," states a circular. As of July 9, 2020 about 15 lakh homes have been constructed using new technologies. 

6. Angikaar campaign

The 'Angikaar campaign' attempts to bring PMAY-U beneficiaries within the fold of central schemes such as the Ujjwala for gas connections and the Ayushman Bharat scheme which ensures health insurance for eligible families. The Angikaar campaign which started from October 2, 2019, in a phased manner got over by December 10, 2019. The campaign included door-to-door activities, ward, and city-level events.

Puri said that the scheme is now transitioning into a more comprehensive, Parivar Yojana.

7. Priority for victims of natural disasters

Wherever possible, the scheme also helped provide homes for victims of natural disasters. In 2019, Maharashtra's Housing Ministry had sent a proposal to the Chief Minister's Office (CMO), to provide homes to flood-affected families in western Maharashtra. Areas like Kolhapur and Sangli that were amongst the worst affected were displaced in a week's time due to the floods in August 2019. Similarly, in Odisha the state government urged authorities to identify victims of cyclone Fani and provide them with homes under the PMAY.

8. PMAY app for beneficiaries

In February 2019, a new application was launched for PMAY beneficiaries. Available on the Playstore, the app allows beneficiaries to capture and upload high-resolution photographs and videos of completed houses, along with their families. These pictures would then be scrutinised at the state and Central levels. Selected beneficiaries from the states and union territories would be awarded and invited as special guests for the anniversary celebration of PMAY (U). One can also post video clips.

Reviews on the Playstore, however, reveal that these beneficiaries would like more process-related information and capabilities through the app. These include ease of generating online applications, tracking the status of applications and loans, an EMI calculator, grievance redressal, etc.

PMAY-U and Union Budget 2018 to 2020

From 2018-19 to 2020-21, affordable housing has invariably found a mention in the budget speech. In 2018, a dedicated fund for this segment of housing was set up under the National Housing Bank (NHB). Affordable housing also got an industry status and a tax holiday was offered to developers who undertook such projects.

In the same budget, standard deductions were also increased, helping people save a little more by allowing a little more EMI bearing capacity. In Budget 2019, affordable properties got a water-tight definition as well. Properties up to Rs 45 lakhs were affordable and the size was maintained at up to 60 sq mt in metro cities and 90 sq mt in non-metros. An additional deduction of Rs 1.5 lakh on interest for home loans were also launched. Altogether, this overall deduction stood at Rs 3.5 lakh while those repaying their EMIs over a 15-year loan period could save Rs 7 lakh. While the latter was welcomed, the definition of affordable housing was a point of contention with most developers in big cities.

“One of the areas that require the immediate attention of the government is increasing the threshold value of affordable housing under the Pradhan Mantri Awas Yojana (PMAY) scheme from the current Rs 45 lakh to Rs 75 lakh. Today, in markets such as Bengaluru, the lands prices are high, making it unrealistic for the developers to offer homes at a price point of Rs 45 lakh,” says JC Sharma, vice-chairman and managing director, SOBHA Limited.

Real estate developers who are active in India’s bigger property markets noticed a gap between the aim of the authorities and the actual supply scenario in the markets. For example, 85 per cent of housing units are in the Rs 45-75 lakh price bracket making the affordable housing definition somewhat unrealistic. Therefore, even developers would find it tough to offer properties below Rs 45 lakh given that the land values have gone up. Hence, it was suggested that the carpet area threshold for affordable housing be increased from the current 60 sqmt to 90 sqmt in metros and from 90 sqmt to 120 sqmt in non-metro cities, in line with the consumption trends. This hasn’t been addressed in Union Budget 2020 though.

However, the Union Budget 2020-21 has extended the tax holiday for developers of affordable housing by a year and has also proposed to extend the Rs 1.50 lakh benefit on interest paid on loans for the purchase of affordable homes, to March 2021, strengthening the aim of providing lakhs of Indians with a budget home.

How many PMAY-U units have been completed by 2020?

As of July 9, 2020, the PMAY-U Mission has sanctioned more than one crore houses against the validated demand of 1.12 crore units. A total of 65.66 lakh houses are grounded for construction of which 34.72 lakh have been completed.

Speaking at a conference on August 20, 2019, housing minister Hardeep Singh Puri said that all the 1.12 crore units would be sanctioned by March 2020. While the target was of one crore units, demand for 12 lakh more units surfaced, pushing up the target. The official website of PMAY-U shows that over 15 lakh homes have been constructed using new technologyies. 

Everything that a middle-income buyer needs to know about PMAY-U

The Centre had approved the enhancement of the carpet area of houses meant for the middle-income group (MIG) category under the (PMAY-U).

In 2017, the PMAY was widened, to include the country's middle-class home buyers. States, where the response to the scheme has been comparatively better, are Maharashtra, Gujarat, Karnataka, Uttar Pradesh and Andhra Pradesh, in that order. So far, the government has made modifications to the size of these dwelling units twice. From 90 sq mt and 120 sq mt (MIG-I category), the size of the dwelling is now 160 sqmt while for the MIG- II category, the size has gone up from 110 sq mt and 150 sqmt to 200 sqmt.

"Housing for All by 2022 has taken a huge leap forward, thanks to the increase in the unit size of MIG houses under the Credit-Linked Subsidy Scheme. The average middle-class buyer in smaller towns and cities, will now be able to afford bigger and better-quality homes" says Confederation of Real Estate Developers' Associations of India (CREDAI) president, Jaxay Shah.

According to Farshid Cooper, managing director, Spenta Corporation, “This is a welcome move by the government and will incentivise more people in Tier-II and Tier-III towns, to purchase homes while still being able to avail of the interest benefits under the PMAY. Over time, this decision will result in increased demand in Tier-II and Tier-III towns."  

PMAY home loans growth

Under the PMAY-U, the housing ministry has implemented the Credit-Linked Subsidy Scheme for the middle-income group. Financial and industry experts have pointed out that PMAY–linked loans have been one of the main drivers of home loan growth, registering as much as 20 per cent year-on-year growth. Most of these beneficiaries are those earning Rs 6 lakh to Rs 18 lakh, annually.

However, till early 2019, only 3.4 lakh applicants have availed of subsidised loans, despite the fact that those with an annual income of up to Rs 18 lakh per annum are entitled to a credit-linked subsidy of up to Rs 6 lakh.

In order to reach out to more prospective beneficiaries, the government is keen on changing the process of applying for a home under the scheme. The government may tap into your income tax data, to see who is eligible for a PMAY unit. A certificate issued by the Income Tax Department, will be enough for one to avail of a subsidised bank loan, without having to stand in queues at bank branches. This could be a fool-proof way to check a prospective beneficiary’s eligibility.

Measures needed for the improvement of the PMAY scheme

Lack of awareness could be one of the prime factors that have led to the PMAY-U not being as popular as it should have been. A slump in the real estate sector could be another reason why the scheme did not get the response it was expected to. A strict eligibility criterion has also played spoilsport. For example, those with a pucca house anywhere in India cannot apply under this scheme.

Amrit Abhijat, joint secretary in the ministry and the mission director of the PMAY, says: “With awareness increasing and the infrastructure in place, we expect many more people from the middle-income category to avail of benefits under the PMAY.”

While units are being sanctioned now, there is still a need for higher funds to speed up the allotment process. "A significant increase in the planned spending under the PMAY, is likely to result in a notable pick-up in execution, since funding availability was a constraint in the past," says Shubham Jain, vice-president and real estate head at ICRA.

In addition to this, banks too have been delaying disbursements, admits the government. As per reports, the government has received complaints regarding delay in sanctioning and disbursing loans to applicants under the Credit-Linked Subsidy Scheme (CLSS). A government representative claims that the situation is being reviewed and that nodal agencies will take up these issues. Banks do undergo a sensitisation programme, prior to the implementation of the scheme.

Social auditing

Guidelines pertaining to the PMAY scheme mention social auditing an important component. Based on feedback of beneficiaries and stakeholders, the audit “helps to measure, understand, report and improve the mission’s social and ethical performance." It is, therefore, a participatory monitoring exercise to assess the progress of the PMAY. The government gives full financial help to states to conduct the social audit. In states that have expressed interest by submitting a plan, half the funds have already been granted.

Note: Homebuyers are advised to exercise caution while buying units through mediators. Have questions on PMAY? Comment in the section below.