By R K Arora
Housing shortage has been a perennial problem for Indian policy-makers. Estimates place the nationwide shortfall in urban areas at 18 million units. Merely building the requisite number of units will not solve the housing problem. In fact, most people cannot afford homes at the rates currently prevailing in urban zones. Significantly, it is the economically-weaker sections that comprise as much as 90% of the housing shortage victims.
These facts have been clearly taken into account by the government when the Prime Minister announced the Pradhan Mantri Awas Yojana (PMAY) in June 2015. Under its mission ‘Housing for All by 2022’, PMAY will build 20 million houses for the urban poor by 2022. During this period, central assistance will be provided via urban local bodies as well as other implementing agencies. All statutory towns (and cities) as per Census 2011, and those notified thereafter, will be eligible under this mission.
This will be done mainly through credit-linked subsidy and affordable housing schemes launched in partnership with other developers. The latter initiative seeks to encourage private developers to build affordable housing projects. Since the scheme is meant to provide housing for all, people who own a home (or have family members who own one) may seem technically ineligible under PMAY. Those having availed of any central assistance for housing schemes are also not allowed to apply. Nonetheless, the guidelines clarify that male or female earning adults (irrespective of marital status) can be considered as a separate household—provided he/she owns no ‘pucca’ home in his/her name anywhere in India.
Similarly, for any married couple living in the parents’ own home or separately on rent, eligibility applies since they constitute a separate household. But even if both are earning, the couple would only be eligible for one home, either individually or jointly, under PMAY. That’s not all. The benefits are available for buying a new house from any developer or for one repurchased from the secondary market. A person can also avail a loan to construct a house.
All this may make it seem that a person who already owns a home cannot avail of any PMAY benefit. Again, not true. PMAY provides benefits even for enhancement or extensions to an existing ‘pucca’ house. Therefore, a person seeking to build a room, kitchen, balcony, etc. can still apply for a loan to fulfil this purpose. This rule will prevail even if the home is a ‘pucca’ one. The other significant point to note is this scheme only considers the carpet area of a house, not the built-up or super-built-up area. Accordingly, only the area that lies within the four walls needs to be taken into account.
To promote the Affordable Housing mission more vigorously, this segment was given infrastructure status in Union Budget 2017. Additionally, the norms were relaxed to make them more attractive for developers. Earlier, developers were required to complete their Affordable Housing projects
within three years. But the completion tenure has now been relaxed to five years.
Given all these incentives, prices in the Affordable Housing segment are likely to stabilise or even dip marginally. Moreover, during the past few months, banks and other lenders have announced lower interest rates on home loans. All these factors can incentivise developers to consider projects in the Affordable Housing segment due to the rising scope for such developments. Besides developers, bankers and housing finance companies will also be happy with the government incentives.
Thanks to the lower risks, institutional funds will become easily available for developers at more competitive rates. Earlier, developers were forced to procure finance at much higher rates. These funds will also be disbursed much faster. All of this would ensure greater liquidity in the Affordable Housing segment. Considering these advantages, all stakeholders should take advantage of these incentives and ensure that the government’s ‘Housing for All by 2022’ mission becomes a resounding success.