Union Budget 2019 expectations: The government might announce new measures in the Budget to further bring down borrowing cost of affordable urban housing to boost demand for such houses.
Union Budget 2019: Prime Minister Narendra Modi’s recent assurance of remaining committed to improve urban infrastructure and housing for all has fanned expectations that the government’s flagship affordable housing scheme — Pradhan Mantri Awas Yojana (Urban) —is likely to get a boost in the upcoming Union Budget. The government might announce new measures in the Budget to further bring down borrowing cost of affordable urban housing to boost demand for such houses. It might also allow banks to finance land purchases by beneficiaries to boost construction of affordable houses, said sources.
Currently, under the credit-linked subsidy scheme, the Centre gives interest subsidies of 6.5%, 4% and 3% on loan amounts up to Rs 6 lakh, Rs 9 lakh and Rs 12 lakh to beneficiaries belonging to EWS/LIG, MIG-I and MIG-II categories, respectively. Additionally, the Centre gives up to Rs 1.5 lakh per EWS (economically weaker section) house construction and Rs 1 lakh per dweller for slum redevelopment. “Four years ago, today we started important initiatives PM Awas Yojana (U), AMRUT, Smart Cities with the aim of #TransformingUrbanLandscape in India. These initiatives have not only helped usher in a new paradigm of urban development but have also transformed crores of lives,” Modi tweeted on Tuesday, June 25. The scheme was launched on June 25, 2015.
Union minister Hardeep Singh Puri earlier this week said the target to construct one crore urban housing can be achieved by end of 2020, two years before the deadline. In fact, the housing scheme has already gathered momentum under the second stint of Modi. As per the ministry of housing and urban development (MoHUA), by end of March 2019, of the 79.78 lakh homes sanctioned under PMAY (U), around 47% were either complete or occupied.
However, by end of May 2019, more than 80.96 lakh homes have already been sanctioned in urban areas under PMAY and 61% are already completed or occupied. “These initiatives have seen record investment, speed, use of technology and public participation. We are committed to further improving urban infrastructure. No stone will be left unturned to fulfil the dream of housing for all, which will give wings to crores of aspirations,” read another tweet by Modi on Tuesday.
PMAY (U) envisages to be implemented during 2015-2022 through assistance from the Centre to urban local bodies or other state-level agencies. The execution is done through four verticals — rehabilitation of existing slum dwellers using land as a resource through private participation, credit-linked subsidy, affordable housing in partnership, and subsidy for beneficiary-led individual house construction or enhancement.
As per the first method, a slum dweller can get up to Rs 1 lakh for redevelopment using own land as resource with help of a private developer. Under the credit-linked subsidy — which was extended for middle income group as well from January 1, 2017, apart from economically weaker section (EWS) and low-income group (LIG) — beneficiaries are eligible for an interest subsidy of 6.5% on loans up to Rs 6 lakh for a 20-year tenure, wherein the net present value of loan is calculated at a discount of 9%.
Under the third arrangement, the Centre provides Rs 1.5 lakh per EWS house for projects that have at least 35% units for EWS category and have least 250 houses. And finally, an eligible EWS beneficiary can seek Rs 1.5 lakh of central assistance to build a house on her own land. The size of the house eligible for the scheme for the EWS families is 30 square metre; however, states can decide to increase the size in consultation with MoHUA. The beneficiary EWS family has been defined as one with annual income of Rs 3 lakh and LIG as one with an annual income of Rs 3-6 lakh.
However, while the government has brought down GST rate from 5% to 1% already, there are some issues which need to be sorted. “One of the things is that banks should be providing funding for land. This will increase a lot of demand for affordable houses as land ownership is an issue,” said Anuj Puri, chairman, ANAROCK Property Consultants. At present, a beneficiary needs to own land to avail the benefit, but debt is not available to buy land. The other change that the government might bring is to extend the benefits presently available only for projects approved up to March 31, 2019.
Under PMAY (Gramin), the target number of houses to be constructed by the year 2021-22 is 2.95 crore. In the first phase, one crore houses were taken up for construction in three years between 2016 and 2019. In the second phase, 1.95 crore houses are targeted for construction between 2019 and 2022. The government provides Rs 1.5 lakh to each eligible beneficiary to construct a house under PMAY (G).