With the Budget round the corner, expectations run high on more sops for the real estate sector, in particular the affordable housing segment. But rather than continuing to address the demand-side issues (by offering interest subvention for low-ticket home loans), the Centre will have to focus on supply constraints to realise its “housing for all by 2022” dream.

The Pradhan Mantri Awas Yojana (Urban) -- PMAY(U) – Housing for All, one of the Centre’s ambitious projects, has made limited progress since it was launched in 2015, going by the number of houses constructed under the scheme so far. As on January 20, while 1.03 crore houses have been sanctioned to be constructed by States/UTs, only 32 lakh houses have been constructed or completed. Given that India’s urban housing shortage is pegged at about 1 crore, meeting the Centre’s target of providing houses to all eligible families by 2022 will be a herculean task.

The fact that the top 10 States alone account for over 80 per cent of the houses constructed so far under PMAY (U) also suggests that progress in many States is dismal. For instance, in the North-East States, of the 3.1 lakh houses sanctioned, only about 73,000 are constructed so far. In Assam, of the 1.1 lakh sanctioned houses under PMAY (U), only 17,700 have been constructed. In Sikkim, just 537 houses have been sanctioned, of which less than half have been completed so far.

Even among the top States (in terms of number of houses completed), there is a wide disparity in the pace of construction of houses (against the sanctioned numbers). For instance, while in Gujarat, West Bengal, Telangana and Madhya Pradesh, the percentage of houses completed to those sanctioned is 40-58 per cent, in Andhra Pradesh, Karnataka and Maharashtra, it is 16-25 per cent. In Haryana, Manipur, Andaman, Mizoram, Jammu & Kashmir and Nagaland, it is less than 15 per cent.

Increasing focus on middle income segment

The PMAY(U), during its 2015 launch, covered the Centre providing a grant under the slum rehabilitation programme with the participation of private developers, using land as a resource, central assistance for the economically weaker section (EWS) category -- under both affordable housing in partnership and beneficiary-led individual house construction or enhancement. Importantly, it included the Credit Linked Subsidy Scheme (CLSS), offering an interest subvention of 6.5 per cent on housing loans up to Rs 6 lakh to the EWS and low income group (LIG) with income ceilings of Rs 3 lakh and Rs 6 lakh, respectively.

In 2017, the scope of CLSS under PMAY(U) was widened to include the middle income category, offering an upfront interest subsidy of up to ₹2.3-2.35 lakh per annum to borrowers, covering two income segments — ₹6,00,001 to ₹12 lakh (MIG-I) and ₹12,00,001 to ₹18 lakh (MIG-II). The maximum loan amount qualifying for interest subsidy under MIG-I and MIG-II stands at Rs 9 lakh and Rs 12 lakh, respectively.

Given the robust appetite for affordable housing within the middle income segment, the Centre has been sweetening the deal under CLSS for MIG. The eligible carpet area was increased two times ---from 90 sq m to up to 120 sq m, then to 160 sq m for MIG I and from 110 sq m to 150 sq m and finally to 200 sq m for MIG II.

There has been a notable rise in beneficiaries under CLSS. According to the 2018-19 annual report of the Ministry of Housing & Urban Affairs, there were 5,67,950 beneficiaries to whom a subsidy of Rs 12,717 crore had been disbursed, cumulatively, until March 2019. Per a Rajya Sabha response in December 2019, 8,02,732 households including EWS/LIG households have availed CLSS subsidy benefits, amounting to Rs 18,358 crore.

While the Centre may have resolved the demand-side issues to some extent by offering interest subvention for low-ticket home loans, supply constraints remain. The slow pace of construction of houses and the wide disparity in the progress across States is a cause for concern.

Weak Budgetary allocation

The Centre has made modest allocation for interest subsidy under CLSS until now, which is also a cause for worry. In its 2017-18, it had spent Rs 1,200 crore for EWS and LIG and Rs 600 crore for MIG under CLSS. In 2018-19, the revised estimates of the interest subsidy for the two categories were pegged at Rs 1,300 crore and Rs 600 crore, respectively. For the current fiscal, the Centre has allocated a lower Rs 600 crore and Rs 400 crore, respectively, for the two categories.