Inadequate subsidies, insignificant slum redevelopment: CSEP report on PMAY
Under PMAY, 11.8 million houses have been sanctioned, while more than 8.55 million houses have already been delivered to the beneficiaries since 2015, making it one of the largest housing schemes globally
New Delhi: Inadequate subsidies leading to beneficiaries seeking high-interest loans from non-institutional sources, lengthy delays, and insignificant slum redevelopment were some of the issues in the union government’s flagship affordable urban housing scheme flagged in a recently released working paper policy think tank Centre for Social and Economic Progress (CSEP).
Incidentally, the Union cabinet headed by PM Narendra Modi approved the specifics of PMAY-U 2.0 only on Friday. Another 10 million houses will be built through the scheme, considered a flagship project of the PM. Under PMAY, 11.8 million houses have been sanctioned, while more than 8.55 million houses have already been delivered to the beneficiaries since 2015, making it one of the largest housing schemes globally.
In the paper titled ‘Pradhan Mantri Awas Yojana Urban (PMAY-U)—What do the Numbers Say?’, CSEP, a New Delhi-based not-for-profit think tank, cited sample surveys done by earlier studies in Kerala, Odisha, and Tamil Nadu to say that while 80% of the beneficiaries had to borrow their share of funds for the construction, only a third of them did so from banks or other financial institutions. This meant they borrowed from friends and family or from moneylenders or landlords. In the latter case, interest rates could be as much as 60%.
Officials of the MoHUA, however, did not respond to the findings of the paper.
Land ownership challenges in big cities, especially in slums, meant that the scheme succeeded primarily in smaller cities compared to bigger and million-plus cities, authors Debarpita Roy and Rashmi Kundu said in their paper, while noting the ongoing implementation of the scheme to be unprecedented both in scale and reach.
As a remedy, Roy said, “To make the recently announced PMAY-U 2.0 more impactful, especially in India’s million-plus cities, it is critical to address the myriad land-related challenges and enhance urban poor’s access to institutional home loans on mission mode as well.”
Originally, the scheme had four verticals or sub-schemes, namely Beneficiary Led Construction/Enhancing (BLC), Affordable Housing in Partnership (AHP), In-Situ Slum Redevelopment (ISSR), and Credit Linked Subsidy Scheme (CLSS). BLC is the key driver of the scheme’s scale, accounting for 62% of the total sanctions, the paper said. Among the remainder, 15% of the sanctioned houses are from the AHP category and 2% are from the ISSR category, according to the data as of January 2024. In 2020, in the aftermath of the pandemic, the government announced another vertical called assisted rental housing complex (ARHC), which continues to be at a nascent stage at 0.2%. The CLSS sub-scheme, which was discontinued in 2022, will now be replaced by the newly introduced ISS (interest subsidy scheme) vertical while the government has discontinued the ISSR sub-scheme.
It has to be noted in the CLSS vertical that no government involvement or monitoring is there in the completion of the houses. The sub-scheme accounts for 21% (second largest) of the total houses sanctioned. The researchers found that most of the beneficiaries were from middle- and low-income groups, and only 21% were from the economically weaker section category.
Delays and cancellations
As of May 2024, the researchers noted that 30%, or 3.6 million, of the sanctioned houses under BLC, AHP, and ISSR were still under construction, and another 0.4 million were yet to see the start of construction.
Even then, 22% of sanctioned BLC houses were cancelled; of the remaining houses, 29% were delayed, which meant they could not be completed within the stipulated 18-month post-sanction period, the paper said.
Regarding delays, the researchers noted that even though they are a regular feature in the Indian real estate sector, delays in the scheme meant to help the most vulnerable make it more concerning.
Role of state governments
While the scheme has been implemented across states, nine major states (having 68% of India’s urban population according to the 2011 census data) accounted for 80% of the PMAY-U sanctions. The paper noted that disparity existed even within the different verticals of the scheme. For example, 44% of the sanctions under BLC were from the two states of Andhra Pradesh and Uttar Pradesh alone.
This reflected the active involvement of state governments even though PMAY-U is a central government scheme, the authors noted. Notably, even in the CLSS sub-scheme where there was no direct role of the state government, the Gujrat government’s involvement by forming a committee and regular monitoring ensured strikingly better results, the research found.
The authors found that the timing of the subsidy release too makes it harder for the beneficiaries to arrange for their share of funds.
Even then, the paper said the role of state governments made a difference, noting that the Uttar Pradesh government released Rs.50,000 of the Rs.1 lakh state subsidy at the time of approval to overcome this problem. Uttar Pradesh has the highest number and proportion of completed houses under the BLC sub-scheme, suggesting a portion of the subsidy had likely positive effects.