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Housing for all?

By Nitin Mehta& Pranav Gupta

The Modi government has promised to provide 'Housing for All; by 2022. Various housing schemes of the government like the Rajiv AwasYojana, Indira AwasYojana etc. have been subsumed under the Pradhan MantriAwasYojana. The scheme includes provisions for government grants for construction of pucca houses (similar to provisions of the IAY), a Credit Linked Subsidy Scheme (CLSS) and funds for construction of urban housing alongside state governments. Apart from this, urban house buyers would also be aided by the operationalisation of the Real Estate Regulatory Act (RERA) which provides consumer protection in the real estate sector.

Housing for all?

Rural Housing

The Indira AwasYojana was launched in 1985 with an aim of providing assistance to rural households for construction/renovation of their homes. Fiscal year 2016-17, the programme was subsumed within the PMAY. Under the PMAY, the government aims to provide a pucca house to 1 crore households currently living in kutcha houses by 2019. The government has increased the minimum house size from 20 sq.m to 25 sq.m. Also, the grant given to each household has been revised upwards from Rs. 70,000 to Rs. 1,20,000.

NDA doing far better than UPA II

We find that there has been a substantial increase in rural house construction in the last few years. In the last two years of UPA II, only around 10 lakh houses were completed under IAY annually. As compared to this, in the last fiscal year alone, more than 28 lakh houses had been completed across the country. While there has been a consistent increase in completion rate since 2014, a major increase in construction happened only after the launch of PMAY. Like some other programmes like Swacchh Bharat and Skill India, the government needs to improve its performance to achieve the declared targets. The number of houses constructed annually needs to be increased further if the government intends to achieve its target of 1 crore rural houses by 2019.

Urban Housing

In urban areas, the Credit Linked Subsidy Scheme (CLSS) and the introduction of RERA are likely to provide impetus to the housing sector. In his new year's eve address to the nation, Prime Minister Modi had announced broadening of the CLSS. The government now promises to provide interest subvention of 4% and 3% on loans upto 9 Lakhs and 12 Lakhs respectively. This is likely to help close to two-third of borrowers from major public sector banks as per some claims. The scheme is aimed at ensuring EWS and LIG households have their own home. Before the expansion of the programme, response to the CLSS had been tepid and number of beneficiaries was extremely low. The government must ensure that lack of communication should not lead to failure of an important initiative.

Controlling Inflation and Jan Dhan Accounts have helped

In the last three years, there has been a decrease in the cost of borrowingas interest rates have reduced. The government's success in controlling the inflation rate has indirectly helped the public in the form of lower interest rates. Alongside cheaper credit, efforts should also be made for improving access to credit. Jan DhanYojana may have brought masses to the banks but one is doubtful whether it has become easier for them to get formal credit for household/personal purposes.

A major concern among the urban homebuyers is unfinished projects and massive delays by builders. Despite receiving almost complete payment from buyers, many builders have failed to deliver houses on time and complete their projects. The RERA Act intends to change this by bringing a real estate regulator and making builders more accountable towards the public. Passed as a model law by the centre, many states have diluted important norms of the act. The central government needs to ensure that all states introduce it in a robust manner.


Succesful implementation of the PMAY in both urban and rural areas can be extremely helpful in generating employment in the construction sector. Proper implementation of RERA is likely to bring a paradigmatic shift in the real estate sector and could help immensely in bridging the trust deficit between buyers and builders. Overall, the government has made a good beginning in fulfilling its objective of Housing for All, but one should at least wait for another fiscal year before making any major assessment.

(Nitin Mehta is managing partner, Ranniti Consulting and Research. Pranav Gupta is an independent researcher)

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