By Arushi Sharma
The Union Cabinet on February 20 approved the establishment of a Rs 60,000 crore National Urban Housing Fund (NUHF) to finance the Housing for All programme or the flagship Pradhan Mantri Awas Yojna (PMAY). The urban component of the initiative aims to build two crore affordable houses in urban areas by 31 March 2022. For the fiscal year 2018-19, the government has set a target of constructing 1.2 crore urban housing units.
Sources of funding
The Fund will be raised from non-budgetary sources with the Housing and Urban Affairs Ministry borrowing from government entities like Housing and Urban Development Corporation (HUDCO). It will also tap the National Small Savings Fund that contains deposits of about Rs 1.2 lakh crore at present. The NUHF will be situated in the autonomous Building Materials and Technology Promotion Council, according to Union Minister Hardeep Puri. Additionally, a committee under the chairmanship of the Mission Director of Pradhan Mantri Awas Yojnas urban leg will be constituted to operationalise and monitor the Fund.
Finance Minister Arun Jaitley mentioned the adoption of such a financing model for the Pradhan Mantri Awas Yojna while promising to build at least 37 lakh houses in urban areas in 2018-19. The current budgetary allocation of Rs 6,505 crore was considered inadequate to realise the commitments of the urban housing scheme. Hence, the NUHF will overcome the finance crunch problem as well as give a push to the pace of implementation by provisioning for funds to the tune of Rs 60,000 crore over a period of four years. The Fund is also expected to be advantageous for companies in the banking and housing finance sector as it will increase their exposure to the affordable housing loan segment.
Benefits under the different components of the scheme
Implementation of the Pradhan Mantri Awas Yojna requires a sustained flow of funds for the different verticals such as Beneficiary Linked Construction (BLC), In-Situ Slum Redevelopment (ISSR), Affordable Housing in Partnership (AHP), and Credit Linked Subsidy Scheme (CLSS). The urban arm of the scheme intends to address the gap in urban-housing by reaching all urban poor by 2022, the year that will mark the 75th anniversary of the Indian Independence. The creation of NUHF will thus, contribute towards scaling up this urban development scheme.
The eligible beneficiaries include individuals under 70 years of age, who do not own any housing unit in the name of any family member in any part of the country. Economically weaker sections with an annual income of less than Rs 3 lakh as well as the lower income groups, whose annual income ranges between Rs 3 lakh and Rs 6 lakh also qualify for houses under the scheme. Each beneficiary receives Rs 1.5 lakh to support the construction of an affordable housing unit and a financial assistance worth Rs 1 lakh in the case of in-situ development that seeks to replace slum dwellings. A sub-component of the scheme also targets the middle-income group by providing Rs 2.5-2.7 lakh as interest subsidy.
Progress so far and the way forward
According to a press release by the government, about five lakh units out of the targeted 1.2 crore houses have been completed, whereas 17 lakh houses have been launched. The Housing Ministry further approves Central assistance to an average of 2-3 lakh houses every month on the basis of proposals received from different states and Union territories. Recent releases from the ministry have also informed that more than 87,000 applications for interest subsidies on housing loans have been approved while 40,000 applications are currently being processed.
Although a notable pick-up in the execution of Pradhan Mantri Awas Yojna is likely with the setting up of a dedicated fund for urban housing, the numbers still remain very far from the proposed targets. As per the credit rating agency ICRA, funding will continue to be a key challenge to achieving the objectives of Housing for All by 2022. The success of the scheme depends upon the ability to raise financial resources, considering that it mostly entails revenue expenditure rather than the creation of capital assets. Therefore, it remains to be seen what avenues the government will tap to meet the goal of physical completion.
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