Pradhan Mantri Awas Yojana (Urban): the credit linked subsidy scheme

The “Pradhan Mantri Awas Yojana – Housing for All (Urban)”, launched by the central government aims to provide housing to all urban people by 2022. It is the urban component of the ‘Housing for All by 2022’ initiative. A remarkable feature of the PMAY is that it is a credit linked subsidy scheme. Here, interest subsidy is given to the beneficiaries when they take the housing loan.

The scheme provides central assistance to States and UTs for constructing houses to all eligible sections by concentrating on urban slums and economically weaker sections. Hence, slum rehabilitation and affordable housing to Economically Weaker Sections are the major features of the project.

The scheme gives credit linked subsidy in the form of interest subsidy to three type of income groups in the urban areas:

  1. Economically Weaker Sections (Per capita Income less than Rs 3 lakh; subsidy 6.5%)
  2. Low Income Group (PCI from Rs 300001 to Rs 6 lakh; subsidy 6.5%)
  3. Middle Income Group I (Rs 600001 lakh to Rs 12 lakh; subsidy 4%)
  4. Middle Income Group II (Above Rs 12 lakh to up to Rs 18 lakh; subsidy 3%)

Credit linked subsidies will be provided to these people based on the eligibility. Higher interest subsidy will be given to the low per capita income categories. The programme has following components/options to States/Union Territories and cities: –

  1. a) Slum rehabilitation of Slum Dwellers with participation of private developers using land as a resource;
  2. b) Promotion of Affordable Housing for weaker section through credit linked subsidy;
  3. c) Affordable housing in partnership with Public & Private sectors and
  4. d) Subsidy for beneficiary-led individual house construction or enhancement.

All statutory towns as per Census 2011 and towns notified subsequently would be eligible for coverage under the Mission.

As per the criterion of the project, a house constructed for EWS will be an all-weather single unit or a unit in a multi-storeyed super structure having carpet area of upto 30 sq. m. with adequate basic civic services and infrastructure services like toilet, water, electricity etc. States can determine the area of EWS as per their local needs.

Credit linked subsidy component of the scheme

Under the Credit Linked Interest Subsidy component, interest subsidy of 6.5 percent on housing loans availed upto a tenure of 20 years will be provided to EWS/LIG categories. Central assistance at the rate of Rs.1.5 lakh per house for EWS category will be provided. State Government or their affiliates like Housing Boards can take up project of affordable housing to avail the Central Government grant.

Similarly, credit linked subsidy also will be given to Middle Income Group (MIG). Middle-income group beneficiaries with annual income of above Rs.6 lakh and up to Rs.12 lakh get an interest subsidy of 4 per cent on a 20-year loan component of Rs. 9 lakh. The MIG with annual income exceeding Rs. 12 lakh and up to Rs. 18 lakh would get interest subsidy of 3 per cent.

The scheme covers the entire urban area consisting of 4041 statutory towns with initial focus on 500 Class I cities and it will be implemented in three phases as follows, viz. Phase-I (April 2015 – March 2017) to cover 100 Cities to be selected from States/UTs; Phase – II (April 2017 – March 2019) to cover additional 200 Cities and Phase-III (April 2019 – March 2022) to cover all other remaining Cities.

As on October 2017, around 28.57 lakh affordable houses were sanctioned by the Ministry of Housing and Urban Poverty under PMAY-Urban. Total investment is around Rs 1.54 lakh crore.

Financing of the scheme

The project has been implemented as a Centrally Sponsored Scheme. But the credit linked subsidy component will be implemented as a Central Sector Scheme. The Mission also prescribes certain mandatory reforms to make adequate urban land available for affordable housing. Houses constructed under the mission would be allotted in the name of the female head of the households or in the joint name of the male head of the household and his wife.

State governments have considerable participation in the programme as it would have the flexibility in deploying the slum rehabilitation grant to any slum rehabilitation project, using land as a resource