What is it? Launched in June 2015, PMAY is an attempt to make ‘Housing For All’ a reality by 2022. The scheme originally covers the economically weaker section (EWS = annual income not exceeding ₹3 lakh) and low-income group section (LIG = annual income not exceeding ₹6 lakh) but now covers the mid-income group (MIG) too.
The PMAY scheme intends to build homes for slum dwellers in conjunction with private developers. It also plans to give credit-linked subsidy to weaker sections on loans taken for new construction or renovating existing homes.
For those in the EWS and LIG category, for a loan of up to ₹6 lakh, the interest subsidy is 6.5% for a tenure of 15 years. Recently, the government increased the loan to ₹12 lakh for the mid-income category. The interest subsidy on loans upto ₹12 lakh will be 3%. In rural areas, there is an interest subsidy of 3% on loans up to ₹2 lakh for constructing new homes or extension of old homes.
The government offers financial assistance to the tune of ₹1.5 lakh for affordable housing projects. This is done in partnership with states/union territories for the EWS.
Why is it important?
Developers in India’s metropolitan cities have lakhs of unsold residences costing upwards of ₹50 lakh. Furthermore, the country has an estimated shortage of nearly 20 million housing units for the rural and urban poor at far lower price points of ₹5 to 15 lakh. Consequently, PMAY intends to address this shortfall.
The PMAY will hopefully boost India’s realty sector to reduce its obsession with affluent home buyers in the cities.
How does it affect me?
For those in the lower and mid-income groups, PMAY reduces the cost of acquiring a home by ₹1 lakh to ₹2.3 lakh. The increase in loan amount to ₹12 lakh to the mid-income group may make more homes within the reach of the urban poor.
This scheme combined with falling interest rates means improved home loan growth for banks and NBC focused on this segment. A pickup in demand for affordable housing will not only provide an impetus to the performance of banks and housing finance companies but also support the growth of allied businesses such as cement and steel. In turn, this will increase employment opportunities and drive economic growth further. GSS Projects develops affordable housing layouts around Mysore.