PMAY-U pines for private sector push
According to Binaifer Jehani, Director, CRISIL Research, the policy framework for Pradhan Mantri Awas Yojana-Urban (PMAY-U) is in the right direction, but execution needs to be faster.
The ‘Housing for All by 2022’ initiative of the central government aims to provide affordable pucca houses with uninterrupted water facility, sanitation and electricity supply to the economically weaker sections (EWS). The Ministry of Housing and Urban Poverty Alleviation has estimated a shortage of nearly 20 million dwelling units for the urban poor. PMAY-U aims to address this by providing central assistance to the implementing agencies through states and union territories to all eligible families/beneficiaries by 2022.
With the Union Budget for 2017 providing infrastructure status to affordable housing, more developers have started shifting focus to the segment. Affordable housing in partnership has become the most preferred PMAY-U intervention by states, followed by Beneficiary-Led Construction which is the majorly adopted intervention in union territories.
Affordable housing in partnership is implemented along with private or public sector agencies. Central assistance of Rs 1.5 lakh per EWS house will be received by projects with at least 250 houses, where 35% houses are eligible to avail of the EWS category benefit. In addition, state governments and urban local bodies will contribute depending on criteria. On the other hand, under Beneficiary-Led Construction, EWS category households can use the Rs 1.5 lakh grant from the Government to construct or make improvements to own house.
PMAY-U is a lucrative opportunity for developers, with the government offering incentives like, additional FSI, free sale component, TDR, and land under a host of interventions.
- The Central Sanctioning and Monitoring Committee (CSMC) has sanctioned close to 1.9 million units for the EWS so far.
- Investment commitments of Rs 1 lakh crore have been frozen under PMAY-U.
- As of May 2017, Madhya Pradesh has sanctioned maximum investments for affordable housing projects, contributing 18% to the total investment sanctioned under PMAY-U in the state.
- The top five states in terms of sanctioned investment for affordable housing (Madhya Pradesh, Maharashtra, Andhra Pradesh, Gujarat and Tamil Nadu) command a 61% share of the overall investments under PMAY-U.
The Way Ahead
Two years into the PMAY-U’s launch, only 0.1 million units have been constructed. As most projects sanctioned are likely to take 2-3 years to complete, only 1.5 million units will be ready by 2019, compared with 20 million units required. Clearly the government needs to encourage private sector participation by an order of magnitude to achieve its lofty goal.
Developers have caught on to the potential of low-cost housing but availability of land for affordable housing remains a major challenge. Therefore, the role of state governments and urban local bodies becomes important to provide land, especially in city limits, under the Slum Redevelopment or Affordable Housing Project in partnership models. In fact, the government has recently asked its various departments to identify unutilized land, especially in developed government colonies, so as to build a land bank for affordable housing.