The Pradhan Mantri Awas Yojana - Urban (PMAY-U), being implemented by the Ministry of Housing and Urban Affairs under the mission ‘Housing for All by 2022’ since June 2015, needs a concerted push to succeed.

As of November 26, 2018, although 63 lakh houses had been sanctioned, only 12 lakh have been constructed, while 23 lakh are under construction. Andhra Pradesh, Uttar Pradesh, Maharashtra, Madhya Pradesh and Tamil Nadu together accounted for 55% share of the sanctions.

The ministry aims to sanction 75 lakh houses and construct 30 lakh of them by the close of this fiscal.

The central government needs to contribute a whopping Rs 1.5 lakh crore in seven fiscals through 2022, at an average Rs 1.5 lakh per house. However, only 22% of this, or Rs 32,500 crore, has been disbursed so far.

Of the total central assistance, Rs 19,000 crore has been factored in the budgetary allocation till fiscal 2019. The balance would be met through future budget allocations and internal and extra budgetary resources, of which Rs 25,000 crore has been provided for fiscal 2019.

Says Prasad Koparkar, Senior Director, CRISIL Research, “Our calculations show the government will have to garner around Rs 1 lakh crore over the next three years if it has to achieve the target of building 1 crore houses. This is going to be a tall ask given the current fiscal arithmetic.”

For extra budgetary resources, the ministry has already initiated fund-raising (in the form of bonds) through entities such as the Housing and Urban Development Corporation Ltd. As these are typically bonds with 10 years of maturity, with interest and principal repayment to be managed through future budgetary announcements, the provisions in future budgets would be a key monitorable.

The scheme also faces headwinds such as unavailability of land in prime areas, low participation of private developers on account of brand dilution, bidding mechanism, stringent cost and time schedules resulting in low yields, increasing construction cost due to absence of bulk sourcing of materials, and lack of new technology that impacts productivity, cost efficiency and quality. These need to be addressed.

That said, PMAY-U does offer a huge opportunity for several sectors by setting off a virtuous cycle.

Says Rahul Prithiani, Director, CRISIL Research, “One crore houses would mean an opportunity for over Rs 2 lakh crore of home loans, and incremental consumption of 80-100 million tonne of cement and 10-15 million tonne of steel. The construction opportunity is of ~4 billion square feet over the life of PMAY-U. And all that would translate into 9-10 crore incremental jobs over the execution period (not factoring in some repetitive jobs continuing after the completion of a project).”

The PMAY-U mission has four verticals – In-situ Slum Redevelopment (ISSR), Affordable Housing in Partnership (AHP), Beneficiary-led Individual house construction or Enhancement (BLC), and Credit-Linked Subsidy Scheme (CLSS). Under the scheme, Economically Weaker Sections and Low Income Group beneficiaries can avail central assistance of up to Rs 2.67 lakh per house as provisioned under the different components of the scheme, while benefits to Middle Income Group are restricted to CLSS only.