Numbers, like photographs, often convey profound messages. By 2036, nearly 40% of India’s population—almost 600 million people—will reside in urban areas. United Nations estimates indicate that India’s urbanization rate will exceed 45% by 2050, underscoring the rapid pace of this transformation.
As urban areas expand, demand for housing intensifies. The recent government initiative to support the construction of 30 million new homes under the Pradhan Mantri Awas Yojana (PMAY) is a commendable step. However, to genuinely enhance the living standards of more Indians, it is imperative to update certain definitions and metrics.
Update EWS and LIG definitions: The income thresholds for Economically Weaker Sections (EWS) and Low-Income Groups (LIG) were established in 2015 and have since remained static, despite inflation and economic shifts. This stagnation limits the accessibility of housing benefits for these segments.
Our analysis suggests that the income ceiling for EWS should be raised from ₹3 lakh to ₹4.8 lakh per annum, and for LIG from ₹6 lakh to ₹9.2 lakh per annum, aligning with Consumer Price Index (CPI) adjustments. These revisions are crucial to ensure the relevance and accessibility of housing schemes.
Expand affordable home dimensions: Current size limits for EWS and LIG homes are inadequate for dignified living. The carpet area for EWS homes should be increased from 30-sq-m (323-sq-ft) to 60-sq-m (646-sq-ft), and for LIG homes from 60-sq-m (646-sq-ft) to 90-sq-m (969-sq-ft).
This expansion will enhance living conditions and support healthier and more comfortable lifestyles, as advocated by the Swachh Bharat Mission. Additionally, increasing the size of EWS homes to 646-sq-ft for 10 million homes could potential boost GDP by an estimated ₹5 trillion or more.
Enhance BLC scheme implementation: The Beneficiary Led Construction (BLC) scheme grants funds directly to affordable housing buyers, primarily for self-constructed homes. However, the scheme faces two major challenges: limited public awareness and occasional misuse of funds.
To address these issues, it is essential to raise awareness and channel the scheme through Housing Finance Companies (HFCs). With their established controls and audit mechanisms, HFCs can ensure transparency, monitor subsidy transfers and offer technical support to beneficiaries.
Reintroduce the AHF scheme: The government-administered Affordable Housing Fund (AHF) scheme, previously managed by the National Housing Bank (NHB), should be reinstated for new-to-mortgage homes, particularly for the EWS and LIG sectors.
The scheme should be economically sustainable, though, with a minimum interest-rate spread of 5.5%, given the high operational costs associated with low-ticket home loans (under ₹15 lakh). Stable HFCs have an expenditure cost of around 4%, making that margin essential.
Continue PMAY-CLSS with a 5-year lock-in: The Pradhan Mantri Awas Yojana-Credit Linked Subsidy Scheme (PMAY-CLSS) should be continued for the EWS and LIG sectors. This well-administered scheme has proven effective and should persist.
Additionally, implementing a five-year lock-in period for new mortgage customers would enhance scheme viability and prevent misuse. This lock-in period before allowing property sales or loan transfers would deter fraudulent activities and safeguard the scheme’s integrity.
Integrate the PMAY(U) with climate-friendly initiatives: Promoting environmental sustainability is crucial. India should integrate the PMAY scheme with the PM Surya Ghar Yojna. We should promote not just renewable energy usage, but also rainwater harvesting and decentralized waste treatment.
India’s coal-dependent power generation contributes significantly to carbon emissions, with substantial fly ash byproducts. Developing a fly ash brick ecosystem could revolutionize sustainable and eco-friendly housing construction in India, driving green GDP growth. Providing tax benefits for renewable energy usage in housing construction would further help control emissions.
In conclusion, the national agenda of constructing 30 million additional homes can rejuvenate India’s affordable housing sector and drive substantial transformation. Allocating at least 35% of homes in group housing projects for the EWS segment, supported by a transparent contractor rating model, will foster a more inclusive and sustainable future, benefiting society at large.
The author is managing director and CEO, Grihum Housing Finance.