UPSC Express

Pradhan Mantri Awas Yojana (Urban) or PMAY (U) was launched in June 2015 with the target of constructing 2 crore affordable houses by 2022. As well as providing housing to large number of people, it could have potentially significant economic gains, especially in terms of jobs and investment, as well as giving fillip to core construction sectors such as steel and cement.

However, progress on the scheme has been slow. More than 2 years after the launch, about 22 lakh housing units have been approved under PMAY (U), and just 1.4 lakh houses have been completed.

The reasons for slow progress include:

• Disparities in implementation by states: For example, while only 2% of the grounded houses were completed in Himachal Pradesh as on July 2017, the comparable figures for Madhya Pradesh, Maharashtra and Karnataka are 5%, 25% and 25%, respectively.
• Low credit flow: The major slowdown in credit flow to the housing sector has thwarted construction activities of many builders.

Measures to hasten the implementation of the scheme:

1. Overhaul funding mechanisms:

• The Union Budget 2017-18 has awarded infrastructure status to affordable housing and implemented the real estate Bill (RERA), which should ensure easier access to institutional credit to the builders along with greater transparency.

• Long-term bonds could be issued by infrastructure and housing finance companies.

1. Ensuring completion of stalled projects:

• A suitable process must be put in place through which the government can take over stalled projects and ensure their completion.
• Alternatively, the government can ensure access to time-bound and outcome-bound credit, raised through sovereign infra bonds, to developers to help them finish projects.

1. Encourage foreign investment:

• The government has to take a proactive approach to encouraging foreign participation and investment into the affordable housing sector, which will bring both capital and superior technology for fast and efficient completion.

1. Find a way out of high land acquisition costs:

• To minimise land acquisition costs, government could increase floor space index (FSI) and enable vertical construction.
• The government must also consider better utilisation of its existing land banks and that of other public sector enterprises.

Success in implementation of PMAY (U) needs to be ensured through progress in the measures listed above. It is has huge economic benefits with a potential addition of about 2% to the GDP growth rate and create employment across the value chain.