Modi’s ‘Housing For All’ In Cities Plan Needs Rs 1 Lakh Crore In Three Years: Crisil

Prime Minister Narendra Modi's “Housing For All By 2022” scheme needs Rs 1 lakh crore in the next three years to complete the construction of one crore urban homes, according to Crisil Research.

The government needs to contribute Rs 1.5 lakh crore in seven years through March 2022 to construct one crore homes under the Pradhan Mantri Awas Yojana - Urban, making the average cost of a house at Rs 1.5 lakh, according to a note by Crisil. Only 22 percent of this, or Rs 32,500 crore, has been disbursed so far, it said.

“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 one crore houses,” Prasad Koparkar, senior director at Crisil Research, wrote. “This is going to be a tall ask given the current fiscal arithmetic.”

The urban part of the prime minister's scheme includes slum redevelopment, affordable housing in partnership, beneficiary-led home construction or improvement and credit-linked subsidy. Economically weaker sections and low-income group beneficiaries can avail assistance of up to Rs 2.67 lakh a house, while benefits to middle-income families are restricted to credit-linked subsidy.

Although a total of 63 lakh houses were sanctioned but only 12 lakh were constructed as of Nov. 26 and around 23 lakh are under construction, according to the report. The flagship scheme, being implemented by the Ministry of Housing and Urban Affairs since its launch in June 2015, aims to build 30 lakh houses by the end of current fiscal. The ministry also plans to sanction 75 lakh new houses by the close of this fiscal.

Andhra Pradesh, Uttar Pradesh, Maharashtra, Madhya Pradesh and Tamil Nadu together accounted for a 55 percent share of the sanctioned houses, the report said.

Earlier this month, the Union Housing and Urban Affairs Minister Hardeep Singh Puri had said that PMAY will achieve its target two years before its 2022 deadline. “In every three months several housing projects are being sanctioned and execution of projects under PMAY is excellent,” the minister said, adding that Rs 60,000 crore under National Urban Housing Fund had been provided as part of extra budgetary resources for the scheme.

Over the past seven quarters, PMAY-U witnessed average project investments worth Rs 35,000 crore per quarter and average sanctions of six lakh units per quarter, Crisil said. “Going by the current sanctioning velocity, the targets seem achievable, provided execution also gains momentum.”

PM Modi's flagship scheme faces headwinds from unavailability of land in prime areas or within the city limits, lack of interest from private developers, bidding mechanism, among others, the rating agency said.

Crisil noted that for extra budgetary resources, the government has initiated fundraising through entities like the Housing and Urban Development Corporation. Since these are typically bonds with a 10-year maturity with interest and principal repayment managed through future budgetary announcements, the provisions in future budgets would be a key monitorable, the rating agency said.

“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 agency's Research Director Rahul Prithiani said

He pointed that the construction opportunity was worth four billion square feet over the life of the scheme. This would translate into nine to ten crore incremental jobs over the execution period, without factoring in some repetitive jobs continuing after the completion of a project.