Success of Pradhan Mantri Awas Yojna - Credit linked subsidy scheme for EWS/LIG & MIG

Shakti Ranjan
CS & CMA

The world largest democracy is going to celebrate its biggest festival and that is election. With the announcement of General Election 2019, model code of conduct has been put in place. This means that not only new policy can not be announced, but also there can't be any modification to existing scheme. Agenda for 2019 election has been in complete contrast to 2014, when Shri Narendra Modi was seeking mandate to enter into national politics with corruption and policy paralysis as two of the most potent poll agenda items. Currently, he has served India for full five years and seeking mandate across country based on his performance and delivered promises. 

Social Justice and Equitable Distribution are two such core issues which have been in poll agenda since India's Independence. Whether it is Pandit Nehru, or Indira Gandhi, or Rajiv Gandhi, or Manmohan Singh, they all have "Roti, Kapda, aur Makan" incorporated into their election manifesto in one way or other. Mr. Modi was no exception and had included this in his agenda for five years. it is time now to analyze his performance on this core issue, when he is on the verge of rolling out 2019-24 agenda in few days.

Thanks to his vision, mission, and schemes, "Roti and Kapda" is not any more a big poll agenda. Hunger death has not been reported in this country for last few years which indicates availability of food to all. Targeted subsidy schemes through Jan-Dhan Yojna has provided enough cash into hands of poor that they are not denied of their basic rights of food. Same stands for clothing. Now, the poorest strata of India buys new cloths which have been made affordable through various scheme. Promotion of Khadi is also one the reason why clothing is available to every Indian. Therefore, focus is on "Makaan" i.e. housing. PM has promised to deliver housing for all by end of 2022. This is the reason why PM has been focusing on this issue even in his election campaign which has just begun.

Scheme Details

Hounarable Prime Minister, Shri Narendra Modi, with mission of "Housing for All " has launched a credit linked subsidy scheme (CLSS) under Pradhan Mantri Awas Yojna (PMAY) for the Economically weaker section (EWS), Low income Group (LIG), and Medium Income Group (MIG) people seeking home loans from banks and Housing finance companies. 

Beneficiaries of EWS and LIG category seeking housing loan under this scheme would be eligible for an interest subsidy @6.5% for a loan tenure equal to or less than 20 years which ever is lower . This subsidy will be available for housing loan up to 6 lakhs. Any additional loan beyond 6 lakhs will be at non- subsidized rate. Important part is that the loans will not only be available for new construction, but also for addition of rooms , kitchen, toilets, or any other part.

Scheme for MIG category covers two different segments. MIG-1 covers for people having income between.₹6 lakhs and 12 lakhs per annum. MIG-2 caters to people with income of more than ₹12lakh, but not exceeding 18 lakhs per annum. In the MIG-1 ,an interest subsidy of 4% for loan upto 9 lakh while in MIG-2, interest subsidy of 3 % has been provided for loan upto 12 lakh . The NPV of intrest subsidy is calculated at a discount rate of 9% over a maximum loan tenure of 20yrs or actual tenure , whichever is lesser.

Benefits

The benefits of the ongoing scheme is enormous and many. First, it has contributed to increase in GDP via construction activities across the country. Construction is such an economic activity which has linkage to more than 100 industries. For example, boost in construction increases growth in industries related to bricks, cement, steel, iron, sanitary fittings, electricity, plastics, chemicals, paints, etc. Second, this scheme is also working for poverty eradication. It provides large scale employment to different sections of society. However, highest employment is generated for unskilled and semi-skilled laborers, which generally comes from poorest background.Third, it has increased purchasing power in beneficiaries. This subsidy is credited upfront to loan account of the beneficiary which result in reduced home loan and EMI. Remaining money is either saved or spent on other necessary expenditure such as education and health. Therefore, it is also contributing to overall well being of deprived strata of Indian society. Fourth, it is contributing to women empowerment as preferences are given to women in this scheme. Through this, women interest in the society are better served and they have social and income security in their adverse time. Fifth, it is also helping in organized urban development and reducing the slum areas which have health and sanitation issues all around due to poor hygiene. 

Achievements

As of now, 1.53 crores of houses are already completed under this schemes. Over 93,000 people from Medium Income Group (MIG) have availed Rs 1,960 crore interest subsidy from the Centre, which has been disbursed through banks. Overall, around 3.39 lakh beneficiaries have availed the CLSS under the PMAY (Urban) and the total subsidy released is Rs 7543 crore. 

The government had also announced a dedicated affordable housing fund, which is expected to benefit banks and housing finance companies to raise financing so that these institution can increase their exposure to the affordable housing loan segment. This way these institution can support the PMAY program implementation and ensure "Housing For All" by 2022.

Conclusion

Overall, the scheme has transformed housing scheme for poor and middle class in such a short time. There were days before Mr. Modi became PM when corruption in the housing schemes ensured that the houses are not delivered to deserving population. This way, a vote bank continued to exist on the name of providing affordable housing. PM Modi ensured that the houses are delivered to beneficiaries in a transparent way so that more than a crore family got houses. If we see the track record of implementation of other schemes announced by PM Modi such as Rural Electrification, Jan-Dhan Yojna, Swach Bharat Abhiyan, Toilet in Every School, etc. Indian voters should rest assure that this project will also see a timely completion. We hope that this issue will also be not discussed in 2014 as all people have access to affordable housing.