Radhika Merwin The Centre’s interest subsidy scheme for home loans has seen a healthy response from the low- as well as mid-income groups. But budgetary allocation for this scheme in FY19 could be inadequate, when the disbursals of the National Housing Bank (NHB) — the agency that channels the chunk of this subsidy to lending institutions — is considered.

The Centre allocated a mere ₹500 crore more for this scheme in Budget 2018-19 compared to 2017-18. This allocation may need a review soon, since the NHB alone has disbursed ₹3,458 crore of the subsidy so far to 1,59,879 households under the credit linked subsidy scheme (CLSS) of the Pradhan Mantri Awas Yojana (Urban) or PMAY(U).

The Centre’s allocation to this scheme over the past four years — ₹1,900 crore of budgetary allocation for FY19 added to the ₹2,075 crore that has been utilised for interest subsidy between FY16 and FY18 — appears insufficient when viewed against NHB’s total disbursements up to May 2018.

The Centre, in its 2017-18 Budget, had initially allocated ₹400 crore for the economically weaker section (EWS) and low income group (LIG), and ₹1,000 crore for the middle income group (MIG). The revised estimates of the interest subsidy for the two categories were pegged at ₹800 crore and ₹600 crore, respectively. For FY19, the Centre has set aside ₹1,000 crore for EWS and LIG and ₹900 crore for MIG.

While the budgetary allocation for FY19 is disappointing, housing finance companies remain positive that the Centre will dole out additional funds if need be for CLSS. However, there still seems to be a lack of clarity on the proposed dedicated Affordable Housing Fund (AHF) that was to be funded from the priority sector lending shortfall and fully serviced bonds authorised by the Government of India.

Supply side issues

While the CLSS addresses demand side issues, supply constraints remain. India’s urban housing shortage is pegged at about 1 crore. At the rate at which houses under PMAY(U) are being sanctioned and constructed, meeting the housing shortage by 2022 appears a tall task.

In response to a Lok Sabha question on March 13, Union Minister Hardeep Singh Puri had stated that the Ministry of Housing and Urban Affairs (MoHUA) has sanctioned the construction of 40,62,364 houses by States and Union Territories, but thus far just 3,39,866 had been constructed.

Wide disparity in the progress across States is also a cause for concern. While many of the western and southern States — Gujarat, Madhya Pradesh, Tamil Nadu and Karnataka — are progressing faster, the response from the eastern and north-eastern States has been modest.

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