Hours after taking office for a third consecutive term, Prime Minister Narendra Modi’s new Union Cabinet announced its first major policy decision to provide assistance for the construction of an additional three crore rural and urban houses under the Pradhan Mantri Awas Yojana (PMAY). This, say real estate experts, is aimed at ensuring continuity to the Housing for All scheme and will help revive the affordable housing segment.
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Prime minister Narendra Modi said on X, “This decision underscores the government’s commitment to addressing the housing needs of our nation and ensuring that every citizen leads a better quality of life. The expansion of PMAY also highlights our government’s commitment to inclusive growth and social welfare.”
HUDCO, NBCC shares surge
On June 11, shares of housing finance and infrastructure project companies such as HUDCO and NBCC went up by almost 9% on the BSE after the announcement.
Move augurs well for the affordable housing segment
The decision reiterates the NDA government’s strong priority towards housing. This is “in line with the announcements made by the honorable FM at the interim budget 2024/25. This will empower crores of homebuyers and is another step towards providing housing for all, with an overarching aim to facilitate better lifestyles for every citizen of India,” said Boman Irani, president, Credai.
“The decision by the newly elected cabinet to facilitate the construction of 3 crore homes across rural and urban areas under PMAY has set the tone for the next 5 years in terms of the Government’s priorities towards sustaining Housing and Infrastructural growth,” said Anshul Jain, Chief Executive, India & SE Asia & APAC Tenant Representation, Cushman & Wakefield.
This move augurs well for the affordable housing segment which could well be primed for a revival, especially after witnessing subdued demand in the past few quarters, he said.
“Apart from facilitating home ownership at the grassroot level, we also expect this to provide a boost to the local economies across Tier III, IV regions in particular, owing to the impending infrastructural development in the forthcoming months and years,” he added.
“The downward spiral of this erstwhile poster child of the Indian housing industry began during the pandemic, and then morphed into a broader malaise. An affordable housing revival hinges on such government incentives for buyers and developers,” said Anuj Puri, chairman, ANAROCK Group.
Vimal Nadar, senior director and head, research at Colliers India, said that the increased allocation of funds for a wider coverage under PMAY signals the government’s continued commitment to meet the housing needs of the poor. At the same time, it will steer construction activity in the public sector. At a time when residential activity is witnessing a steady traction across larger markets, the government’s push only adds to buoy the market sentiment.
“The decision to construct an additional 3 crore houses under the Pradhan Mantri Awas Yojana in the very first cabinet meeting shows the intent of the new government to continue with a welfare approach, indicating that measures to boost housing demand would be among the top priorities. This initiative will not only provide shelter to the poor and the middle class but also generate employment and stimulate the economy,” said G Hari Babu, national president of NAREDCO.
Chintan Patel, Partner and Head – Building, Construction and Real Estate, KPMG in India, said that “…affordable housing is the need of the hour especially with rising cost of construction and land across major cities. We hope that the first budget of this government provides further incentives for developers to aggressively develop more affordable housing projects.”
Decision to help revitalize real estate markets
Niranjan Hiranandani, chairman, NAREDCO National, said that affordable housing development is a crucial step towards revitalizing the property market.
“As the real estate sector is the second largest employer in the country, the extension of the PMAY scheme will have a ripple effect on employment and economic growth indices. The construction of urban-rural houses in the backdrop of last-mile connectivity being established under mega infrastructure projects will allow us to explore a multitude of new untapped real estate markets,” he said.
“…the scheme promises to make a substantial impact on the housing sector, encouraging more developers to reconsider the affordable housing projects and ultimately enhancing the overall housing supply in the country,” said Pradeep Aggarwal, founder and chairman, Signature Global (India) Ltd.
The PMAY scheme
The government of India has been implementing the PMAY since 2015-16 to provide assistance to eligible rural and urban households for the construction of houses with basic amenities.
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According to the live dashboard maintained by the Union ministry of housing and urban affairs (MoHUA), 11.86 million houses have been sanctioned so far in urban areas, and 8.35 million houses have been built. In rural areas, more than 25.5 million houses were built under the scheme, against the sanctioned target of 29.5 million.
The affordable housing sector, a flagship scheme of the government, had not fared well over the last term, according to an analysis by Anarock. Affordable housing are homes priced under ₹40 lakh and their sales in Q1 2024 recorded 26,545 units, which is just 20% of the total sales. Concurrently, supply in this critical segment had also dropped from 44% in Q1 2019 to 18% in Q1 2024.
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