PM Modi's PMAY Expansion To Spur Home Loan Growth, Affordable Housing
The expansion of the Pradhan Mantri Awas Yojana marks a major step towards fulfilling the housing needs of India's growing population, experts say
Immediately after securing his third term as Prime Minister, Narendra Modi, at his first Cabinet meeting, approved government assistance for the construction of three crore rural and urban houses under the Pradhan Mantri Awas Yojana (PMAY). This expansion aims to address the housing needs of a growing number of eligible families across the country.
The Cabinet's approval targets two crore houses under PMAY-Gramin and one crore under PMAY-Urban. This decision reflects the government's commitment to enhancing living standards and providing quality housing. In a statement on X, Prime Minister Modi highlighted the importance of this initiative, emphasizing its role in promoting dignified living and social justice (Sabka Vikas aur Samaj Kalyan).
Data Insights And Trends
Multiple reports indicate that affordable home sales in the first quarter of 2024 were under 20 per cent, nearly half of what they were in 2019. On the other hand, higher-priced home sales across the top seven Indian cities made up more than 20 per cent of sales, compared to high single digits in 2019. Developers likely focused on segments with higher demand, shifting their proposition accordingly.
"The recent announcement by our PM is likely to encourage developers to tilt toward affordable housing projects and, given the possibly higher unit volume, boost overall housing supply," said Akriti Singh, Chief Alliances Officer IMGC (India Mortgage Guarantee Corporation).
Data indicates a declining trend in affordable home sales, with homes priced under Rs 40 lakh accounting for only 20 per cent of total home sales in the first quarter of this year, down from 38 per cent in 2019. The expansion of PMAY is expected to reverse this trend by incentivizing homebuyers through subsidy schemes and promoting affordable housing.
"The affordable housing segment has underperformed compared to mid and luxury segments post-pandemic," said Ameet Venkeshwar, CBO of LoanTap. "Small-ticket housing loans are home loans of relatively small amounts, typically aimed at low-income borrowers. These loans enable low-income families to move into better housing conditions, which can have positive effects on their overall well-being and health. By providing these loans, financial institutions can include a segment of the population that is often excluded from traditional banking services."
Mortgage Guarantees: A Safety Net
Mortgage guarantees are gaining traction in India, providing a safety net for lenders. The Indian Mortgage Guarantee Corporation (IMGC) offers higher loan-to-value ratios for low-income groups and extends housing loan guarantees to informal salaried and self-employed borrowers without formal income proof. This increases lenders' confidence and enables them to cover a broader range of home loan borrowers in urban and semi-urban markets.
The revival of affordable housing is expected to be driven by PMAY and other government incentives. Currently, approximately 10-12 per cent of housing loans are under the PMAY scheme, with this number expected to rise significantly. The forthcoming budget in July may also bring positive announcements for the housing sector, further boosting demand for home loans.
Dr. Brajesh, Associate Professor at JNU, emphasised that mortgage guarantees enhance housing accessibility and affordability by enabling lenders to accept reduced down payments. Akriti Singh from IMGC highlighted the role of PMAY in driving growth in housing finance and contributing to economic growth through job creation.
Ameet Venkeshwar, CBO of LoanTap, noted that PMAY has significantly benefitted low- and middle-income groups, boosting the affordable housing market and the real estate sector. He expects this expansion to positively impact tier 3 and tier 4 cities, leading to a surge in home loan applications and stimulating related industries such as steel, cement, and white goods.
The expansion of the Pradhan Mantri Awas Yojana marks a major step towards fulfilling the housing needs of India's growing population. By promoting affordable housing and providing financial assistance, the government aims to enhance the quality of life for millions and stimulate economic growth. As the demand for home loans rises, this initiative is set to transform the housing landscape in India, making homeownership more accessible and affordable for all, added the experts.
