Union budget may approve ₹4.5 trillion for rural housing scheme over next 5 years

The allocation will be for 20 million rural houses under PMAY Gramin, as reported by Mint earlier, and for 3.5 million of the 29.5 million houses under the previous phase of the Centre’s flagship scheme, an official said. The proposed construction of 20 million additional houses over the next five years will be over and above the 10 June Cabinet decision to build 30 million homes for the urban and rural poor.

“The aim is to complete 4 million houses by the end of FY24, 8 million by FY26 and the remaining 8 million by FY29, and funds will be given accordingly," the official said.

If the plan to build the additional 20 million houses in rural areas is approved by the Union Cabinet, it may cost a total of ₹4.3-4.5 trillion, including the Central exchequer’s share of ₹2.8 trillion-2.9 trillion, and ₹1.5 trillion-1.6 trillion by the state governments, the official added. 

“The cost includes completion of building 3.5 million remaining houses at various stages of construction from the previous phase. These are rough estimates based on initial calculations and may fluctuate depending on material cost and inflation," the official said.

Aiming at ‘housing for all’ in rural areas, PMAY-G was rolled out on 1 April 2016 to help the rural poor build 29.5 million houses with basic amenities like toilets and access to cooking gas, electricity and piped water by integrating with other government schemes. About 26 million houses have been constructed since its inception.

Financial aid

The ratio of the cost-sharing between the central and state governments was 60:40 for houses in the plains and 90:10 for houses in the northeastern and hilly states when the scheme started. Each household in the plains would get ₹120,000 as financial assistance, while in the hilly regions, the amount was set at ₹130,000. The aid is likely to be revised upwards to ₹180,000 and ₹200,000, respectively, in view of an increase in material and labour costs, the official said.

“The spending has been as much as nearly ₹7 trillion to aid constructing 26 million pucca houses with basic amenities and implementing the scheme since its launch in 2016," the official said when asked about total expenditure for PMAY-G in the past eight years.

Queries sent to secretaries and spokespeople of the rural development ministry, expenditure department and cabinet secretariat remained unanswered at press time.

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Providing more funds for housing indicates the government’s intent to bolster rural infrastructure, including improvement of village roads and the implementation of job programmes aimed at helping millions of youths trapped in the agriculture sector amid scarce opportunities in manufacturing.

PMAY-G has resulted in both direct and indirect employment and facilitated job creation in the construction sector. It is estimated that the rural housing scheme has so far created around 5 billion person-days of unskilled labour.

Economists and industry stakeholders have urged the Union government to ramp up allocations for rural schemes and boost housing programmes to stimulate consumer demand, since private consumption has grown at a significantly lower rate than the nearly 8% annual economic growth.

Consumption growth has remained weak since the pandemic. Private consumption is recovering, with growth tracking at 4% in the March quarter, as against 1.5% a year ago, but it is just catching up with the pre-pandemic trend and remains below the pre-pandemic average of 6.3% in 2019.

Rural India's monthly per capita household consumption, adjusted for inflation, rose over 40% from FY12 to FY23, statistics ministry data showed, though it remains lower than urban consumption. Without adjusting for inflation, the figures stood at ₹6,459 for urban households and ₹3,773 for rural households in FY23, compared with ₹2,630 and ₹1,430, respectively, in FY12.