Centre may tweak criteria for middle-income groups for urban housing scheme

The middle-class housing scheme, announced in the interim budget earlier this year, is likely to be a part of the PMAY-U scheme, with the government likely to re-introduce an interest subsidy for its urban housing schemes, one of the two people mentioned above said.

"While the percentage of the interest subvention offered to the beneficiaries under the scheme is currently being worked on, the property carpet area available to beneficiaries, after the tweaks, will likely be higher than the property carpet area availed under the Credit Linked Subsidy Scheme (CLSS) for the urban poor under PMAY-U," the person said on condition of anonymity.

CLSS for the urban poor under PMAY-U was discontinued at the end of FY22.

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Defining PMAY-U

Currently, under PMAY-U, households with annual income of ₹6-18 lakh come under the ambit of middle-income group, while those in the ₹6-12 lakh income slab are under the middle-income group-I (MIG-I) and those with income in the range of ₹12-18 lakh fall under MIG-II.

Households with an annual income of ₹6-12 lakh per year can currently buy or build a property with a carpet area of up to 90 sq. m under the scheme, while households with an annual income of ₹12-18 lakh per year can build or buy a property with a carpet area of up to 110 sq. m.

The maximum loan amount and maximum interest subsidy amount for the first category currently stand at ₹9 lakh and ₹2.35 lakh, respectively, while it is ₹12 lakh and ₹2.30 lakh, respectively for the second category.

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"The government is looking at changes in the middle-income group criteria for the urban housing scheme. The new incentives for the middle class and urban poor, in the form of interest subvention announced in the interim budget, would largely be worked upon under the ongoing scheme," said the second person mentioned above, requesting anonymity.

"The tweaking is likely to improve the efficiencies of the scheme by better targeting the beneficiaries," the person added.

In the interim budget in February, finance minister Nirmala Sitharaman had announced the Centre's plans to help deserving sections of the middle class living in rented houses, slums, chawls and unauthorized colonies to buy or build their own houses.

Identifying beneficiaries

This tweaking of the criteria for beneficiaries of the PMAY-U scheme, which would include beneficiaries of the middle-class housing scheme announced in the interim budget, will help the Centre more effectively identify the beneficiaries of these schemes.

Last month, the Centre indicated the PMAY-U scheme, scheduled to end in December 2024, would continue as 30 million new homes (10 million in urban areas and 20 million in rural areas) were approved in the first Cabinet meeting of the new government.

Implemented in June 2015, PMAY-U is one of the major flagship programmes under the housing ministry to provide all-weather pucca houses to eligible beneficiaries in urban areas.

As things stand, under the first leg of PMAY-U, which covered about 1.18 crore houses, 1.14 crore houses have been grounded for construction, and 83.67 lakh houses have been completed.

There are suggestions to have a single income group for the middle-class beneficiaries of the urban housing scheme, the first person mentioned above added.

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Spokespersons of the housing and finance ministries did not respond to emailed queries.

“As we look forward to the Union budget 2024-25, there is strong anticipation of significant advancements in urban development and infrastructure sector - in the interim budget we have already seen approximately 11% increase in capital allocation for infrastructure," said Adil Zaidi, EY Partner & Leader - Economic Development Advisory.

"The Urban Infrastructure Development Fund (UIDF) under the National Housing Bank is likely to receive a substantial boost, enhancing urban infrastructure in Tier 2 and Tier 3 cities. Additionally, expanding affordable housing initiatives, such as the Pradhan Mantri Awas Yojana, will play a pivotal role. These measures, combined with policies to stimulate urban consumption, are essential for sustaining economic momentum and supporting sustainable urban growth," Zaidi added.