The scheme promises housing for all by 2022. But in big cities such as Mumbai, affordable housing remains a distant dream.

PK Das, an urban planner in Mumbai, does not believe the prime minister’s scheme will succeed in creating substantial affordable housing in urban areas. He claimed that building affordable housing under the public-private partnership model ultimately amounts to giving “freebies” to builders. “The builders buy private land at low rates in faraway places like Panvel and get cash subsidies and other concessions to build affordable homes,” he explained. “And they still get to sell 50% of the homes at market rates. Anyway, people will not buy homes so far away if they work in the city. So, it is speculative investment on the part of the government.”


At his rallies in the past few months, Prime Minister Narendra Modi has repeatedly claimed that more than a crore houses have already been built and handed over to beneficiaries in villages while 54 lakh houses have been approved for construction in cities. Data available with the Ministry of Housing and Urban Affairs shows that till August, 53.7 lakh houses were sanctioned under the scheme’s urban component, of which 8.3 lakh have been built. The government has given over Rs 78,000 crore for states to build urban homes. 

However, in a dense metropolis such as Mumbai, where real estate is notoriously expensive, affordable housing projects under the scheme seem to be restricted to suburbs and satellite towns far from the city. Can Pradhan Mantri Awas Yojana then really serve as a solution to the affordable housing crisis in Indian cities?

While real estate developers are largely optimistic, some fear the workforce of metropolitan cities will be pushed to the outskirts, away from their workplaces.

The four components

The scheme’s predecessor – Indira Awas Yojana, launched by the Congress in the 1980s – gave the rural poor a cash incentive of Rs 70,000 to build a home. The new scheme offers monetary subsidies of Rs 1.2 lakh to Rs 1.3 lakh for constructing rural houses and Rs 1.3 lakh to Rs 2.6 lakh for urban houses. It is intended for low-income and middle-income people who have never owned a home.

The urban component of Pradhan Mantri Awas Yojana has four verticals. The first is in situ slum rehabilitation, which allows private builders to redevelop slums and, on fulfiling certain conditions, avail of subsidies from the state government for each housing unit built. 

Maharashtra already has an active Slum Redevelopment Authority and the houses built by it are now being clubbed with those constructed under the prime minister’s scheme. A housing department official said the state has approved the construction of 2.2 lakh housing units under various slum rehabilitation projects in the last three years. However, the official added, the state will find it “very difficult” to compile data on the completed projects. Since the Slum Redevelopment Authority’s projects are meant to provide free housing for slum dwellers, Maharashtra has not needed any Pradhan Mantri Awas Yojana funds to provide subsidies under this vertical.

Another vertical offers subsidies to families that want to build their own homes on private land. It is not very popular in Maharashtra given the scarcity of private land in urban areas. The state has approved just 43,408 housing units under this vertical.

The third vertical is credit-linked subsidy. A first-time home buyer can avail of a home loan subsidy if they have an annual household income of less than Rs 18 lakh. Once an eligible buyer’s loan application is approved, the central government pays the subsidy directly to the bank in question, easing the pressure of repayment on the buyer. The subsidy is worth Rs 2.6 lakh for Economically Weaker Sections (families with annual income of up to Rs 3 lakh) and Low Income Groups (income of Rs 3 lakh to Rs 6 lakh). For Middle Income Groups, the subsidy is Rs 2.35 lakh for those with a family income of Rs 6 lakh to Rs 12 lakh and it is Rs 2.3 lakh for those with an annual income of Rs 12 lakh to Rs 18 lakh.

A senior official at the National Real Estate Development Council, or Naredco, which functions under the Union housing ministry, said credit-linked subsidies are perhaps the most popular of the scheme’s verticals nationally. While officials in Maharashtra have seen more of low-income applicants avail of credit-linked subsidies, Naredco said middle-income groups are the biggest beneficiaries. “People from low-income groups, like auto drivers and small businessmen, are making good use of this scheme, but people in middle-income groups are using it the best,” said RR Singh, director general of Naredco. “Middle-income groups have more resources at their command and are in a better position to save money and get loans from banks.”