Will extension of PMAY revive affordable housing in India? Experts weigh in

This comes when the affordable housing sector has been struggling due to higher demand for bigger, costlier homes in India

Prime Minister Narendra Modi’s decision to extend the Pradhan Mantri Awas Yojana (PMAY) may give much-needed fillip to the affordable housing sector which has been struggling since pandemic, in sharp contrast to homes in the mid-range and luxury segments which are in high demand, experts believe.

According to recent data published by Anarock, affordable homes, priced under Rs 40 lakh, accounted for 20 per cent of total home sales in the January-March quarter this year. This was 38 per cent in 2019.

Luxury homes, meanwhile, made up 21% of all residential units sold across the top seven Indian cities in the first quarter of 2024, Anarock said. It was 7% for the same period in 2019.

The Union Cabinet on Monday approved assistance to 30 million additional rural and urban families to construct houses under the scheme.

“The new scheme is poised to make a substantial impact on the housing sector, encouraging developers to prioritise affordable housing projects and ultimately boosting the overall housing supply in the country,” said Pradeep Aggarwal, founder and chairman at Signature Global (India) Ltd, a real estate developer.

Due to lower demand, developers have been reducing the supply in the affordable segment. The new homes in this segment out of the total launches fell to 18 per cent in the Jan-Mar quarter this year as compared to 44 per cent four years ago.

“The downward spiral of this erstwhile poster child of the Indian housing industry began during the pandemic, and then morphed into a broader malaise,” said Anuj Puri, chairman at Anarock.

“The affordable housing revival hinges on such government incentives for buyers and developers,” he said.

Adding to this, Anshul Jain, Chief Executive, India & SE Asia & APAC Tenant Representation at Cushman & Wakefield said, “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.”

The government started the Pradhan Mantri Awas Yojana in 2015-16 to provide assistance to eligible rural and urban households for the construction of houses with basic amenities.

All the houses constructed under PMAY are provided with other basic amenities such as toilets, LPG connections, electricity connections, functional household tap connections, etc. through convergence with other schemes of the central government and the state governments.

Industry executives also said that the approval highlights that the Centre considers real estate as a key pillar of the Indian economy.

It is also expected to improve employment opportunities.

“The increased focus on rural and urban housing will not only improve the living standards of millions but also create substantial employment opportunities,” said Prashant Sharma, President at Naredco Maharashtra.

“It will steer construction activity in the public sector and boost affordable housing in the country,” said Vimal Nadar, Senior Director & Head of Research at Colliers India.

“At a time, when residential market sentiment is upbeat, such expansionary moves reinforce the confidence of developers, financiers and investors in the market,” he said.