Funding a key challenge to achieve PMAY targets: ICRA

New Delhi, February 24, 2018: The Union Budget 2018-19 has clearly reinforced the Government of India’s intent to focus on the ongoing programme for development of the affordable housing sector. Therefore rather than introducing any new scheme, the Government  has  focused on expanding the coverage of its ‘Housing for All by 2022’ agenda through the Pradhan Mantri Awas Yojana (PMAY). Through the PMAY, the Government had set a target of constructing 50 million new housing units by 2022, of which 30 million units are likely to be constructed in the rural areas (through PMAY-Gramin) and 20 million in the urban areas (through PMAY-Urban).As an immediate target, the PMAY-G intends to cover 10 million new houses by FY2019, of which five million are to be completed by March 2018. The PMAY-U had set a target for completion of 1.2 million houses in FY2018.

“However in terms of physical progress,” says Mr. Shubham Jain, Vice President and Sector Head – Real Estate, ICRA, “both the PMAY-U and the PMAY-G has been slow in the context of the stated targets. That the current budget has made clear the Government’s intention to ramp-up the execution of the ongoing programme is a definite positive. And a significant increase in the planned spending under the PMAY, from Rs. 29,043 crore in FY2018 to Rs. 64,500 crore in FY2019, is likely to result in a notable pick-up in execution since funding availability has been a constraint in the past.”

Regarding progress under PMAY, the progress under the PMAY-U, launched in June 2015, has been modest in terms of houses completed. As against close to 3.6 million housing units which have been approved since FY2016, till date, only around 0.3 million units have been completed. Under the PMAY-G too, the number of houses sanctioned under the scheme as on January 15, 2018, stands at 6.0 million units with the completion at 1.6 million units. Thus, a significant pick-up in implementation pace for both, the PMAY-U and the PMAY-G, will be required to achieve the Housing for All target by 2022.

The Government has, in the budget for FY2019, indicated internal and extra-budgetary resources of Rs 37,000 crore combined for the PMAY-U and PMAY-G, which is in addition to the budgetary support of Rs 27,500 crore. Ability to raise such resources would be critical to meet the financial spending and physical completion targets. It remains to be seen what avenues the Government will tap to raise such financing, given that this is largely revenue expenditure and not for creating capital assets.

More importantly, the cumulative assistance necessary under the PMAY-U and PMAY-G, to achieve the stated targets, far exceeds the current annual outlay on these programmes. The current year’s allocation, when released, will be enough to achieve completion of ~7.7 million pending housing units, out of the total sanctioned 9.6 million units. Going forward, ICRA estimates Rs. 5.15 lakh crore of cumulative assistance would be necessary to achieve the construction of the balance 40 million units by FY2022. Thus, funding is viewed as a key challenge by ICRA in achieving the PMAY targets.

Mr Jain added: “While the budgetary allocation on a comparable basis witnessed a decline of 5% from Rs. 29,043 crore as per FY2018 (RE) to Rs. 27,500 crore in FY2019, there has been a heavy reliance on internal and extra-budgetary resources (IEBR) to meet the targets for FY2019. Around 57% of the outlay towards PMAY is proposed to be funded through IEBR. While a significant pick-up in progress is expected, its success will hinge on the ability to raise and provide the funds for execution. Also, the future fund requirement over the next three years, starting FY2020, to achieve the targets, would entail an annual allocation of almost 2.5 times of the spending outlay considered for FY2019.“

In the FY2019 budget the Government has also announced a dedicated affordable housing fund, which is expected to benefit banks and housing finance companies raise financing to increase their exposure to the affordable housing loan segment and thus support the PMAY programme implementation. In a recent announcement, the Union Cabinet approved the creation of the Rs. 60,000-crore National Urban Housing Fund to finance the Government’s Housing for All programme in the urban areas. The said funds, proposed to be raised through non-budgetary sources, are likely to be used for the next four years.

Corporate Comm India(CCI Newswire)