Analysis of Pradhan Mantri Awas Yojana

SUBMITTED TO:

Mr. Kamal Narayan

Assistant Professor, Political Science

HNLU, Raipur

SUBMITTED BY:

Abhijeet Audichya

B.A.LL. B(Hons.)

SEMESTER I, SECTION-A

Submitted On:

January 15, 2021

HIDAYATULLAH NATIONAL LAW UNIVERSITY

Uparwara Post, Naya Raipur-492002(C.G.)
 DECLARATION:

I hereby declare that this project work which is titled “Analysis of Pradhan Mantri Awas
Yojana” is my own work done under the commendable guidance of Mr. Kamal Narayan,
Faculty Member, HNLU. It represents my own ideas, and where others’ ideas or words have
been taken, I have adequately cited and referenced the original sources.

I also declare that I have adhered to all principles of academic honesty and integrity and have
not misrepresented or fabricated or falsified any idea /fact/source in my submission.

Abhijeet Audichya

Semester 1

Roll No.-1

B.A.LL. B

Section A

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 ACKNOWLEDGEMENTS:

First and foremost, I would like to thank my faculty of Political Theory-Asst. Prof. Mr.
Kamal Narayan for giving me this wonderful opportunity to work on this project titled
“Analysis of Pradhan Mantri Awas Yojana”. His guidance and support were very crucial
for the successful completion of this project.

I would also express my gratitude to all the authors, writers and columnists whose ideas and
works have been used in this project. I also thank all the staff and IT team of HNLU for the
resources in the form of E-library for the useful research in the subject matter of this project.

Last but not least, my heartfelt gratitude goes to my parents, seniors and friends who have
given their precious inputs in this project.

I hope you will appreciate my efforts and give your precious comments for the same.

Abhijeet Audichya

Semester 1

Roll No.-1

B.A.LL. B

Section A

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 TABLE OF CONTENTS

S.NO TOPIC PAGE NO.

1. Declaration I

2. Acknowledgements II

3. Introduction 1

4. Objectives of Study 2

5. Scope of Study 2

6. Research Methodology 2

7. Chapter 1- Knowing about the PM Awas yojana 3

8. Chapter 2- Merits of PMAY 7

9. Chapter 3- Demerits of PMAY 9

10. Chapter 4- Changes required in PMAY scheme 12

11. References 15

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 INTRODUCTION:

Policies and Acts have always been enacted in our country since British times. The main aim
behind these policies is betterment of the public, whether deprived of or endowed with
resources.

Many people take benefit out of these policies. The directive principles of state policy also
convey that the government shall make laws and acts for the welfare of the public.

Similarly, Article 39(b) states that The government shall, for the purpose of development,
construct houses for the underprivileged. So, in 2015, the government of India announced a
yojana for the housing aid of underprivileged section of society. This was called the Pradhan
Mantri Awas yojana.

It was further classified as –

1. PM Awas Yojana (Gramin)- Housing aid for the people from the rural areas of the country.

2. PM Awas Yojana (Urban)- Housing aid for the people from the urban areas of the country.

The main aim of this yojana was to provide affordable and reasonable housing to the
underprivileged and poor section of India by the year 2022. It is also mentioned that the number
of affordable houses shall be 20 million.

So basically, in this project, we shall be discussing about the PM Awas Yojana, its merits,
demerits, changes required in the yojana.

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OBJECTIVES OF THE STUDY

1. To explore the Pradhan Mantri Awas yojana and its applicability.

2. To examine the merits of PM Awas yojana.

3. To analyze the demerits of PM Awas yojana.

4. To suggest some changes in the PM Awas yojana for its optimum use.

SCOPE OF THE STUDY

As the project employs secondary data, availability of the accurate and primary data becomes
an impediment to the study. And as the project is non-empirical in nature, first hand data and
experiences are not taken as a part of the study. The pandemic situation and internet
connectivity also come as a serious limitation to the research.

RESEARCH METHODOLOGY:

The project is non-empirical in nature. The project employs secondary sources for fulfilment
of the objectives of the study. The project is descriptive and analytical in nature and various
literatures have been covered from journals, news websites, books, various published reports,
published research works etc.

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 Chapter 1- Knowing about the PM Awas Yojana

India has the 7th largest land area, 2nd highest population and one of the highest poverty rates
in the world. These numbers show that India is a mammoth country.

But due to these factors only, many people in India do not have access to food, clothing and
shelter. While food and clothing can be arranged on a day to day basis, it is impossible for these
people to either own or rent a shelter/house for themselves.

This is why Indian government introduced the Pradhan Mantri Awas Yojana in 2015 to provide
subsidy to the underprivileged sections of India. This scheme was announced by our Honorable
Prime Minister Mr. Narendra Modi.

Under this scheme, the government will provide credit linked subsidy to the eligible
beneficiary. It will give interest subsidy on home loans for buying, setting up, expanding or
improvement (including re-purchase) of houses. The grant will be paid in advance on the loan.

The housing interest rates are reduced by 6.5% for economically weaker Sections (EWS) and
low-income groups, and they reduce by 4% for Middle income group 1 (MIG-1) and 3% for
Middle income group 2 (MIG-2).

This reduction in interest rate is paid in the form of subsidy by the central government which
makes purchase of house through this scheme very much affordable.

The subsidy given will be up to Rs. 2.67 lakhs. The time period of re-paying the loan must be
under 20 years.

In the coming pages, we shall discuss about the eligible beneficiaries, applicability and the
respective deadlines for respective income groups applying under this scheme. We shall
mainly focus, in this project, on PMAY Urban.

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Income groups divided for the purpose of PM Awas Yojana-

1. Economically Weaker Sections (EWS)– These are those sections of Indian society
whose yearly household income is Rs. 3 lakhs or below. Under the scheme, they will
be provided with a 6.5% interest subsidy up to Rs. 2.76 lakhs. The maximum area of
land that they can build their house on is 30 square meters. Women ownership is
necessary for this income group. The deadline to avail the benefits of the scheme for
these groups is 31st March, 2022.

2. Low Income Groups (LIG) – Their income ranges between Rs. 3 lakhs and Rs. 6
lakhs. They also get a reduction of 6.5% from their housing loan interest up to Rs. 2.76
lakhs. They can claim subsidy for 60 square meters of land. Women ownership is
mandatory for these groups. The deadline to avail the benefits of the scheme for these
groups is 31 March, 2022.

3. Middle Income Groups- Income ranges from Rs. 6 lakhs to Rs. 18 lakhs. This group
is further classified as below. This scheme for MIG’s is referred as Credit linked
Subsidy scheme. For both MIG-1 and MIG-2 groups, women ownership is not required
and the deadline to avail the benefits of the scheme for these groups is 31st March,
2021.

Criterions Middle Income Group 1 Middle Income Group 2

Groups (MIG 1) (MIG 2)
Income Rs. 6-12 lakhs Rs. 12-18 lakhs
Interest subsidy 4% 3%
Maximum Area of the Land 160 square meters 200 square meters
Maximum Interest Subsidy Rs. 2.35 lakhs Rs. 2.30 lakhs

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Eligibility for the Purpose of Pradhan Mantri Awas Yojana, 2015-

1. The intended beneficiary family must not be an owner of a permanent (pucca) house.
The word beneficiary family includes husband, wife as well as the unmarried sons or
daughters (if any). But if the unmarried child is earning and is living with his/her parents
in their house, he/she can avail the benefits of the PMAY.

2. For married couples, the subsidy will be provided only to the couple as a whole once
and not to individual persons.

3. The beneficiary should not be availing any benefit under any other central housing
schemes.

4. This house (for which the subsidy is being taken) must be the first registered house of
the beneficiary.

Applicability of the scheme-

Persons who got their housing loans approved on or after January 1, 2017 are eligible to take
advantage of the scheme.

What will Basically Happen?

Suppose the loan amount which is approved is Rs. 10 lakhs, a beneficiary from EWS will get
an interest deduction of Rs. 2.75 lakhs. After that, the interest rate as given by the developer
will be applied on the remaining amount (Rs. 7.25 lakhs) which can be paid by the beneficiary
on EMI installments.

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Also, to provide gas connections, toilets, electricity connections and regular supply of drinking
water in the newly constructed houses as per the scheme, the government has decided to merge
some schemes which provide the aforementioned services to the allotted income groups with
the Pradhan Mantri Awas Yojana. So, this scheme will not only provide adequate housing but
will also guarantee a basic quality of life which is required by these underprivileged sections
of the society.

The PMAY, 2015 is divided into 3 phases by the government of India-

1. Phase 1- From March 2015 to March 2017 and will cover 100 cities all across the
country
2. Phase 2- From April 2017 to March 2019 and the scheme will be implemented in 200
more cities.
3. Phase 3- From April 2019 to March 2022 and the scheme will be executed in the
remaining planned cities (Total cities as decided in the scheme-2508).

The main aim of this scheme, as announced by our Honorable Prime Minister Mr. Narendra
Modi is to provide essential means required to get affordable house to each household in India
by 2022.

Under both PMAY (Urban) and PMAY (Rural), the government has collectively sanctioned
2.5 crore houses (1 crore for urban and 1.5 crore for rural). The size of the house for the rural
scheme has also been increased to 25 square meters.

Out of these, construction of 32 lakh houses has been completed under the urban scheme and
a comparatively large chunk of rural houses has also been done.

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 Chapter 2 – Merits of the Pradhan Mantri Awas Yojana, 2015

1. Grants from EWS to MIG-2 category ranging from Rs. 1,00,000 to Rs. 2,30,0000

In this modern world where the interest rates on the housing loan are soaring high. Also, the
other schemes are just giving 1-2 % interest deduction, this scheme gives an extra incentive
for the middle-class people who want to own a house.

For an average household coming under Low income or Economically weaker section of the
society, getting a grant ranging from Rs. 1 lakh to Rs. 2.3 lakh is a fairly large help.

They get the basic help which they require through this scheme. But there are certain
drawbacks to this point which will be discussed in the next chapter.

2. Favor female owners over male owners, making it a pro-women program

This scheme provides some extra benefits to the transgender, widow and low earning female
earning groups of the country. Also, the registration of house in the name of a women is
made mandatory for Low Income Groups and Economically Weaker Section of the society.

If a question arises as to who should get a home on preferential basis, the groups which have
been discussed above will be given the priority over the other strata of the society.

3. In the case of houses on the first floor, preference is given to the elderly or
differently abled people

If a senior citizen wants to avail the benefits of this scheme, he/she can opt in for house on the
ground floor as the scheme specifically mentions that in the guidelines. He/ She will be given
priority for ground floor against the persons below their age.

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 4. All the houses constructed should take environment friendly measures

The government has specifically communicated it to the developers that each house which is
to be constructed through this yojana has to conform to the Eco-friendly measures. This would
not harm the environment around the construction sites and will also help in minimizing the
pollution in the area.

5. Development of slums with initial focus on land development

These kinds of schemes not only provide affordable housing for all but also promote the further
development of the nation. When the abundant land coming in the slum areas and the rural
regions of the country is acquired by the government to construct houses, it also leaves scope
for the further construction.

This acts as an incentive for the house developers and real estate agents who, by planning
projects in these areas, make it an infrastructure hub which increases the monetary value of the
area.

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 Chapter 3 – Demerits of Pradhan Mantri Awas Yojana, 2015

1. Limit on credit subsidy

The scheme does provide the subsidy on the housing loan. But the limit to which the amount
can be deducted is kept very minimal. This makes the scheme less affordable for Low Income
Groups (LIG) and Economically Weaker Sections (EWS) who earn less than other groups.

When the amount will be deducted as a subsidy by the government, the interest rate that will
be applied on the remaining amount will be the rate that the developer demands which can
even go as high as 9-10%.

This is a major drawback of this scheme that it fails to provide relaxation on the interest rate
on the remaining amount and just deducting some amount (Max. 2.76 lakhs) from the total
loan.

2. Scarcity of land

The excessive development of the metropolitan cities has made these cities a hub of industrial
and production activities. But at the same time, it has left vey less space for further housing
which is being provided through this scheme.

This seems to be a great challenge to the scheme as the availability of land at affordable or
competitive prices is very crucial for the successful implementation of this scheme.

Also, providing some incentives to the house developers in these areas is also not possible
because in most of the cities in India, the developers are not able to recover their costs
through those housing projects.

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 3. Increasing cost of initial materials and labour

The prices of the basic materials used in the construction of houses like cement, bricks, paints
are continuously increasing day by day. These price hikes make the aim of affordable
housing for all a mere dream.

Also, the cheap cost of labour for which India was previously known is continuously
increasing due to the hike in the market prices.

4. Unorganized working class as the major beneficiary

As the scheme is majorly inclined towards providing affordable housing to the Low Income
Groups (LIG) and economically Weaker Section (EWS). A majority of these groups is
currently working in the unorganized sector which itself provides temporary employment and
income.

After specifically looking at these criterions, there is a cancellation of their housing loan
applications. Even if it gets approved, they have the additional burden of providing the bare
minimum initial payment that is required to book the house.

5. Lack of skilled Workforce and Cutting edge Technology

In India, there is an acute shortage of skilled labour which is an essential for the
construction of houses. This puts a heavy load on the existing skilled labor to complete the
target of the Pradhan Mantri Awas Yojana.

Also, India does not have the new technology to successfully complete the house target of the
scheme in a short span of time i.e. before the deadline.

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 6. Acquiring Land to provide Affordable Housing

Acquisition of land by the government for this yojana is the most tedious task. The extreme
scarcity of residential land combined with the long cases with the owners and huge
compensation to them, makes the matter even worse.

The long legal battles pave the way for extension in the aimed target dates. Also, it increases
the cost of the house and in the end, because of these 2 reasons, it becomes very difficult to
provide affordable housing to the target groups.

Also, there is a lack of infrastructure and job opportunities in the outer parts of the city (where
there is scope for further construction of houses) which makes this scheme less lucrative for
the daily wage earners. They have to travel a fairly large distance to get the employment
opportunities.

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 Chapter 4- Changes Required in Pradhan Mantri Awas Yojana,
2015

In the previous chapters, we have seen that the demerits of PMAY dominate over the merits.
This is because the PMAY scheme requires serious amendments to make it more adjustable
and affordable for the poor, low income earning and underprivileged section of our country.

In this section, we have divided the above-mentioned demerits into 4 heads. We will first
recognize the underlying problem and then after analyzing these problems will give an
appropriate solution for the same.

Demerit 1- Limit on credit subsidy

Underlying problem- The main problem here is that the government must recognize that why
the target people (under the scheme) don't own a house. It is because they are either not having
a good amount of money or not having the necessary knowledge as to what procedure is to be
followed. The government has given an interest subsidy of max. 2.6 lakhs which is not an
adequate amount for convincing these people to buy a house. This is because of the fact that
the prices of the houses these days is very high.

Even after getting a subsidy, they have to pay the interest on the remaining amount as per the
conditions of the house developer.

Solution- The ideal solution for this problem is to increase the subsidy amount to a level that
fulfils the main target of this scheme. But this will involve a huge spending by the government
which is itself very difficult in this pandemic times.

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There are 2 viable solutions other than this for the problem mentioned-

1. Increasing the tenure of the loan taken to provide a reasonable time period for these
people to repay the loan.
2. Applying the subsidy and then applying an uniform interest rate by the government-
This solution can also convince people as they will not have to pay high interest on the
loan because interest rate set by developers is way more than the government's interest
rate.

Demerit 2- Scarcity of Land

Underlying problem- The problem here is that the land required for successfully achieving
the desired target of 2 crore houses is not available in the central areas of the cities as the land
there has been utilized to the maximum extent.

Solution- This problem can be resolved by acquiring the land in the outer regions/outskirts of
the city which can be acquired easily and at competitive prices.

Also, the government has to spend on building the required basic infrastructure (like
transportation, electricity, schools and employment) for the beneficiaries. Without this
spending, it would be very difficult for the government to address this problem because
without this basic infrastructure, there would be no further development of the region (except
the construction of houses).

Demerit 3- Increasing cost of Raw materials and Labor

Underlying problem- The increasing cost of the raw materials and skilled labor increases the
cost of the house to a great extent. This is mainly because the workman cannot survive on a
meagre income as the prices of the daily use items is also increasing day by day.

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And the cost of the raw materials is increasing due to the high taxes on these items. The basic
materials that are used in the construction of the house like cement and bricks are placed in
the highest tax slab across India of 28% under the GST.

Solution - This problem requires either one of these approaches-

1. Decreasing Inflation-
This can be done majorly through 2 ways-

1. Reducing the fiscal Deficit- This can be done by reducing the unnecessary
expenditure.

2. Increasing the lending rates- This will reduce the money flow in the market which,
in turn, will decrease the prices of the products.

2. Reducing taxes- At this time, the cement and related products are placed in the
highest tax slab. The tax on these products (which are used for the construction of
houses under PMAY) has to be decreased to a certain extent that it becomes available
at fairly low prices.

Demerit 4- Lack of new technology and skilled workforce

Underlying Problem- Without the presence of new technology and necessary number of
skilled workmen, construction of the houses in the given time becomes very difficult. It also
impacts the design and durability of the house as it requires a fair amount of skill.

Solution- The solutions for this problem are listed below.

1. The government of India can import the new mass construction technologies
which are now being used globally.
2. The lack of skilled labor requires a long-term solution. But for a short time period,
skilled labor (which is available at low prices) can be called from the other countries.

Pradhan Mantri Awas Yojana is one of the very few housing schemes which provide a
good amount of subsidy. But after applying these changes, PMAY can become even
better and can really assist the poverty-stricken people of our country in buying their
own house.

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 References

• PMAY-HFA(Urban). Pmaymis.gov.in. Retrieved 2 January 2021, from

https://pmaymis.gov.in/.

• Pathak, K. (2021). Disadvantages of Pradhan Mantri Awas Yojana - Pradhan Mantri

Awas Yojana. Pradhan Mantri Awas Yojana. Retrieved 18 December 2020, from
https://www.pmawasyojana.co.in/disadvantages/.

• Dhawan, S. (2021). PMAY (Pradhan Mantri Awas Yojana): All about PMAY: How
does it work, eligibility and subsidy available. The Economic Times. Retrieved 19
December 2020, from https://economictimes.indiatimes.com/wealth/borrow/you-can-
still-get-benefit-under-pmay-even-if-your-parents-own-a-
home/articleshow/58003642.cms?from=mdr.

• Vaidyanathan, R., & Mary, F. (2020). Progress and Prospects of PMAY Scheme in
India. SSRN Electronic Journal, 1889,1890. https://doi.org/10.2139/ssrn.3534549

• PMAY - Key Benefits of the Pradhan Mantri Awas Yojana. Bajajfinserv.in. (2021).
Retrieved 24 December 2020, from https://www.bajajfinserv.in/insights/key-benefits-
of-the-pradhan-mantri-awas-yojana-pmay.

• What is PMAY? 10 important FAQs about Pradhan Mantri Awaas Yojana scheme. The
Economic Times. (2021). Retrieved 24 December 2020, from
https://economictimes.indiatimes.com/wealth/borrow/what-is-pmay-10-important-
faqs-about-pradhan-mantri-awaas-yojana-scheme/articleshow/76131335.cms.

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