Budget 2025: Ramp-up in PMAY-Urban 2.0, new allocation for industrial housing

The Union government is set to ramp-up the second iteration of its flagship interest subsidy scheme for affordable housing, the Pradhan Mantri Awas Yojana-Urban 2.0 (PMAY-U 2.0), with an allocation of Rs 3,500 crore for the 2025-26 financial year, up from a revised estimate of Rs 1,500 crore in FY25, according to expenditure estimates in the Union Budget. The PMAY-U 2.0 was announced by the Union government in August 2024, with implementation for a five-year period starting from September 1, 2024.

The government has also allocated Rs 19,794 crore towards the original iteration of the Pradhan Mantri Awas Yojana for the upcoming year. However, it is lower than the Rs 30,171 crore originally budgeted for FY25, while the government has also revised its estimated spending on PMAY-U to Rs 13,670 crore for FY25.

The new iteration of PMAY is meant to provide one crore houses to people with low-to-middle incomes over a five-year period, while the government has also extended to the rural version of the scheme, PMAY-Gramin, allocating Rs 54,232 crore for FY26. In FY25, the budgeted estimate for the rural housing scheme was Rs 54,500 crore.

In other new schemes, the government provided the first allocation of Rs 2,500 crore to the rental housing scheme for industrial workers  announced last year. The government will execute the scheme in conjunction with the states in which the housing will be located, as well as with private entities. Under the model, the Centre and the respective state will provide viability gap funding of 20 percent each of the total project cost, with the private entity required to provide the rest.

The Budget also allocated the first Rs 10,000 crore of the Rs 1 lakh crore-Urban Challenge Fund announced by Union Finance Minister Nirmala Sitharaman in her Budget speech. As part of the scheme the Union Government will invest upto 25 percent of the cost of bankable projects, while the rest of the funds have to be sought through bonds, bank loans, and public-private partnerships.

The new fund, aimed at urban renewal and development, will consider development proposals under broad themes such as cities as growth hubs, creative redevelopment, and water and sanitation.

As for existing urban development and renewal schemes, the government has proposed an increase in the FY26 allocation for the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) to Rs 10,000 crore, from the budgeted estimate of Rs 8,000 crore for FY25. Allocation in the PM e-Bus Sewa scheme, which finances the purchase of electric buses by various state and city-level transport utilities, was increased to Rs 1,310 crore, from an estimate of Rs 1,300 crore in the previous budget.