Budget 2024: Middle-class housing scheme to follow interest subvention model

HUDCO to be nodal agency in middle class housing

The government will likely introduce interest subvention for its middle-class housing scheme announced in the interim budget, with state-run housing finance company Housing and Urban Development Corporation (HUDCO) as one of the nodal agencies, sources told Moneycontrol.

“Options are being explored to make middle-class housing scheme an interest subvention scheme, in line with what is being done for low-cost housing,” said a source aware of the matter.

The government, at present, offers a credit-linked housing subsidy scheme for the low-cost model and the economically weaker section (EWS) under the Pradhan Mantri Awas Yojana-Urban model (PMAY-U), with HUDCO, National Housing Bank (NHB) and State Bank of India (SBI) as the central nodal agencies.

The credit-linked subsidy scheme offers interest subvention across three categories: EWS, low-income group (LIG)  and middle-income group (MIG).

In the case of EWS/LIG, the beneficiaries are eligible for an interest rate subsidy of 6.5 percent, up to Rs 6 lakh.

Discussions are underway to determine the extent of the subsidy that can be provided and the maximum level it can reach, the source pointed out.

There are still some unresolved issues, such as the exact definition of the middle class and the carpet area limits for the scheme.

For EWS, the carpet area is 30 square metres, while for the LIG scheme, it is 60 square metres.

The MIG scheme caters to income groups of Rs 6-12 lakh and Rs 12-18 lakh. The carpet area limit is 160 square metres for lower income eligibility and 200 square metres for higher income eligibility. The subvention is also lower at 4 percent and 3 percent, respectively.

Over 8 million houses have been constructed under PMAY-U until now, out of the 11.8 million sanctioned. The Centre has released Rs 1.6 lakh crore, out of the Rs 2 lakh crore committed under the scheme.

The outlay for PMAY-U in the interim budget was 18 percent higher than FY24’s revised estimates.

The central government had spent Rs 22,103 crore on PMAY-U in the previous fiscal.

Another scheme is likely to increase the outlay further under the scheme.

The Union cabinet, in its first meeting in June, gave the nod to provide assistance in constructing 3 crore additional rural and urban houses under PMAY.

Housing prices in 10 cities tracked by RBI’s house price index were up 4.1 percent in the fourth quarter of FY24. Ahmedabad had witnessed a double-digit increase during this period.