Demand slows under urban housing scheme as fund utilisation tapers across states

PMAY-U is facing implementation challenges

Demand under the Centre’s flagship urban housing programme appears to be slowing across several states, with utilisation of central funds tapering off in recent years, a Moneycontrol analysis of government data shows. After a pandemic-era surge driven by front-loaded allocations, the programme is now showing signs of execution fatigue.

Spending under Pradhan Mantri Awas Yojana–Urban (PMAY-U) peaked at nearly Rs 60,000 crore in FY22, as the Centre boosted outlays to support construction activity and employment. That momentum has not been sustained. Actual expenditure fell to about Rs 28,700 crore in FY23, declined further to Rs 21,700 crore in FY24, and revised estimates for FY25 point to another drop to around Rs 15,200 crore—even as budget allocations were raised sharply.

For FY26, the government has pegged allocations at Rs 19,794 crore, including Rs 2,500 crore for middle-income and low-income credit-linked schemes. The pattern highlights a widening gap between budgetary intent and on-ground execution.

Execution emerges as the constraint

While allocations were increased in FY25 and scaled up again for FY26, the pace at which states are drawing down funds has slowed. This reflects both weaker incremental demand in some urban pockets and persistent challenges in completing sanctioned projects.

State-level data reveals a mixed picture. Overall completion rates have improved steadily over the past three years, rising to nearly 76 percent by December 2025, up from 63 percent in December 2023. Larger states such as Gujarat, Madhya Pradesh, Tamil Nadu and Maharashtra have recorded completion rates well above the national average, supported by stronger administrative capacity and sustained urban housing demand.

However, several states continue to lag. Bihar, Haryana, Andhra Pradesh and parts of the Northeast reported completion rates below 60 percent, despite central funds being available.

In some cases, completion rates have stagnated or even declined year-on-year, pointing to bottlenecks linked to land availability, beneficiary identification and state-level financing constraints.

Construction slows even in big contributors

Construction activity has weakened in some key states. Uttar Pradesh and Maharashtra, which together account for a large share of annual urban housing output, saw a sharp drop in houses constructed in the latest year compared with the previous one. Telangana reported negligible additions, reflecting project delays and administrative transitions.

High occupancy masks supply-side stress

Occupancy data offers a more reassuring signal. Once completed, houses are largely being occupied, with all-India occupancy exceeding 95 percent by December 2025. States such as Bihar, Punjab, Rajasthan and most Union Territories reported near-universal occupancy, indicating that demand remains robust where projects are completed and handed over on time.

The divergence between strong occupancy and slowing construction underscores the programme’s core challenge. While urban housing demand remains intact in many regions, execution capacity and state-level implementation have emerged as binding constraints.

As PMAY-U enters a more mature phase, the data suggests future progress will depend less on headline allocations and more on improving completion timelines, resolving project-level bottlenecks and better aligning state capacities with available central funds.