Interim Budget 2024: Corpus under National Housing Bank for affordable housing may be hiked significantly, says report

Budget expectations: Union Finance Minister Nirmala Sitharaman in her 2023-24 Budget speech announced the setting up of Urban Infrastructure Development Fund (UIDF) under the National Housing Bank for the creation of urban infrastructure in Tier 2 and Tier 3 cities. Even this year, there is a buzz that corpus under National Housing Bank for affordable housing may be hiked yet again to address the challenges the mid-tier cities are facing, a report on ET Now said.

Presenting the Union Budget 2023, FM Sitharaman said that the urban infra development fund would be managed by National Housing Bank and used by public agencies. "We expect to make available Rs 10,000 crore per annum for urban infra development fund," she said.

She noted that 50-year interest-free loans would continue for states.

The loan (principal) will be repayable in five equal annual instalments within seven years from the date of withdrawal, including a moratorium period of two years while interest will be payable on quarterly basis.

Earlier, Reuters reported that FM Sitharaman is likely to raise allocations for low-cost housing by more than 15 per cent to Rs 1 lakh crorefor 2024/25 from Rs 790 billion.

In July 2023, UIDF was launched with an initial corpus of Rs 10,000 crore to supplement efforts of the state governments by providing stable and predictable source of finance for creation of urban infrastructure in Tier 2 and Tier 3 cities.

As many as 459 tier-2 cities with population of 50,000 to less than a lakh and 580 tier-3 cities with population of one lakh to less than a million as per 2011 census are being covered under UDIF as of now.

India Inc has also asked the government to extend the interest subvention scheme to cover total housing cost of up to Rs 35 lakh, up from Rs 25 lakh presently to promote low-cost and affordable housing.

CREDAI said the allocation under Affordable Housing, which was earlier capped at Rs 45 lakh, need to change. Due to inflation alone, there has been a significant rise in real estate prices in the past seven years.

Citing data from the National Housing Bank (NHB), there has been an increase of 24 per cent in housing rates since June 2018 in India – which makes the current cap of Rs 45 lakh extremely unfeasible for developers to adhere to.

Hence, CREDAI recommends the definition of affordable housing to be revised as “a unit with 90 square meter RERA Carpet Area in Metros Cities and 120 square
meter RERA Carpet Area in Non-metros without a cap on cost of the unit”.

Pradhan Mantri Awas Yojna was launched in June 2015 with the objective of "housing for all." The scheme's deadline was set for December 2024. However, after missing this target, the NDA government may extend the scheme for another three to five years, reports said.

As part of the housing scheme, the central government offers an interest-cost subsidy ranging from Rs 1 lakh to Rs 2.67 lakh to households securing bank loans for housing construction. This follows in addition to subsidies from state governments.

So far, the government has spent nearly $29 billion over the last five years under the programme, it said in the Parliament during the winter session held in December.

Earlier this month, PM Narendra Modi handed over 15,024 homes in Solapur district in Maharashtra to beneficiaries from economically weaker sections including unorganised workers, textile workers, beedi workers, construction workers, ragpickers and garment workers. This is the world’s largest affordable housing project being executed under Pradhan Mantri Awas Yojana - Urban (PMAY-U).

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