Government in dilemma over private firms’ participation in PMAY

Amid a major slump in the real estate sector, the state government is in a dilemma over the state-wide implementation of the ambitious Pradhan Mantri Awas Yojana (PMAY), which would also require equal participation of private realty players. This has resulted in the state trying to woo private developers by offering business loans at discounted interest rate.

The loan would be made available to the developers interested in constructing homes under the PMAY scheme in semi-urban cities of the state. The state government in December had formally adopted the Union government’s ‘housing for all’ scheme under PMAY to be implemented in 51 cities, for which the state government has decided to provide land at a nominal rate of Rs 1 per square metre.

“According to the guidelines of the Centre, there are basically two models for implementing construction projects under PMAY. One is through Public-Private Partnership (PPP) and other option is providing loans from the open market. However, due to the uncertainty in the real estate market there is a possibility that banks might not provide loans to developers irrespective of higher or lower interest rates. Hence, we have decided a model of having assistance from Central funding agencies like Housing and Urban Development Corporation Limited (Hudco) and National Housing Bank (NHB),” said Shrikant Singh, principle secretary, housing department.

According to the model, when a developer, after getting approval from the state government, approaches any particular nationalised bank seeking a loan for construction under PMAY, the nationalised banks would in turn approach Hudco and NHB with the proposals for seeking loans that would be provided at lower interest rates of around 4-5 per cent. The state government would be the handholding agency between the Central banking institutions, nationalised banks and the developers.

Recently, the redevelopment of Dharavi under the PPP model yielded no response from developers despite five extensions for bidding purpose.

Gulam Zia, executive director, Knight Frank India, a consultancy firm, said, “Nowadays finance is the major issue for developers when they approach various consultants. Considering PMAY, a city like Mumbai is not where homes costing Rs 15-20 lakh would be available. In this case, implementing PMAY in semi-urban cities of state and getting stable private real estate players (to work in such places) would be challenging.”

PMAY in numbers Eligibility: Monthly family less than Rs 25,000 Area: 322 square feet Number of approvals under PMAY till now: 1.41 lakh homes Locations of projects: Mumbai Metropolitan Region, Solapur, Akola, Amravati, Nagpur, Nashik and Yavatmal