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The National Housing Bank (NHB) has expressed concern over slower-than-expected disbursements under the Pradhan Mantri Awas Yojana Urban 2.0 (PMAY U 2.0) interest subsidy scheme. In a review with top housing finance companies (HFCs) last week, officials urged lenders to enhance participation, particularly for smaller-ticket loans. Despite the government providing details of over 1.8 million potential beneficiaries, uptake remains limited due to perceived repayment risks and operational challenges. Most disbursements continue to focus on larger loans, running counter to the programme's goal of supporting lower-income urban borrowers.
The National Housing Bank (NHB) has highlighted the need for housing finance companies to increase their involvement in the PMAY U 2.0 interest subsidy programme as disbursements have not kept pace with expectations. During a review meeting with chief executives of leading HFCs last week, NHB officials indicated that lending activity under the scheme is still concentrated in larger-ticket loans, which require less underwriting effort and minimal investment in on-ground infrastructure. Advertisement
Officials noted that while the programme aims to expand access to affordable credit for smaller urban borrowers, participation has been limited. The government has shared details of more than 1.8 million potential beneficiaries with HFCs, but uptake remains slow due to lenders concerns over repayment risks and operational challenges. Beneficiary-led construction, a key segment under PMAY U 2.0, is facing stress, especially for loans below INR 5 lakh. Microfinance-linked repayment issues have also contributed to caution among lenders.
HFC executives explained that underwriting and monitoring costs for smaller-ticket loans are high, while repayment behaviour in this segment can be volatile. They stressed that scaling such portfolios without safeguards could compromise asset quality. The regulator urged HFCs to recalibrate risk assessment frameworks and focus on broadening outreach to ensure meaningful traction for the scheme.
Under PMAY U 2.0, eligible urban homebuyers can avail loans up to INR 25 lakh, with subsidies provided in five annual instalments totaling INR 1.80 lakh. This replaces the earlier one-time subsidy of INR 2.67 lakh. The subsidy applies uniformly across economically weaker section (EWS), lower-income group (LIG), and middle-income group (MIG) households, with income caps of INR 3 lakh, INR 6 lakh, and INR 9 lakh, respectively.
The NHB's emphasis reflects the ongoing challenge of translating policy into effective credit access for lower-income urban households. While the design of PMAY U 2.0 targets inclusivity, execution hurdles, risk perceptions, and small ticket sizes have slowed progress in several states.
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