The Union government has significantly increased grants for rental housing under the revamped Pradhan Mantri Awas Yojana-Urban 2.0 (PMAY-U 2.0), approved on August 9, 2024. The scheme now offers INR 1.5 lakh per unit for constructing one-bedroom rental flats, up from INR 60,000, with central and state governments sharing the costs. Aimed at addressing the previous scheme's shortcomings, PMAY-U 2.0 seeks to enhance rental housing availability for working women, students, and migrant workers by encouraging private sector participation and optimizing government resources. Detailed guidelines are expected soon.
The Union government is planning a major increase in grants for developing rental housing under the updated Pradhan Mantri Awas Yojana-Urban 2.0 (PMAY-U 2.0). This initiative aims to enhance the availability of rental accommodation in urban areas, particularly for working women, students, and migrant workers. The cabinet approved this revamped plan on August 9, 2024, in response to a lackluster performance of the existing scheme, which struggled to attract the needed participation from private developers.
The Ministry of Housing and Urban Affairs is currently working on the detailed guidelines for the new scheme, which are expected to be released within the next month. According to ministry officials, one of the key features of PMAY-U 2.0 is an increased grant of INR 1.5 lakh per unit for constructing rental housing complexes that include one-bedroom flats measuring 30 square meters. This is a significant jump from the previous grant of INR 60,000 offered under the Affordable Rental Housing Complex scheme (ARHC), a sub-scheme of PMAY-U.
In this revamped model, states will share the financial burden with the central government. For each unit, the Centre will provide INR 90,000, while INR 60,000 will need to be funded by states or Union territories. Furthermore, the grant for dormitory units will increase from INR 20,000 to INR 50,000. This shift aims to encourage both public and private entities to participate in creating rental accommodations, as previous attempts have shown limited success.
The revamped scheme will be executed through two models. The first model involves converting existing government-built housing into rental complexes, allowing for a more efficient use of resources. The second model provides grants to private companies and government agencies to create new rental units. Officials highlight that this strategy could lead to more affordable housing options, especially for transient populations such as students and workers who need short-term rentals.
The need for improved rental housing facilities in urban areas is underscored by recent statistics. Over the last four years, more than 82,000 housing units have been approved for rental development under the current scheme, but only a fraction, approximately 20,000, has been made available to tenants. The revamped initiative is considered a crucial step in attracting private sector investment in rental housing, which has been vital yet underutilized until now.
In addition to improving access to affordable housing, the government's focus on conversion and new construction is expected to create more hostel-like accommodations. This could cater specifically to various demographics, including single workers and students relocating for education and jobs.
Despite the shortcomings of the previous ARHC scheme-where only 5,648 of the proposed 83,534 units were converted into rental housing-this new incentive structure aims to spark interest among developers. With the lifting of financial restrictions and the promise of increased funding, the government hopes to finally address the growing demand for affordable rental housing in urban centers.
Overall, this new approach under PMAY-U 2.0 presents an opportunity for the government to rectify past inefficiencies and work toward a more sustainable solution to urban housing shortages. As guidelines are finalised and further details are released, stakeholders eagerly await the impact of this initiative on the rental housing landscape in India.
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