India is recalibrating its approach to affordable urban housing, shifting from subsidy-led announcements to a more integrated policy architecture that links finance, taxation and institutional reform. The renewed thrust anchored by PMAY Urban 2 aims to expand homeownership while improving credit access and reducing construction costs in fast-growing cities.
The Centre’s strategy now treats affordable housing as an economic enabler rather than a standalone welfare scheme. With urban migration accelerating and housing deficits persisting across income segments, policymakers are focusing on structural bottlenecks that historically limited delivery including land supply constraints, financing gaps and fragmented state-level regulations. At the core of this transition is PMAY Urban 2, launched in September 2024 as the next phase of the flagship housing mission. The programme targets support for one crore additional urban households over five years. Unlike earlier iterations, the revised mission broadens its toolkit combining beneficiary-led construction, public-private partnership models, rental housing initiatives and a strengthened interest subsidy framework. The interest subsidy component has emerged as a critical lever. Eligible households with annual incomes up to Rs 9 lakh can access subsidised loans for homes within defined value caps. By lowering borrowing costs for first-time buyers, the scheme seeks to bridge the affordability gap created by rising land and material prices in urban centres. Officials indicate that thousands of households have already benefited, signalling improved traction in credit-linked homeownership.
Financial risk-sharing mechanisms are also being expanded. The restructured Credit Risk Guarantee framework provides lenders with partial protection against default in loans extended to economically weaker and lower-income groups. This is particularly significant for informal sector workers who often struggle with documentation barriers. By reducing institutional risk, the government hopes to deepen mortgage penetration beyond salaried urban populations. Parallel fiscal measures are aimed at easing supply-side pressures. Rationalisation of GST rates on select construction inputs has moderated project costs, offering developers greater flexibility in pricing entry-level units. Industry observers note that while input costs remain volatile, tax adjustments can help stabilise margins and maintain viability in the affordable segment. Urban planners argue that coordination between state governments and private developers will determine long-term outcomes. Several states are now revisiting zoning norms, approval timelines and density regulations to align with the objectives of PMAY Urban 2. Streamlined approvals and transparent land policies are viewed as essential to scaling affordable housing stock without compromising urban infrastructure capacity. The broader implication is clear: affordable housing is increasingly tied to urban productivity, labour mobility and climate resilience. Well-planned, energy-efficient housing near employment corridors reduces commute burdens and carbon footprints while strengthening local economies.
As India’s cities continue to expand, the success of PMAY Urban 2 will hinge on execution discipline and sustained financing. If implemented effectively, the initiative could reshape not only housing access but also the quality and inclusiveness of urban growth over the coming decade.
Also Read:Â Nido Home Finance secures Carlyle backing
India strengthens affordable housing finance reforms
