PMAY 2.0: Hits, Misses, Obstacles To Affordable Housing In States

This figure set the baseline target for the NDA’s ‘Housing for All’ mission, targeting the most acute needs among the urban poor, including those living in non-permanent kuchha houses, congested dwellings and households without housing.

The Pradhan Mantri Awas Yojana (PMAY) was launched in 2015 to fill this gap. By November 2021, states and UTs had assessed a demand of 112.24 lakh urban houses, while the scheme had sanctioned 114.06 lakh houses — exceeding the pre-implementation demand estimate.

Of these, 89.36 lakh houses were grounded for construction, and 52.55 lakh were completed or delivered by late 2021. As the scheme progressed, the sanctioned figure rose to about 123 lakh, with 107 lakh grounded and 61 lakh completed by December 2022.

PMAY-U 2.0 was launched in September 2024 in order to fill the remaining gap, and aims to construct 1 crore affordable homes over five years with an approximate investment of Rs 10 lakh crore, including Rs 2.3 lakh crore in government subsidies.

It expands coverage to include Economically Weaker Sections (EWS), Low Income Groups (LIG), and Middle Income Groups (MIG), emphasising inclusivity, with over 2.67 lakh houses approved for women beneficiaries, and allocations for SC/ST/OBC and other minority households. 

Alongside existing verticals, PMAY 2.0 also introduces the Affordable Rental Housing (ARH) vertical — which was first launched as a scheme in response to the COVID pandemic, and an Interest Subsidy Scheme (ISS) — with a focus on faster construction using innovative technologies and integrated urban infrastructure.

While the scheme has transformed lives through housing, it faces mounting challenges. Affordable housing now accounts for just 20 per cent of residential property sales in top-tier cities, down from 38 per cent in 2019, even as luxury segments boom. 

Before delving deeper into critical pain points under PMAY 2.0, it’s important to mention which states are at the forefront of this nationwide effort, and will be the focus of this article. The landscape of affordable housing in India is vast, but key states have emerged as leaders and laboratories for both innovation and persistent hurdles: Maharashtra, Gujarat, Tamil Nadu and Uttar Pradesh.

In this article, we closely examine these, as they have diverse socioeconomic and real estate markets. Additionally, these states have not only sanctioned some of the highest numbers of affordable housing units under PMAY-U 2.0, but have also developed state-specific incentives and policies to accelerate implementation.

These states represent a cross-section of India’s urban and peri-urban housing challenges, from the hyper-developed metros of Mumbai and Chennai to the rapidly growing cities of Ahmedabad and Lucknow.

There have also been recent developments in Odisha, where the state government is rolling out a digital platform to monitor the implementation of PMAY-U 2.0, and refer to the experiences of states like Andhra Pradesh, Rajasthan and Telangana, which have collectively received approvals for over 3.5 lakh houses in the latest round of the Central Sanctioning and Monitoring Committee (CSMC) meetings. 

Success Stories, Stalled Ambitions

In Maharashtra, PMAY-U has driven slum redevelopment in Dharavi and Govandi, with 92,000 units sanctioned since 2022. Gujarat’s Ahmedabad leads in blockchain-based land registries, reducing title disputes by 40 per cent.

Tamil Nadu’s 5 per cent GST rebate for PMAY projects has attracted developers like Shriram Properties, while UP’s stamp duty waiver for sub-45 sqm units boosted sales by 34 per cent in Lucknow. Karnataka also took the same approach.

Yet, glaring gaps persist. Only 17 per cent of Karnataka’s 2016 affordable housing targets were met by 2021, while Mumbai’s land prices (Rs 45,000-Rs 60,000 per sqft) force 72 per cent of PMAY projects into distant suburbs like Virar, where vacancy rates hit 55 per cent.

“Affordable housing can’t thrive in geographies disconnected from jobs,” says Rupali Thakkar of the Ahmedabad Urban Development Authority.

Where Policy Meets Ground Realities

1. Funding Shortfalls and Bank Reluctance: Despite a Rs 15,000 crore SWAMIH Fund 2.0, only Rs 4,200 crore has been disbursed. Banks like SBI demand 30 per cent collateral for PMAY loans, and excludes informal workers. Karnataka’s CM Housing Scheme faces a Rs 3,700 crore deficit, while UP’s Rs 2,800 crore gap forces reliance on NHB refinancing. Ashok Mokha, chairperson, Indian Green Building Council, Vidarbha, notes: “Delays in fund flow erode 15-20 per cent of project viability before construction even starts.”

2. Regulatory Quagmire: Tamil Nadu requires 27 approvals across 12 departments, and add 14-18 months to timelines. Maharashtra’s Single Window Portal, launched in 2023, still lacks integration with environmental and fire departments. CREDAI’s Maharashtra president Pramod Khairnar Patil argues, "Without tax holidays on Section 80-IBA beyond 2025, rising cement costs (up 22 per cent since 2022) will kill margins."

3. Land Scarcity Vs Speculation: Only 19 per cent of rural land parcels in UP and Bihar have clear titles, stalling acquisitions. Proptech firm Housing.com estimates that 1.2 million hectares of underutilised government land could be repurposed for PMAY, but the states lack digitised records. “Land banks are useless without title guarantee funds,” says Akshay Tripathi, ex-NITI Aayog consultant.

Industry Demands: Incentives Vs Viability

Developers seek the following reforms to revive interest:

• Uniform 50 per cent FSI for all PMAY projects (currently limited to PPPs in most states)
• Building regulations that allow for more mixed income product delivery, not solely affordable housing
• Infrastructure status for developers that will ease ECB norms and attract pension funds
• Cancel all stamp and registration duties for affordable housing projects
• More commercial permissibility split across projects
• Transferable development rights (TDR) to offset mandatory land reservations

DLF and Shapoorji Pallonji are piloting 3D-printed homes in Gujarat, cutting costs by 25 per cent, but face material standardisation hurdles. MD and CEO of Tata Realty and Infrastructure Ltd (TRIL), Sanjay Dutt, warns: “Without FSI parity, density bonuses will remain a public-sector privilege.”

Blueprint For 2025: Three Pillars To Strengthen Affordable Housing

A KPMG report recommends a 2 per cent urban land tax on vacant plots to deter speculation, potentially generating Rs 12,000 crore annually for housing. Gaurav Agarwala (CREDAI Nagpur) advocates blockchain land registries: “Litigation delays could drop 60 per cent if states adopt Gujarat’s model.”

Meanwhile, Colliers India urges Metro-linked AHZs (Affordable Housing Zones) with pre-approved designs to slash timelines. An affordable housing project does not pop up anywhere, but it is well strategised and anticipated through proper planning and inclusion.

However, at a meta level, three things remain at the heart of the success of affordable housing:

• Streamline or Sink: States must adopt Maharashtra’s proposed 45-day approval window for PMAY projects, integrating fire, environmental, and municipal nods into a single portal.
• Funds with Teeth: Expand the SWAMIH fund’s scope to include land acquisition and title insurance, backed by sovereign guarantees to attract institutional investors.
• Private Sector Parity: Offer FSI boosts and tax holidays equally to private developers, not just PPPs, while mandating TDR for land reservations.

As CREDAI’s national committee starkly notes, “Without these steps, India will miss its 2025 target by 40 per cent — leaving 1.2 crore families without homes.” The clock is ticking and there are a lot of moving parts.