Government needs Rs 1 lakh crore in 3 years to build 1 crore houses: CRISIL

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As of November 26, 2018, although 63 lakh houses had been sanctioned, only 12 lakh have been constructed, while 23 lakh are under construction.
To meet its ambitious target of constructing one crore houses in urban areas by 2022, the government will have to raise around Rs 1 lakh crore over the next three years, according to rating agency Crisil.

The government had launched its flagship Pradhan Mantri Awas Yojana - Urban (PMAY-U) scheme on June 25, 2015, with an aim to provide affordable housing for all by 2022.
The rating agency noted that as of November 26, although 63 lakh houses had been sanctioned, only 12 lakh have been constructed, while 23 lakh are under construction.

Among states, Andhra Pradesh, Uttar Pradesh, Maharashtra, Madhya Pradesh and Tamil Nadu together accounted for 55 per cent share of the sanctions, it said.

The government aims to sanction 75 lakh houses and construct 30 lakh of them by the close of FY19, it added.

The government needs to contribute Rs 1.5 lakh crore in seven years through 2022, at an average Rs 1.5 lakh per house, however, Crisil said only 22 per cent of this, or Rs 32,500 crore, has been disbursed so far.

"Our calculations show the government will have to garner around Rs 1 lakh crore over the next three years to achieve the target of building one crore houses. This is going to be a tall ask given the current fiscal arithmetic," said Prasad Koparkar, senior director, Crisil Research.
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The agency noted that for extra budgetary resources, the government has already initiated fund-raising (in the form of bonds) through entities such as the Housing and Urban Development Corporation.

"As these are typically bonds with 10 years of maturity, with interest and principal repayment to be managed through future budgetary announcements, the provisions in future budgets would be a key monitorable," it said.

Crisil pointed out that the PMAY-U scheme also faces headwinds such as unavailability of land in prime areas, low participation of private developers on account of brand dilution, bidding mechanism, stringent cost and time schedules resulting in low yields and increasing construction cost due to absence of bulk sourcing of materials.

Crisil Research director Rahul Prithiani said one crore houses would mean an opportunity for over Rs 2 lakh crore of home loans, and incremental consumption of 80-100 million tonne of cement and 10-15 million tonne of steel.

The construction opportunity is of around four billion square feet over the life of PMAY-U, he said, adding all that would translate into 9-10 crore incremental jobs over the execution period, without factoring in some repetitive jobs continuing after the completion of a project.
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