Government Revamps Affordable Housing Initiative for Urban Areas
NITI Aayog has released a comprehensive approach paper aimed at promoting affordable housing in India. The report, titled ‘A Comprehensive Framework to Promote Affordable Housing’, was published in December 2025 and has been shared with key stakeholders for implementation. This renewed focus aims to enhance housing access for urban residents across the country.
The Ministry of Housing and Urban Affairs (MoHUA) has been actively implementing the Pradhan Mantri Awas Yojana – Urban (PMAY-U) since June 25, 2015. The initiative seeks to provide durable housing with essential amenities to eligible urban beneficiaries nationwide. Building on the lessons learned from PMAY-U, MoHUA has launched the revamped PMAY-U 2.0, also known as the ‘Housing for All’ Mission. Effective from September 1, 2024, this program aspires to reach an additional one crore beneficiaries over the next five years.
Mechanisms for Housing Support
PMAY-U 2.0 is structured around four primary components: Beneficiary Led Construction (BLC), Affordable Housing in Partnership (AHP), Affordable Rental Housing (ARH), and the Interest Subsidy Scheme (ISS). The ISS, functioning as a Central Sector Scheme, aims to facilitate credit flow to the affordable housing sector by offering subsidies on home loans for Economically Weaker Sections (EWS), Lower Income Groups (LIG), and Middle Income Groups (MIG). This support extends to purchases, resales, and new construction.
Beneficiaries can avail a maximum interest subsidy of ₹1.80 lakh, disbursed over five years, for loans exceeding five years in tenure. Those with annual incomes up to ₹9 lakh, loan amounts up to ₹25 lakh, and property values capped at ₹35 lakh can benefit from a subsidy rate of 4.0% on the initial ₹8 lakh of their loan for a maximum duration of 12 years. Thus far, the government has distributed ₹312.38 Crore in home loan subsidies to 70,638 beneficiaries under the ISS.
Encouraging Private Sector Participation
Under PMAY-U 2.0, the government also supports states and union territories in developing ‘Affordable Housing Policies’ that incentivize private sector participation through regulatory, fiscal, and institutional measures. This initiative intends to increase the supply of affordable housing in urban locales. Furthermore, in September 2025, a pivotal reduction of GST rates was announced for essential construction materials such as cement and bricks, enhancing housing affordability across the sector.
The Government of India has also restructured the Credit Risk Guarantee Fund Trust for Low-Income Housing (CRGFTLIH) to strengthen credit access for EWS and LIG households. Launched on January 15, 2025, this scheme has guaranteed 6,205 loans totaling ₹614.76 crore, ensuring timely completion of homes for eligible beneficiaries of PMAY-U 2.0. Additionally, special home loan products tailored for residents of the informal sector are being developed in collaboration with financial institutions.
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