Financial troubles, tiny houses: Why many PMAY allottees rejected the home offer

In October 2020, PMC had alloted affordable houses being constructed under PMAY(U) to 2,918 poor families but only 731 of them claimed them. Now PMC has announced names of 2,187 fresh allottees urging them to book the unclaimed homes.


In August 2017, Babaram Bhagne (53), a helper at an automobile spare parts shop in Nana Peth, was among the 40,000 hopefuls from economically weaker families who had given applications to claim low cost homes being built under Pradhan Mantri Awas Yojana (Urban) in Pune city.

In October 2020, he was among the happy club of 2,918 applicants who were declared ‘winners’ to get the homes being built by Pune Municipal Corporation (PMC) with assistance from private builders at five different locations in the city.

Two months later, he is one of the 2,187 individuals who have decided to let go of this ‘opportunity’. On Monday, PMC’s PMAY (U) cell posted a list of new ‘winners’ from the waiting list who will now have a chance to lay claim over the homes that remained unclaimed in the first round.

“On the day our name was announced in the lottery, we were told to pay up Rs 1.02 lakh (10 per cent of the total price of the apartment) within a month. I had no income from March to October 2020 as the automobile shop I work for was shut due to the lockdown. It was extremely difficult for me to arrange the sum within such a short time,” said Bhagane, who presently stays in a rented home in Sukhasagar with wife, a son and a daughter. He said that getting a housing loan for payment of the total cost (pegged at Rs 9.67) lakh was difficult due to break in employment.

But that wasn’t the only reason he let go of the home offer. “At 350 square feet carpet area, the apartment is too small for my family. My son has finished his graduation this year and very soon we will start thinking about his marriage. Once our family expands, this house will be too tiny for us. Hence, we thought and decided that instead of taking a loan to pay for this small flat, we will wait for an opportunity to buy a bigger home once my son starts earning,” said Bhagane.

The houses are being built for economically weaker sections (EWS) under Affordable Housing in Partnership (AHP) component of the Pradhan Mantri Awas Yojana (Urban). Under this component, the central and state assistance is provided to housing projects where 35 per cent homes are reserved for EWS customers and are made available to them at an affordable rate.

Pune Municipal Corporation (PMC) had announced eight projects under AHP in August 2017 and has also invited applications from EWS families. Of these, five projects progressed and in October 2020 PMC drew lotteries to determine the beneficiaries who would get the opportunity to buy low cost 2,918 apartments from the pool of 40,000 applications that it had received.

The five housing projects are located in Hadapsar, Survey No. 106A (340 homes), Kharadi (786), Vadgaon Khurd (1108), Hadapsar, Survey No.89 (584), and Hadapsar, Survey No.106A12 (100). Each dwelling unit is a 1BHK (bedroom, hall & kitchen) apartment with a carpet area of about 350 square feet.

As per officials at PMC’s PMAY(U) Cell, not all allottees who didn’t lay their claim over the homes found the offer unattractive or were not able to pay up the booking amount. “We had accepted the applications in 2017 and the lottery was drawn full three years later in October 2020. Many may have changed the contact numbers and did not get our messages. Owing to the Covid-19 pandemic and the lockdown, many may have also moved out of the city and did not see lists of the winners published in the newspapers. We were receiving calls and personal visits of such people after November 23 but we could not consider their requests as it would have been unjust to those in the waiting list,” said Dinesh Rokade, Joint-Director for PMAY(U) implementation in PMC areas.

Financial incapability, however, remains a recurring theme among the allottees, including those who have laid a claim and paid up the first installment. “It’s beyond my comprehension why they had to make the allottment in the thick of the lockdown,” said Satvashila Bhosale, a domestic worker who stays in Yerwada area. “My husband who worked in a Titan shop lost his job during the lockdown and now banks are refusing to give us a loan. We are in a big trouble since we don’t want to lose the money we have already paid,” she said.

To help the allottees secure a bank loan, the PMC has set up home-loan stalls in its premises where housing finance companies and loan consultancies are guiding the allottees with loan procedure and accepting applications if they find them eligible. “Problem with most of the allottees is that they already have borrowed from banks and have unpaid loans on their accounts. Most have very poor credit history. In fact, some of them availed personal loans to pay the first installment for PMAY home which reflects poorly on their financial health. This makes them very weak loan candidates,” said a DSA (direct selling agent) present at the spot.

Rokade said that the PMAY(U) cell at PMC is learning from its mistakes earlier and the future AHP projects (five of them are being planned) will take into accounts the issues faced by the allottees and make the allottment process quicker and more accessible to the EWS families.

Show construction progress to avail PMAY funds: Maharashtra civic bodies

Earlier, civic bodies in the state – acting upon guidelines of the Maharashtra Housing and Area Development Authority (MHADA) – were releasing advance subsidy to beneficiary families constructing houses under the BLC (Beneficiary Led Construction) component of the PMAY(U) to ensure fast progress of the projects.

Beneficiaries are now required to show the progress of the house before requesting release of funds at each stage of the construction. (Photo Credit: Atikh Rashid)

Learning from earlier adverse experience, civic bodies in Maharashtra have now changed the pattern of releasing the subsidy under the Pradhan Mantri Awas Yojana (Urban) to the beneficiaries to ensure the money is not diverted from the intended purpose of the house construction.

Beneficiaries are now required to show the progress of the house before requesting release of funds at each stage of the construction.

Earlier, civic bodies in the state – acting upon guidelines of the Maharashtra Housing and Area Development Authority (MHADA) – were releasing advance subsidy to beneficiary families constructing houses under the BLC (Beneficiary Led Construction) component of the PMAY(U) to ensure fast progress of the projects.

However, this policy led to a considerable number of beneficiaries (about 20-25 per cent, as per MHADA officials) diverting the funds for other purposes, thus stalling the progress of construction. In several towns and cities in the state, PMAY(U) projects have not reached completion despite being under progress for one, two or more years.

The Covid-19 pandemic and the lockdown imposed between March and August resulted in a drastic reduction in earnings of economically weaker families – the target demographic for the BLC component – and may have further led to diversion of the funds received from the state and central governments to ensure livelihood.

“Considering past experience, we have decided to release the subsidy amount only after progress is shown at each stage,” Karbhari Divekar, Chief Officer, Pathri Municipal Council in Parbhani district. “Previously, we had deposited an upfront amount of Rs 40,000 in the accounts of the 1,050 beneficiaries when we gave them the building plan sanctions. But about 300 didn’t commence work,” he added.

In Pathri, new 1550 PMAY(U) beneficiaries whose names appear in the latest BLC project plan, have been asked to commence the work on the homes and that they will receive the first installment of Rs 40,000 after the foundation work is done, additional Rs 60,000 when the work progresses until lintel-level and rest Rs 1.50 lakh after the work finishes.

The beneficiaries are not too enthused about this strategy. “I will have to borrow money from private sources to start the work as I don’t have money to put in. As per the new strategy, only those who are well-off or have savings will be able to take advantage of the scheme,” said Laxmikant Ambure, a beneficiary.

Central subsidy released in some towns

Following The Indian Express report highlighting the status of the work on 1,150 houses sanctioned for PMAY(U) beneficiaries in several towns of the Marathwada region, MHADA – the state coordinating agency for PMAY(U) – has released the central subsidy for some of the towns.

As per officials with Parbhani, Hingoli and Pathri municipal bodies, some central funds have been received in the recent weeks, enabling them to release the 3rd and 4th installment of the funds to the beneficiaries.

Officials with Hingoli Municipal Council said they have received Rs 3.33 crore of the central subsidy while those in Pathri said they have received Rs 5 crore. “We had to wait for long. People really suffered as the work got stalled due to unavailability of funds. We hope that in future, the central funds will be released in a timely manner,” said Divekar.

As reported earlier, the release of central funds for the BLC component has been severely delayed owing to failure of a section of the Urban Local Bodies (ULB) to submit the utilisation certificates (UC) for amounts earlier released.

Although MHADA’s Dilip Muglikar, who is in-charge of PMAY(U) implementation in the state, did not comment, officials in the Ministry of Housing and Urban Affairs (MoHUA) said they are still awaiting the submission of UC’s from Maharashtra.

“Of the total Rs 803 crore released, we have received the UC’s only for Rs 211 crore. The amount for which the UCs are due is close to Rs 550 crore. We won’t be able to release additional funds until we get UC’s for at least 80% of this amount,” said the a Ministry official who did not wish to be named.

(This news report appeared in The Indian Express on December 5 2020. It can be read here)