The Pradhan Mantri Awas Yojana scheme falls short of covering the risk of death or disability of the borrower as the loans sanctioned under it do not have an in-built insurance provision.
With COVID-19 pandemic hitting lives and livelihoods, it is important to consider relaunching the Pradhan Mantri Awas Yojana (PMAY) scheme with an in-built credit linked insurance cover for all loans, CII has said.
This will ensure that in all circumstances the intended benefit of the scheme of Housing for All is fulfilled and the families are able to retain their dream home. It will also ensure that the banks or lenders are secured from any financial impact due to the death of the primary borrower, it said.
Pradhan Mantri Awas Yojana (PMAY) is aimed at achieving the Housing for All goal as India completes 75 years of Independence by the year 2022. It was launched in 2015 to ensure that 2 crores houses are built across the country for citizens belonging to the lower income group, economically weaker section and middle-income groups through interest loan subsidy to first-time home borrowers.
The scheme, however, falls short of covering the risk of death or disability of the borrower as the loans sanctioned under the scheme do not have an in-built insurance provision.
“There is a need to relaunch the PMAY scheme with an in-built credit linked insurance or a mandatory life insurance for all borrowers under the PMAY scheme to ensure that the intent of providing Housing for All does not take a hit due to death or disability of the primary borrower. The family should inherit a home-not a loan,” said Chandrajit Banerjee, director general, CII.
“Affordable housing is one of the vital components of economic growth, provided we are able to address prevailing impediments of untimely death of borrower and impact on the residual loan, the status of the home and family in case of such exigency,” he said.
“Now, with the pandemic hitting lives and livelihood of the Indian citizens hard and with increased mortality rate, the importance of protection to families becomes paramount as all sections of society struggle to meet medical costs, unemployment, inflationary pressures. With an in-built insurance cover in the PMAY loans, the inherent lacuna of risk-protection can be plugged with minimum additional disruptions,” he said.
The scheme could have standard premium rates which could be utilized by any insurer to offer the credit cover with their partner banks. The in-built level cover equal to the loan amount could be taken at by the borrower at the inception.
Under the current scheme, the banks or lenders are partially protected as the property is mortgaged with them. But the family is left to pay the loan or lose their home. This also means that the intended long-term benefit of the scheme is not fully utilized and instead of providing housing for all, the bereaved families may not have a house and may slide further down the economic ladder, while lenders / banks may be left behind with some NPAs and recoveries having a cascading effect on economic growth.
Under the PMAY-U, against a revised target of 11.2 million units, almost the entire 11.2 million housing units has been sanctioned and 4.8 million houses have been completed, leading to the completion of only 43% of the near-term target as well as the sanctioned units under the PMAY-U.
The scheme was launched in 2015, through which the government had set a target of constructing 50 million new housing units by 2022, of which 30 million units are proposed to be constructed in the rural areas (through PMAY-Rural) and 20 million in the urban areas (through PMAY-Urban).
Subsequently, the government has set a scaled down near-term target of 21.4 million under PMAY-R and 11.2 million units under PMAY-U by 2022.
Source : Money Control