Changing Dynamics Of India’s Real Estate Under PMAY

Since its launch in 2015, the Pradhan Mantri Awas Yojana (PMAY) has evolved far beyond a government housing initiative, it has fundamentally reshaped the landscape of India’s real estate market, particularly in the affordable housing segment. By bridging public policy and private participation, PMAY has compelled developers, lenders, and policymakers to rethink how India builds and finances homes for its growing urban and rural populations.

Redefining Affordable Housing

PMAY’s framework rests on four key verticals: Credit Linked Subsidy Scheme (CLSS), Affordable Housing in Partnership (AHP), In-situ Slum Redevelopment (ISSR), and Beneficiary-Led Construction (BLC). Together, they create an ecosystem where the government, private developers, and homebuyers work in tandem to address the housing gap.

The scheme’s design has catalyzed the creation of a new market segment for affordable housing while simultaneously highlighting the structural challenges within it. Incentives such as GST reduction to 1% for affordable projects, easier access to institutional finance, and direct subsidies of ₹1–2.5 lakh per unit have made participation more attractive. However, thin profit margins of 8–12% compared to 20–25% in mid- to premium-segment projects, continue to discourage large developers, leaving smaller players to dominate this space with limited capital capacity.

Empowering Homebuyers Through CLSS

The Credit Linked Subsidy Scheme (CLSS) remains one of the most impactful components of PMAY. Under PMAY 2.0, beneficiaries can avail interest subsidies of up to ₹1.80 lakh on home loans. Low-income households receive a 6.5% subsidy on loans up to ₹6 lakh, while middle-income groups benefit from 3–4% subsidies based on income tiers. This framework has significantly expanded access to formal housing finance, enabling millions of families to become first-time homeowners.

Market Realities: The Affordability Paradox

Despite PMAY’s extensive reach, India’s housing market presents a paradox. The luxury housing segment continues to witness a surge, with sales up by 85%, and homes priced above ₹1.5 crore now constituting 21% of total transactions. Meanwhile, the share of affordable housing in overall sales has fallen from 54% in 2018 to just 26% in 2024. The steep cost of urban land accounting for 25–40% of total project costs remain the primary barrier to scaling affordable housing in metropolitan regions.

PMAY 2.0: Renewed Focus and Broader Inclusion

Recognizing these challenges, PMAY 2.0 sets an ambitious target to assist one crore additional urban families over the next five years. The renewed framework emphasizes housing for industrial and migrant workers, acknowledging the evolving socio-economic dynamics of Indian cities. This shift reflects a more inclusive understanding of urbanization and workforce mobility.

Economic Ripple Effects

Beyond housing delivery, PMAY has been a catalyst for economic growth. The programme has generated an estimated 3.23 crore jobs across construction, cement, steel, and allied sectors, reinforcing its role as a significant driver of employment and industrial demand. Even developers operating outside PMAY have benefited indirectly through heightened demand for construction inputs and ancillary services.

The Road Ahead

PMAY’s impact on India’s real estate sector is both transformative and instructive. With over 118 lakh houses sanctioned under PMAY-Urban and 2.8 crore completed under PMAY-Gramin, the scheme has successfully brought millions into the formal housing fold. Yet, the persistent affordability gap underscores that policy intervention alone cannot fully resolve India’s housing challenge.

As the sector moves toward a projected ₹67 trillion affordable housing market, the lessons from PMAY are clear — sustainable success will depend on harmonizing government incentives, regulatory reforms, and market realities. The journey of PMAY thus stands as a case study in how visionary public policy can drive large-scale transformation, while also revealing the inherent complexities of inclusive urban growth.i