Confederation of Indian Industry Suggests Relaunch of Pradhan Mantri Awas Yojana Scheme 'Inherit a Home-Not a Loan' With an Inbuilt Credit Linked Insurance Cover

NEW DELHI, India, July 24 -- The Confederation of Indian Industry issued the following news release:

The Pradhan Mantri Awas Yojana (PMAY) is the ambitious mission of Government of India aimed at 'Housing for All' as India completes 75 years of Independence by the year 2022. The journey which began in 2015 to ensure that 2 crores houses are built across the nation 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.

Mr Chandrajit Banerjee, Director General, CII said, "There is a need for a Relaunch of 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"

"Affordable housing is one of the vital components of economic growth, provided we are able to address prevailing impediments of un-timely death of borrower and impact on the residual loan, the status of the home and family in case of such exigency."

He added, "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."

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.

As per the current version of the scheme, the banks or lenders are partially protected as the property is mortgaged with them, however 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.

CII, therefore, suggests that with a view to ensure continuous success of the PMAY scheme, the Government must consider a relaunch of this scheme with an in-built Credit linked insurance cover for all loans which utilizes the benefits of Pradhan Mantri Awas Yojana. 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.