Unlike the earlier Maharashtra Rent Control Act, which provided for only a 4 per cent annual increase of rent, if this new model law is notified by the States, no house can be rented without specifying the duration in the lease agreement. Say, if it is 2 years, after that period is over, the house-owner can hike the rent even by 400 per cent. The tenant who cannot pay has to vacate and if she doesn’t vacate within 6 months a Tenancy Authority would issue eviction order and police would evict. It goes without saying that the workers would be the worst hit by this new model law.

What is Modi Government’s record on providing housing, especially to the workers? Modi launched Prime Minister Awas Yojana (PMAY) in June 2015 as the main vehicle to achieve ‘Housing for All’. According to Durga Shankar Mishra, the Secretary of the Ministry of Housing and Urban Affairs (MoHUA), under PMAY, as on 5 June 2019, 81 lakh houses have been sanctioned—of which more than 38 lakh houses were just sanctioned in the previous election year of 2018 alone—but so far only 23.64 lakh houses have been delivered to the beneficiaries.

The 2017–18 Economic Survey however indicated that 28 per cent of the urban population of India lived in rented houses and, in absolute terms, going by the 2018 World Bank estimates of the number of people living in urban India in 2018 at 449.5 million, those living in rented houses and not having own houses in urban India would be 28 per cent of that, which is 125.86 million. Assuming an average family size of 5, this would mean 2.25 crore houses would be needed to meet the target of ‘Housing for All’ by 2022. In the first four years after its launch in 2015, PMAY has provided housing to only 10 per cent of those living in rented houses in urban India and how the backlog of 90 per cent of those without own homes, or nearly 12 crore people, would be provided houses under PMAY in the next three years by 2022 is anybody’s guess!

If anything, Ms. Nirmala Sitharaman’s budget allocation for PMAY for the current fiscal shows no possibility of any progress towards clearing even a tiny fraction of this backlog. The increase in allocation for PMAY (urban) works out to a mere Rs. 350 crore—Rs. 6853.26 crore for 2019–20 as against Rs. 6505 crore in Union Budget 2018–19!

The unorganised workers and even a sizable section of organised sector workers will have to depend on a sub-category under PMAY catering to the Economically Weaker Sections (EWS, defined as those having an annual income of upto Rs. 3 lakhs) and Low-Income Groups (LIG, defined as those having an annual income of Rs. 3–6 lakh) where the beneficiaries from these categories are entitled to a credit-linked subsidy scheme.

In 2018–19, loans for 6.16 lakh houses including around 2.16 lakh houses to EWS category, 2.15 lakh houses to LIG category and 1,85 lakh houses under MIG beneficiaries were provided, including a subsidy of Rs. 13,796 crore till March 2019. MIG beneficiaries are those whose annual income is between Rs. 6 –18 lakh. The EWS-LIG sections are entitled to a credit-linked subsidy of 6.5 per cent over a repayment period of 15 years and if a beneficiary borrows Rs. 6 lakh to build a house, she/he would get a subsidy of Rs. 54,000. There is no subsidy above the borrowing of Rs. 6 lakh for EWS-LIG. But from 1 January 2017, two middle-income groups (MIG) were also included in this scheme—MIG-I in the annual income bracket of Rs. 6 lakh to Rs. 12 lakh and MIG-II in the Rs. 12–18 lakh income range. They are entitled to an upfront interest subsidy of Rs. 2.3 to 2.35 lakh! Such is the pro-middle class bias in the scheme.

In urban India, 70 per cent of the workforce is estimated to be in the unorganised sector, numbering nearly 10 crore, or around 2 crore families, and one-third to one-half among them would not be home-owners. Still, why only 1–2 per cent of them have availed the PMAY benefits? The puzzle would unravel if we closely examine some inbuilt exclusionary principles not apparent to general observers. Banks and financial institutions have a rule that no loan would be granted if the monthly repayment instalment is above 75 per cent of the take-home pay.

Let us take an example. The minimum wage fixed for the textile mill workers in Tamil Nadu since April 2018 is Rs. 8100 per month. After deducting 10 per cent pension, 10 per cent EPF, 0.75 per cent ESI and other deductions like vehicle loans, the take-home wages of the textile worker would be around Rs. 6000. Now if a worker were to take a housing loan of Rs. 6 lakh under PMAY with an amortisation period of 20 years at 11 per cent interest rate, she/he will have to pay a monthly installment of Rs. 6200. Since this is above the take-home pay of the worker, either she/he has to go for loan amount lesser than Rs. 6 lakh or opt for a longer amortisation period, say 25 years instead of 20 years. But in that case, workers not having 25 years of service would not be eligible for a Rs. 6 lakh loan. Even if a worker with 10 years of service left were to borrow Rs. 3 lakh with a repayment period of 10 years, she/he will have to pay a monthly installment of Rs. 4132 which is more than 60 per cent of her/his take-home pay. He/she would be left with barely Rs. 2000 for his/her family’s other expenses. Such an exclusion mechanism explains why only around 2 per cent of the unorganised workers have opted for PMAY. ‘Housing for all’, with such exclusionary mechanism?

At the current rate, it would take another 36 years to achieve ‘Housing for All’ and it cannot be a reality by 2022. This is Modi Magic for you! (IPA Service)