Policy Update
Srishti Sinha
Background
Housing is one of the basic amenities of human life; however, urban areas face a significant shortage of housing facilities due to rampant population growth and the pressures of ongoing development projects. According to the Technical Group on Housing Shortage, there was an estimated shortage of 17.84 million units in urban India in the EWS/LIG segments as of 2012. Therefore, a need for a multi-pronged approach was felt to tackle the problem of housing shortages in urban lower-income segments.
To mitigate the housing shortage problem in urban areas, particularly among lower-income segments, a multi-pronged approach involving easier credit terms and affordable house construction was adopted. The Hon’ble Finance Minister, in the Union Budget 2013-14, made the following announcement regarding the establishment of an Urban Housing Fund: “It is proposed to start a fund for urban housing to mitigate the huge shortage of houses in urban areas. I propose to ask the National Housing Bank to set up the Urban Housing Fund and, in consultation with the RBI, I propose to provide 2000 crore to the Fund in 2013-14.”
Objective
The Scheme provides refinance assistance to eligible primary lending institutions in respect of their loans extended in urban areas for the following purposes:
- Purchase /construction of dwelling units
- Repairs/renovation/upgradation of dwelling units
- Incremental housing
Functioning
The Scheme aims to improve credit access and provide financial support for housing to low-income groups living in urban areas. The Scheme is based on area perimeter and loan and cost parameters consistent with the needs and capacity of the people in the lower-income segments. Under this Scheme, the National Housing Bank (NHB) offers refinance to various Primary Lending Institutions (PLIs) for the eligible home loans they extend to individuals from lower-income segments across urban India.
- The eligibility criteria for eligible loans under the Scheme are as follows :
- Location of property – The dwelling unit in respect of which the individual housing loan has been extended should be located in an urban area. The urban areas would be as defined in the Census 2011.
- Date of disbursement – The loans in respect of which refinance is sought under this Scheme should have been disbursed on or after 01-04-2013.
- Loan size – The individual loan size should not exceed 10 lakhs.
- Dwelling unit – The carpet area of the dwelling unit in respect of which the individual housing loan is extended should not exceed 60 m2 or the cost of the dwelling unit should not exceed 16 lakhs.
- Beneficiaries – The household income should not exceed 4 lakhs per annum. It may be mentioned here that Rajiv Rin Yojana (RRY), a centrally sponsored scheme envisages a 5% subsidy to the EWS / LIG borrowers. Inclusion of people marginally above the LIG segment within the scope of UHF would enable them to have better access to the formal housing finance system resulting in more inclusive housing in urban areas. It should, however, be ensured that individuals should not get the benefit of both the UHF refinance scheme and the Rajiv Rin Yojana. In this regard, the Banks would follow due diligence in the identification of the beneficiaries in terms of eligible income group and ensure the non-inclusion of beneficiaries availing loans under various subsidy schemes of the Government, including Rajiv Rin Yojana, by obtaining necessary documentary evidence, including Aadhaar-based identification, etc.
- Extent of Refinance: Refinance from NHB would be available to the extent of 100 percent of the eligible loans sanctioned and disbursed by the Banks
- Tenure of Refinance: The refinance assistance under this Scheme will be available for tenure of 3 to 7 years.
- Rate of Interest:
- Interest rates under the Scheme would be fixed over the entire tenure of refinance and Banks would be encouraged to lend at fixed rates in order to safeguard the borrowers against volatility of interest rates in the market.
- The Banks would be required to ensure that for all refinance claims made under the Urban Housing Fund, only those loans are included where the on-lending rate to the borrower(s) does not exceed 2% above the maximum refinance rate under the Fund.
- Repayment of Refinance: Repayment under the scheme would be on a quarterly basis.
Performance
In 2023:
- The total outstanding refinance grew to ₹92,028 crore by June 30, 2023.
- As of September 30, 2023, India’s total individual housing loans stood at ₹29.38 lakh crore.
- Although UHF-specific data was not publicly broken out, the refinance activity indicated that UHF was contributing significantly to NHB’s overall performance.
In 2024:
- By June 30, 2024, the refinance portfolio reached ₹1,02,024 crore.
- Individual housing loans outstanding as of stood at ₹33.53 lakh crore, showing a growth of 14% over the corresponding period of the previous year.
- The share of loans to EWS/LIG borrowers was 39%, showing improved targeting and greater success in reaching lower-income households. Middle-income group (MIG) loans also increased to 44%, showing broadening access. High-Income Group (HIG) loans were reduced to 17%, showing a positive shift in focus toward lower-income borrowers.
From June 2023 to June 2024 there has been nearly a ₹10,000 crore increase in total outstanding refinance over one year which indicates that the National Housing Bank (NHB) has continued to expand credit flow into the housing sector. This growth suggests heightened participation by Primary Lending Institutions (PLIs), such as Housing Finance Companies and Public Sector Banks, reflecting the scheme’s strengthening appeal as a liquidity support tool.
UHF-specific data was still not publicly broken out but the refinance activity indicated that UHF was contributing significantly to NHB’s overall performance. The reduction in High-Income Group (HIG) loan share to 17%, down from earlier years, confirms a strategic shift in the scheme’s focus, aligning better with government objectives of “Housing for All” under Pradhan Mantri Awas Yojana (Urban).
Impact
The Urban Housing Fund has shown steady and reliable performance across two years. It is helping more low-income urban families get access to home loans. NHB’s overall refinance support is rising, and the proportion of loans for poor families is increasing every year. However, one major drawback is the lack of UHF-specific public data. All numbers are part of larger NHB aggregates, so it’s hard to determine the exact impact of just the UHF scheme.
Emerging issues
- The NHB Report on Trends and Progress of Housing in India (2024) identified regional disparities in credit flow and vulnerability to climate-related risks as some of the key challenges to be addressed by the sector, which is relevant even today.
- There are no separate sets of data available publicly for the Urban Housing Fund, making it difficult to assess its direct impact, beneficiary profile, or regional coverage. Without scheme-specific reporting, it is challenging to evaluate the performance and inclusiveness of UHF independently from NHB’s broader refinance activities.
Way Forward
NHB should publish separate, detailed data on the UHF, such as disbursements, beneficiaries, and geographic spread, to enable better analysis and policy-making. Enhanced data transparency will allow targeted improvements and help assess whether the scheme is truly benefiting low-income urban populations.
References
About the Contributor
Srishti Sinha is a student of sociology at Miranda House, University of Delhi, with a keen interest in gender, cultural representation, development, public policy, and research.
Acknowledgement
The author expresses her sincere gratitude to the IMPRI team and Ms. Aasthaba Jadeja for their invaluable guidance throughout the process.
