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The Riddle Of Affordable Housing In India: SWAMIH And Credit Linked Subsidy Scheme – IMPRI Impact And Policy Research Institute

The Riddle of Affordable Housing in India: SWAMIH and Credit Linked Subsidy Scheme

Yuvraj Mandal


This article examines the urgency of affordable housing in India and analyses key initiatives like the Credit Linked Subsidy Scheme and SWAMIH Fund. These initiatives are explored for their potential to address the housing gap and promote accessible living spaces. The challenges and prospects of achieving comprehensive affordable housing solutions are discussed within the context of India’s evolving urban landscape and economic dynamics.


As per Census of India 2011, the absolute increase in urban areas was more than that of the rural areas. Despite the Census not being conducted in 2021, a report published by the Technical Group on Population Projections in 2020 states that the population will grow by 311 million by 2036, with 70% of this increase occurring in the urban areas. By the year 2035, approximately 43.2% of India’s population is projected to be living in urban areas.

Hence, the need for affordable housing in India is growing and as per a Grant Thorton report, there was a housing deficit of 19 million units in India in 2015, and this figure is expected to increase to 38 million units by 2030 if no significant intervention is undertaken. Approximately 95% of this deficit pertains to the economically weaker sections (EWS) and low-income groups (LIG). 

Emerging Issues of Affordable Housing in India

Despite facing significant disruptions in 2020 and 2021 due to Covid-19, the residential real estate industry demonstrated a swift recovery by early 2022, experiencing substantial double-digit growth in both sales and new project launches. However, the affordable housing segment took a hit as depicted by the graph below:

Source: Anarock Consultants, Housing.com, Industry | Graph made by Author

As per the graph, the proportion of new residential units launched in the affordable segment (up to Rs 45 lakhs) in the top 8 markets in India (Mumbai, Hyderabad, Bengaluru, Chennai, Pune, Delhi NCR, Kolkata, Ahmedabad) declined from over 50% in 2019 to 31% in 2022. 

This fall in supply has also been associated with the unusual decrease in demand for affordable homes. The share of affordable homes in overall residential sales across these markets dropped from 51% in 2019 to 40% in 2022. The consumer sentiment survey conducted by Anarock (a real estate consulting firm) in 2022 showed that 26% of property seekers in the top seven Indian cities expressed interest in homes priced under Rs 40 lakhs, compared to 39% in 2018. In fact, the top seven cities experienced a surplus of unsold affordable housing, comprising more than 27% of the total 6.30 lakh unsold units as of the end of 2022. 

The decline in demand for affordable housing can be attributed to the following factors:

  1. The affordable housing segment is highly susceptible to increases in interest rates. As the Reserve Bank of India (RBI) raised repo rates to control inflation after Covid-19, home loan interest rates followed suit and are at all time high. Consequently, this situation leads to a reduction in cheap credit accessibility to borrowers, and discourages the economically weaker sections to purchase a house in the affordable category.
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Source: Forbes India | Graph made by Author

  1. The Covid-19 pandemic has severely affected the disposable income of low-income groups (LIG) . They faced more financial challenges compared to the more affluent segments of the society. Furthermore, the surge in inflation during 2022 has had significant repercussions for both consumers and producers. Specifically, individuals from the Low-Income Group (LIG) have been compelled to prioritise meeting their basic necessities, resulting in the postponement of house purchases, particularly when housing prices are on the rise.
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Source: World Bank | Graph made by Author

In November 2022, the cost of construction had increased by 28% compared to pre-pandemic levels in November 2021 but remained stable when compared to March 2022. During 2020-2022, the costs of essential construction materials had surged by 32%, affecting the profit margins and operational schedules of construction companies. Affordable homes have a thin profit margin of around 15 per cent, which can easily be affected by such hikes in input prices.

Impact of Credit Linked Subsidy Scheme (CLSS) on Demand for Affordable Housing 

A crucial factor contributing to India’s challenges in offering housing opportunities is the restricted funding and insufficient availability of affordable housing options. Addressing this issue, the government introduced the Credit Linked Subsidy Scheme (CLSS) as part of the Pradhan Mantri Awas Yojana. This initiative was designed to acknowledge the necessity of providing subsidised home loans, aiming to enable urban underprivileged individuals to either own or construct their own residences. It has recently been extended till December 2024.

The PMAY scheme encompasses several beneficiary categories, including:

  • Middle Income Group (MIG II) individuals with an annual income ranging from Rs. 12 to 18 lakhs.
  • Middle Income Group (MIG I) individuals with an annual income ranging from Rs. 6 to 12 lakhs.
  • Low-income Groups (LIGs) individuals with an annual income capped between Rs. 3 to 6 lakhs.
  • Economically Weaker Section (EWS) individuals with an annual income capped at up to Rs. 3 lakhs.
  • Economically Weaker Section (EWS) individuals with an annual income capped at up to Rs. 6 lakhs, exclusively applicable to Mumbai Metropolitan Region.
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Source: MagicBricks

Impact of SWAMIH Fund on Supply for Affordable Housing 

Although this article has highlighted the unsold inventory of affordable homes, it is necessary to address the issue of fewer affordable housing projects launched after the pandemic. In the top seven real estate markets in India, the typical duration for completing a project was 5.1 years for projects featuring fewer than 500 units and extended to 6.6 years for projects with over 500 units. Hence, to ensure affordable housing in the long run, it is also important to address the issue of stalled projects, especially the affordable ones.

In 2019, the Indian government initiated an alternate investment fund (AIF) known as the Special Window for Affordable and Mid-Income Housing Fund (SWAMIH) Investment Fund, with a total value of Rs 25,000 crore. It is India’s largest social impact fund and offers last-mile financing to address the predicament of halted housing projects. 

During its initial phase in December 2019, the fund garnered a commitment of Rs 10,037.5 crore, with the Indian government pledging up to Rs 5,000 crore. Recently, the government further declared an additional investment of Rs 5,000 crore, elevating the fund’s cumulative value to Rs 15,530 crore. This extended commitment empowers the fund to assess potential transactions until December 2024.

The Fund is sponsored by the Ministry of Finance, Government of India, and is managed by SBICAP Ventures Ltd., a State Bank Group company. The Fund has no precedent or comparable peer fund in India or in the global markets.

Notably, the SWAMIH fund has effectively unlocked more than Rs 35,000 crore of liquidity within the economy by facilitating the completion of stalled housing projects across India.

As of March 2023, the fund granted final approval to 130 projects, with sanctioned amounts totaling Rs 12,000 crore. This initiative has already successfully finalised 20,557 homes, and its objective is to complete over 81,000 homes across 130 projects in the next three years, encompassing 30 tier-1 and 2 cities.

Way Forward

In conclusion, the pursuit of affordable housing in India is a critical and complex challenge that necessitates multifaceted solutions. As urbanisation accelerates and population grows, the demand for accessible housing will rise. The initiatives undertaken by the government, notably the Credit Linked Subsidy Scheme and the SWAMIH Investment Fund, demonstrate a proactive approach to address this issue. The government’s commitment to providing financial support, enabling completion of stalled projects, and offering incentives for homebuyers is commendable.

However, it is evident that the journey toward comprehensive affordable housing solutions is ongoing. The interplay of factors such as inflation, interest rates, construction costs, and changing demographics underscores the need for a dynamic approach. Continued collaboration between government bodies, financial institutions, developers, and communities is extremely vital to ensure the success and sustainability of these initiatives.

Yuvraj Mandal is an intern at IMPRI. He is studying economics and finance at Ashoka University.

Acknowledgement: Author would like to thank Nandu S Nair and Mansi Garg for their kind comments and suggestions to improve the article

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organization.

This article was posted by Chaitanya Deshpande, a research intern at IMPRI.

Also read at IMPRI : G20 Presidency: India’s Path to Global Leadership


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