The National Housing Bank (NHB) has raised concerns over the pace of disbursements under the PMAY 2.0 interest subsidy scheme, pushing housing finance companies to increase their participation in the government's affordable housing initiative. During a review meeting with chief executives of leading housing finance companies last week, NHB officials described current disbursement levels as "not up to the mark" and called for enhanced focus on the programme.

Sluggish Uptake Despite Large Beneficiary Base

The government has shared details of over 1.8 million potential beneficiaries with housing finance companies, yet uptake remains disappointing. Lenders continue to view this segment as carrying higher repayment risks, contributing to the slower adoption rates. An official familiar with the discussions noted that the regulator has asked HFCs to recalibrate their risk assessment frameworks to ensure the scheme gains meaningful traction.

Concentration in Larger Ticket Loans

Senior NHB officials observed that current disbursements are predominantly concentrated in larger ticket-size loans, which require relatively lower underwriting effort and limited investment in on-ground infrastructure. This trend runs counter to the broader objective of expanding credit access to smaller borrowers under the scheme, undermining the programme's core mission of financial inclusion.

Industry Concerns Over Viability

Housing finance company executives have raised several operational challenges that impact their participation in PMAY 2.0:

• Rising stress in beneficiary-led construction with elevated bounce rates
• Increased defaults in loans below ₹5.00 lakh
• High underwriting and monitoring costs relative to small ticket sizes
• Volatile repayment behaviour in the target segment
• Minimal impact on balance-sheet growth due to small loan amounts

"From a lender's perspective, the challenge is viability," explained the CEO of a housing finance company. "The ticket sizes under PMAY 2.0 are very small, underwriting and monitoring costs are high, and repayment behaviour in this segment has been volatile. Without additional safeguards, it is difficult to scale this book without compromising asset quality."

PMAY 2.0 Structure and Benefits

The revised scheme features significant changes from its predecessor, with beneficiaries receiving subsidies through a restructured payment mechanism. Under the current framework, the subsidy amount is uniform at ₹1.80 lakh across all categories, distributed over five annual instalments rather than the earlier one-time payment of ₹2.67 lakh.

These provisions apply specifically to urban areas, with the scheme designed to make homeownership more accessible across different income segments. The NHB's push for increased participation reflects the government's commitment to scaling up affordable housing finance, despite the operational challenges faced by lending institutions in this segment.