Need for relaunch of PMAY scheme with in-built credit-linked insurance: CII

The PMAY is the ambitious mission of the government aimed at ‘Housing for All’ as India completes 75 years of Independence by the year 2022.

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, the chamber said in a statement.

Addition of insurance component 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 home, it 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,” CII Director-General Chandrajit Banerjee said.

He said affordable housing is one of the vital components of economic growth, provided “we are able to address prevailing impediments of untimely death of borrower and impact on the residual loan, the status of the home and family in case of such exigency”.

He added that now, with the pandemic hitting lives and livelihood of 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, and 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,” Banerjee said.

The scheme could have standard premium rates which could be utilised by any insurer to offer the credit cover with their partner banks, he said adding that 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, the director-general said.

“This also means that the intended long-term benefit of the scheme is not fully utilised 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,” he added.