The Karnataka government is exploring multiple strategies to reduce the financial burden of unsold affordable homes under the chief minister’s one lakh affordable housing scheme. The state is currently constructing 45,000 houses at an outlay of Rs 11.2 lakh per house, but the scheme is struggling due to a low uptake, with a significant number of homes remaining unsold.
At a recent meeting with Chief Minister Siddaramaiah and Deputy CM DK Shivakumar, the Boston Consulting Group (BCG) presented recommendations to mitigate the financial strain on the state exchequer. One of the key proposals includes providing an interest subsidy of up to 5% for beneficiaries, making housing loans more affordable. Additionally, BCG suggested that private developers be allowed to build homes at their own cost, with the government providing 50-70% of the required land. Under the current scheme, beneficiaries must pay between Rs 7.7 lakh to Rs 8.5 lakh for each house, while the government bears the remaining cost through schemes like Pradhan Mantri Awas Yojana (PMAY). However, many beneficiaries are struggling to raise the necessary funds due to low CIBIL scores, which make it difficult for them to secure loans from banks, resulting in high interest rates between 11% and 12%. To alleviate this issue, the proposal includes offering an interest subsidy of 3-5%, which could reduce the government’s annual loss to between Rs 60 crore and Rs 170 crore.
Additionally, to ensure more housing units are built and sold, the government is considering revisiting the public-private partnership (PPP) model. This approach would involve allocating up to 70% of government land to private developers, who would build and sell residential properties on these plots. Once the units are completed, they would be transferred to the government for distribution to beneficiaries. This model has been successfully implemented in states like Gujarat, Rajasthan, and Odisha. The proposed solutions aim to provide affordable housing to more citizens while minimizing the financial strain on the state government. By introducing interest subsidies and incentivizing private developers, the Karnataka government hopes to improve housing accessibility and reduce the number of unsold affordable homes.
