PMAY housing price limit challenged by Kerala builders

Kerala residential developers have formally petitioned for an upward revision of the ₹45 lakh price ceiling under the Pradhan Mantri Awas Yojana (PMAY). Since its inception in 2015, the cap has remained static—even as construction, land and labour costs have surged by 30–35 % post‑Covid, making affordable housing delivery financially problematic for several builders, especially smaller developers and vendors.

A senior official from a major Kochi‑based developer revealed that homes under PMAY currently qualifying only up to 30–60 sqm must remain priced below this stagnant limit to avail the 1 % GST concession. Anything above reverts to the standard 5 % GST, effectively eroding the affordability benefit. Over the last decade, inflationary pressures have heightened material and labour overheads, squeezing margins and making quality, sustainable homes costly to deliver. The issue has tangible implications. One prominent developer has already delivered nearly 3,000 PMAY units across Kerala, with another 1,700 in progress. Yet the static price ceiling is increasingly a bottleneck, limiting future participation by small and mid‑sized firms. Their pleas emphasise that raising the limit would restore incentives for these builders—boosting employment in allied sectors, invigorating local supply chains, and widening buyers’ access to genuinely affordable, GST‑benefit homes.

This dialogue gains added urgency when contrasted with broader national aspirations. Affordable housing under PMAY remains central to the government’s vision of equitable, urban inclusion. Yet if cost pressures render delivery unsustainable, the policy risks exclusionary effects—benefitting only larger developers with deep capital reserves. Experts in sustainable urban planning point out the crucial balance between affordability and environmental standards. They argue that a higher price cap must be coupled with green infrastructure requirements—solar energy, rainwater harvesting, high‐efficiency building materials—to ensure future stock aligns with zero‑carbon goals. This integration, they say, avoids short‑term political fixes at the expense of long‑term sustainability.

From a gender‑equity standpoint, affordable homes offer profound benefits. Women‑headed households, often sidelined in private‐sector housing, stand to gain significantly when projects are delivered at scale and truly affordable rates. Local NGOs echo this, underscoring that cost relief is not merely about subsidies—but ensuring dignified, secure housing across socio‑economic strata. State policymakers have responded positively. A senior urban development official affirmed that the representation is under review, with cost data being evaluated against regional inflation metrics and material indices. After inter-ministerial consultation, a revised price cap could be launched before the next fiscal year—pending approval from the Central GST Council for updating GST concession thresholds.

More than 20 domestic developers in Kerala have reportedly expressed similar concerns. Their case emphasises that sticker‐price limits are disconnected from the realities of project delivery—rising land values, steel and cement price volatility, and escalating wages call for a policy recalibration. In neighbouring states such as Karnataka and Tamil Nadu, inflation adjustments have been factored into state-specific PMAY schemes, allowing flexibility up to ₹60 lakh in some areas. Advocates now suggest Kerala’s challenge be met with a regionalised cap, pegged to state indexation reflecting urban vs rural delivery costs. This would offer calibrated relief without increasing subsidy burden substantially.

Critically, the affordability ceiling bears weight on credit access. Developers within the PMAY framework can access concessional financing and construction subsidies. However, projects outside the cap face standard financial scrutiny, increasing loan costs. A revised ceiling would unlock smoother credit flows for medium-sized firms, benefiting the entire value chain—from material suppliers to finishing contractors. Analysts highlight that equitable housing is more than shelter. Locally built PMAY homes support civic planning, from school and clinic integration to local‐level transport nodes. When developers can operate viably under relevant GST and financing structures, cities near the Equator—like Kochi, Thiruvananthapuram and Kozhikode—can scale sustainable, inclusive housing, rather than fragmented private enclaves.

Delaying the policy update, they warn, hampers micro‑economic targets. Costs continue to rise—every quarter of delay pushes a larger share of affordable homes beyond financial reach. Resetting the PMAY ceiling by 15–20 % could rapidly revitalise stalled projects, inject demand into allied industries and sustain employment. As the federal review unfolds, several NGOs have announced participatory consultations with affected households, design societies and builders to ensure the policy reflects diverse voices. Officials suggest a revised cap—perhaps ₹55 lakh to ₹60 lakh—would remain affordable to households without disproportionately inflating subsidy outlays.

In closing, Kerala is advocating for a forward‑looking response: revising the PMAY price cap, integrating environmental standards, safeguarding subsidy integrity, and sustaining a vibrant affordable housing ecosystem that supports equitable, climate‑friendly, and gender‑inclusive urban growth.

PMAY housing price limit challenged by Kerala builders