Affordable Housing Fund (AHF) Scheme

The Affordable Housing Fund (AHF) Scheme is a government-backed initiative established to promote affordable housing projects in India. The scheme primarily aims to address the housing shortage among Economically Weaker Sections (EWS) and Lower Income Groups (LIG). The initiative intends to increase housing options for and by offering funding to housing finance companies at reduced interest rates.

 

This scheme contributes to the Government of India’s mission to ensure 'Housing for All' by making homes more accessible and affordable for underserved communities.

 

Under this scheme, funds are allocated from the priority sector lending shortfall of commercial banks and channelled through the National Housing Bank (NHB). These funds are then used to finance affordable housing projects or provide loans to individuals in need of housing.

 

By reducing the cost of funds for lenders, the AHF Scheme makes it feasible to offer home loans at lower interest rates, enabling more people to purchase or construct homes. This initiative aligns with the government's broader objective of ensuring ‘Housing for All’ under the Pradhan Mantri Awas Yojana (PMAY).

The Affordable Housing Fund (AHF) Scheme was introduced with the following key objectives:

Promote Affordable Housing

Support the development of affordable housing projects to bridge the housing gap, particularly for EWS and LIG.

Enhance Financial Accessibility

Provide low-cost funding to housing finance companies, cooperative banks, and commercial banks, enabling them to extend affordable home loans.

Support the Government’s Housing Mission

Aligned with the 'Housing for All' initiative under the Pradhan Mantri Awas Yojana (PMAY) to provide homes to underserved and low-income households.

Encourage Private Sector Participation

Motivate private players to invest in affordable housing projects by reducing financing constraints and boosting demand.

Focus on Rural and Urban Housing

Ensure balanced development by promoting affordable housing in both rural and urban areas, addressing housing shortages in diverse regions.

Facilitate Economic Growth

Stimulate the real estate and construction sectors, contributing to employment generation and overall economic development.

Here are the key features of Affordable Housing Fund scheme:

Funding Sources

Utilises Priority Sector Lending (PSL) shortfalls from banks, managed by the National Housing Bank (NHB).

Affordable Housing Financing

Provides low-cost funds to institutions, enabling affordable housing loans and refinancing through NHB.

Target Beneficiaries

Focuses on EWS, LIGs and people in underserved rural and urban areas.

Focus Areas

Prioritises both rural and urban affordable housing projects.

Interest Rate Benefits

Provides concessional funding to institutions, leading to reduced loan interest rates for borrowers.

Alignment with PMAY

Actively supports the 'Housing for All' initiative by funding affordable housing developments.

Increased Access to Housing

Provides low-income households, particularly EWS and LIG segments, with affordable home loan options, improving housing accessibility.

Boost to Affordable Housing Projects

Encourages developers to undertake affordable housing projects by reducing financing constraints and increasing demand for such projects.

Support for 'Housing for All'

Contributes to the government's mission of achieving universal housing by addressing housing shortages in rural and urban areas.

Lower Loan Costs

Enables lending institutions to offer reduced interest rates on housing loans, making home ownership more achievable for underserved communities.

Balanced Regional Development

Focuses on rural and urban housing, reducing disparities in housing availability across regions.

Economic Growth

Stimulates the construction and real estate sectors, generating employment opportunities and driving economic development.

Incentive for Private Players

Attracts private sector participation by improving the financial viability of affordable housing projects.

Improved Living Standards

Helps families in low-income groups transition from inadequate housing to safer, more secure homes, enhancing their overall quality of life.

Underutilisation of Funds

Challenge

Difficulty in ensuring full utilisation of allocated funds due to administrative inefficiencies or lack of eligible projects.

 

Solution

Streamline fund allocation processes and promote awareness among lending institutions about the scheme.

Reaching the Underserved

Challenge

Limited penetration in remote rural areas and smaller towns where the housing need is greatest.

 

Solution

Strengthen partnerships with regional rural banks (RRBs) and cooperative banks to expand coverage.

Administrative Hurdles

Challenge

Complex documentation and slow approval processes delay fund disbursement.

 

Solution

Simplify the application and verification processes with digitisation and standardised procedures.

Limited Awareness

Challenge

Lack of knowledge about the scheme among target beneficiaries and developers.

 

Solution

Conduct awareness campaigns and workshops to educate communities and stakeholders.

Here is a quick comparison between AFH and other similar schemes:

Funding Mechanism

The AHF is primarily funded through priority sector lending shortfalls and fully serviced bonds by the government, allowing for long-term, low-cost financing specifically for affordable housing projects.

 

Other housing schemes, like the Pradhan Mantri Awas Yojana (PMAY), rely on direct subsidies and incentives for beneficiaries rather than a dedicated fund for developers.

Target Audience

Focuses on providing financial support to developers who construct affordable housing units aimed at economically weaker sections (EWS) and low-income groups (LIG).

 

PMAY, for example, offers direct benefits to individuals, including credit-linked subsidies for homebuyers based on their income levels, thereby addressing both supply and demand sides of housing.

Incentives for Developers

Provides various incentives such as tax benefits, reduced GST rates, and extended project completion timelines to encourage developers to focus on affordable housing.

 

While PMAY also provides incentives, its focus is more on the end-users rather than directly developers through a dedicated fund.

Scope of Application

Specifically targets the construction of new affordable housing units by providing refinancing options to financial institutions that lend to these projects.

 

Many other schemes also include renovation or upgrading of existing housing structures, which is not the primary focus of the AHF.