PMAY Must Include In Built Credit Linked Insurance For Borrowers

India's top industry chamber -Confederation of Indian Industry (CII) has suggested that the Central government should relaunch the Pradhan Mantri Awas Yojana (PMAY) with an in-built credit-linked insurance cover for the borrowers.

As per the industry body, the PMAY scheme, which aims to provide housing for all by 2022, 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.

CII Director General Chandrajit Banerjee 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."

Affordable housing is one of the vital components of economic growth, provided the prevailing impediments of untimely death of the borrower and impact on the residual loan, the status of the home and family in case of such exigency are dealt with, he added.

"Now with the pandemic affecting lives and livelihood of the Indian 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, 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, according to CII. The in-built level cover equal to the loan amount could be taken by the borrower at the inception.

CII has made presentation on the same to the Finance Ministry, the IRDAI and the National Housing Bank.

As per the current version of the scheme, the banks or lenders are partially protected as the property is mortgaged with them, but the family is left to pay the loan or lose their home.

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 or banks may be left behind with some NPAs and recoveries having a cascading effect on economic growth.

CII has suggested that with a view to ensure continuous success of the PMAY scheme, the government must consider a relaunch of this scheme with an in-built credit linked insurance cover for all loans which utilises the benefits of Pradhan Mantri Awas Yojana.

"This 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 dream home. It will also ensure that the banks or lenders are secured from any financial impact due to the death of the primary borrower," it said in a statement.