India plans to hike rural housing subsidies to over $6.5 bln after election setback, sources say (updated)

Housing and Urban Development

03/07/2024 11:12

(Adds share movement in paragraph 5 after Reuters report)
    By Manoj Kumar
       NEW DELHI, July 3 (Reuters) - India plans to increase
state subsidies on rural housing in the upcoming federal budget
by as much as 50% from the previous year to more than $6.5
billion, after setbacks for the prime minister's party in
elections, two government sources said.
    The planned hike in housing subsidies is part of a broader
government initiative to boost spending on rural infrastructure
including village roads and a jobs programme to help millions of
young people stuck in the agriculture sector amid limited
manufacturing jobs. 
    If approved, it would mark the largest annual increase in
federal spending on the rural housing programme since its
inception in 2016.
    "The government is worried over widespread rural economic
distress, driven by higher food inflation and sluggish growth in
 farmers' incomes," said one of the government sources with
knowledge of budget discussions.
        Shares of Housing and Urban Development Corp  HUDC.NS 
rose as much as 9% after the Reuters report, while Aadhar
Housing Finance  AADA.NS  and GIC Housing Finance  GICH.NS  rose
around 4.5%.
  
        Prime Minister Narendra Modi's Bharatiya Janata Party
(BJP) is having to rely on allies to run the government for the
first time in a decade, after the opposition did much better
than expected in a bitterly fought national election that ended
last month.
    Under the PM Awas Yojna(Rural) housing scheme, the 
government aims to facilitate construction of an additional 20
million houses over the next few years, after providing aid for
more than 26 million homes for poor households over the past
eight years.
    Finance Minister Nirmala Sitharaman is expected to announce
details of plan during the budget presentation later this month.
    "We expect a substantial increase in allocations for several
rural schemes this year, including housing, roads and jobs
programme," said the second government source, noting federal
subsidies for rural housing could exceed 550 billion rupees
($6.58 billion), up from 320 billion rupees last fiscal year.
        He said state spending on the rural jobs programme was
expected to increase substantially from an earlier estimate of
860 billion rupees, but the government may seek parliament
approval for this additional spending later, not as part of the
budget.  
    He said a separate proposal for increasing spending on
village roads was also under consideration, from earlier
estimates of 120 billion rupees in the current fiscal year. 
    Both sources spoke on the condition of anonymity as they
were not authorised to discuss budget proposals with the media. 
    During pre-budget consultations, economists and industry
leaders urged the government to ramp up rural spending to
stimulate consumer demand, noting that private consumption was
growing at half the pace of nearly 8% annual economic growth. 
    The sources said to build 20 million houses for the poor in
the rural areas, the federal and state governments are expected
to allocate up to 4 trillion ($47.89 billion) over the next few
years, with the federal government contributing around 2.63
trillion rupees.
    A finance ministry spokeswomen didn't comment when asked
about spending plans. 
    Last month, shortly after assuming office, Modi's cabinet
announced plans to assist in the construction of 30 million
houses in rural and urban areas, without disclosing financial
details.
    The Ministry of Rural Development has proposed increasing
state subsidies to about 200,000 rupees ($2,395) per housing
unit, up from 120,000 rupees previously, citing rising costs of
raw materials, the second official said. 
        
($1 = 83.5315 Indian rupees)

 (Reporting by Manoj Kumar;Additional reporting by Aftab Ahmed;
Editing by Kim Coghill)
 ((manoj.kumar@thomsonreuters.com; +919810286200;
Twitter:@manojgulnar;))