Housing For One And All

CII Seeks Mandatory Life Cove For Borrowers

The industry chamber, CII has sought mandatory life insurance cover for all borrowers under PMAY- Pradhan Mantri Awas Yojana. This will help to ensure that the intent of providing ‘Housing for All’ is not hit because of death or disability of the primary borrower. The scheme seeks to provide housing for everyone by 2022, as the country completes 75 years of Independence through this ambitious mission of the Government. PMAY, however, 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. There is a need for a re-launch of the PMAY scheme with an in-built credit linked insurance. The family should be able to inherit a home, not a loan. The addition of insurance component 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 home.

Affordable housing is one of the vital components of economic growth, provided that everyone is able to address the prevailing impediments of untimely death of the borrower and impact the residual loan, the status of the home and family in case of such exigency. With the Covid-19 pandemic hitting lives and livelihoods and with increased mortality rate, the importance of protection to families have become paramount as all sections of society struggle with higher medical costs, unemployment and inflationary pressures. It is believed that with an in-built insurance cover in the PMAY loans, the inherent lacuna of risk-protection can be plugged with minimum additional disruptions.

The scheme could have standard premium rates which could be utilised by any insurer to offer the credit cover with their partner banks, and that the in-built level cover equal to the loan amount could be taken at by the borrower at the inception. As per the current version of the scheme, the banks or lenders are partially protected as the property is mortgaged with them, however, 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/ banks may be left behind with some NPAs and recoveries having a cascading effect on economic growth.

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