PMAY-U 2.0 Drives Digital Revolution Among Urban Poor

The Pradhan Mantri Awas Yojana-Urban 2.0 (PMAY-U 2.0) is not just realizing the home ownership dreams of millions of urban poor and middle-class families. It is also instigating a significant shift in digital payment behaviors, according to a recent study by the State Bank of India (SBI). With affordable housing loans at subsidized interest rates, PMAY-U 2.0 is spurring both discretionary and non-discretionary spending, says the research report.

Describing PMAY-U 2.0 as a 'change agent,' the report credits the scheme with improving financial stability and well-being by promoting a wealth effect. Financial inclusion is expanding as affordable housing instills a sense of long-term security. Launched on September 1, 2024, PMAY-U 2.0 aims to assist one crore urban families within the Economically Weaker Section (EWS), Low-Income Group (LIG), and Middle-Income Group (MIG).

The study highlights a surge in digital transactions, particularly UPI payments, among PMAY beneficiaries. UPI spending increased by Rs 5,050 monthly after loan disbursement, rising from Rs 40,032 to Rs 45,081, reflecting a wealth effect and enhanced financial confidence. In contrast, debit card usage remained mostly unchanged, suggesting sustained non-discretionary spending alongside increased discretionary digital payments.

The perceived wealth effect of owning homes under subsidized interest conditions emerges as a pivotal factor behind this change. Many borrowers, especially those with lower incomes, perceive financial empowerment as housing costs decline relative to market rates, creating liquidity for other expenses. Notably, female borrowers exhibited the most significant spike in digital payments, aligning with PMAY's directive to register properties in the name of a female head of household or jointly. Women's average UPI spending rose by Rs 7,522 post-loan, nearly double compared to male borrowers.

This report emphasizes PMAY's gender empowerment impact by linking property ownership with heightened digital financial engagement. Urban and semi-urban borrowers made the largest UPI transaction gains, increasing by Rs 6,093 and Rs 8,848, respectively. However, metro borrowers experienced slight declines potentially due to higher living costs. With over 1.2 crore homes sanctioned and 75% construction achieved, PMAY-U 2.0 is not only a triumph in housing but also a crucial element in India's digital economy, enriching the formal financial sector for low-income households. (ANI)