Union Cabinet approves to build 20 million New Rural Homes by FY25

Last week, the Union Cabinet approved the construction of 20 million new rural homes over the next five years starting in FY25.

However, the allocated assistance per unit is set at Rs.120, 000 for plains and Rs.130,000 for hills, which is lower than the Rs.200,000 and Rs.220,000 per unit mentioned in the FY25 Budget footnote from the Ministry of Rural Development.

The Budget footnote stated, "Beneficiary households currently receive unit assistance of Rs.1.2 lakh in plain areas and Rs.1.3 lakh in Integrated Action Plan (IAP) districts, hill regions, and North-Eastern states. However, from FY 2024-25 onwards, this assistance will be increased to Rs 200,000 in plain areas and Rs.220, 000 in IAP districts, hill regions, North-Eastern states, and difficult areas, with a goal of constructing 20 million houses."

The total cost for constructing 20 million new houses over the next five years is estimated at Rs.418,200 crore, with the central government contributing Rs. 263,466 crore and states expected to cover the remaining Rs.154,734 crore.

The FY25 Budget had allocated Rs.54, 500 crore for the Centre's share in the first year of the five-year program. However, the Union Cabinet's decision on August 9 to maintain the per unit assistance at Rs.120, 000 for plains and Rs.130, 000 for hills appears to reduce the projected financial burden on the Central exchequer over the next five years.

According to the Cabinet decision on August 8, the revised total outlay for the rural homes program over the next five years is Rs.306,137 crore, nearly 27% less than the Budget Estimates. The Centre’s share is also 22% lower, amounting to Rs.205, 856 crore.

If the final expenditure on rural houses in FY25 aligns with the amount approved by the Union Cabinet, the Centre's actual expenditure is expected to be around Rs.42, 000 crore, which is 23% lower than the Budget Estimates.