PMAY-U 2.0 and the Rental Revolution: Can Indian Cities House the Mobile Poor?

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PMAY-U 2.0 and the Rental Revolution: Can Indian Cities House the Mobile Poor?

PMAY-U 2.0 and the Rental Revolution: Can Indian Cities House the Mobile Poor?

For decades, India’s urban housing policy has been anchored in the dream of homeownership. While the Pradhan Mantri Awas Yojana – Urban (PMAY-U) successfully sanctioned millions of houses for the urban poor, a critical segment of the population remained largely underserved: the mobile workforce. These are the circular migrants, industrial workers, and service providers who power our cities but do not seek permanent ownership. With the official launch of PMAY-U 2.0 on September 1, 2024, the narrative is shifting. The introduction of a dedicated Affordable Rental Housing (ARH) vertical marks a significant policy evolution, acknowledging that for a city to be truly inclusive, it must offer flexible tenure options alongside asset ownership [1].

The scale of the challenge is immense. As of July 13, 2026, over 127.68 lakh houses have been sanctioned under the PMAY-U missions, with 16.20 lakh units already approved under the 2.0 phase [1]. However, the question remains: can this new rental focus finally bridge the gap for India’s 450 million internal migrants? As discussed in my previous post on Delhi Master Plan 2047, the pressure on urban land requires us to think beyond traditional housing models toward more dynamic, high-density solutions.

Comparison of PMAY-U 1.0 vs 2.0 focus areas
Figure 1: The shift from ownership-centric planning to a balanced rental-ownership ecosystem under PMAY-U 2.0.

The Ownership Obsession vs. The Rental Reality

Traditional urban planning in India has often suffered from a "sedentary bias," assuming that every urban resident wants to buy a home and stay put. This ignores the reality of the "mobile poor"—workers who move between rural homes and urban jobs depending on seasonal demand. For these individuals, a 30-year mortgage is not a solution; a clean, safe, and affordable bed near their workplace is. The Affordable Rental Housing Complexes (ARHCs), initially launched as a sub-scheme during the pandemic in 2020, were the first formal step to address this. Yet, by April 2025, government data showed that fewer than 42,000 rental units had been completed nationwide [2]. The transition to PMAY-U 2.0 aims to scale this by integrating rental housing into the core mission rather than keeping it as a peripheral sub-scheme.

PMAY-U 2.0: What’s New for Rental Housing?

PMAY-U 2.0 expands the scope of the mission to support an additional 1 crore beneficiaries. The ARH vertical specifically targets urban migrants, industrial workers, and working women through two primary models. The first involves converting existing vacant government-funded houses into rental complexes through Public-Private Partnerships (PPP). The second model encourages private and public entities to construct new rental housing on their own land, incentivized by government grants and tax concessions [1]. This multi-pronged approach is essential because, as noted in the debate on urban density, we cannot solve the housing crisis solely through horizontal expansion.

Table 1: Evolution of PMAY-U Housing Models

FeaturePMAY-U 1.0 (2015-2024)PMAY-U 2.0 (2024-Present)
Primary GoalOwnership through Credit Linked Subsidy and BLC.Balanced mix of Ownership and Affordable Rental Housing.
Target AudienceEWS/LIG families with permanent residence intent.Migrant workers, industrial labor, and mobile workforce.
Housing TypologyIndividual Dwelling Units (DUs).DUs and Dormitory-style accommodation.
FinancingDirect subsidies to beneficiaries.PPP models and ₹2,500 Cr for industrial housing [2].

The Dormitory Model: A Solution for Industrial Clusters

One of the most promising aspects of the new policy is the emphasis on dormitory-type accommodation. The Union Budget 2024-25 committed ₹2,500 crore specifically for rental housing for industrial workers through PPP modes [2]. This aligns with the 2024 Niti Aayog report, 'SAFE Accommodation,' which advocated for site-adjacent housing to support manufacturing growth and worker welfare [2]. By providing housing within or near industrial clusters, cities can reduce the commute burden on workers and improve industrial productivity. This is a crucial step toward creating "live-work" environments that are more sustainable and inclusive.

The Implementation Gap: Lessons from ARHCs

Despite the policy intent, the slow progress of the initial ARHC scheme serves as a cautionary tale. The conversion of vacant government houses has been hampered by poor location—many were built on the urban periphery with no access to livelihoods or transport. For rental housing to succeed, it must be centrally located. As we have seen with municipal infrastructure finance, the success of these projects depends on their operational viability. Private developers are often hesitant to enter the rental market due to low yields and the complexities of managing tenant-landlord relationships in a social housing context.

Planning for Mobility: Decoupling Tenure from Documentation

A fundamental shift required in our planning framework is the decoupling of housing eligibility from permanent city documentation. Most social housing schemes require proof of long-term residence, which effectively excludes the very migrants who need the housing most. PMAY-U 2.0 must address this "sedentary bias" by allowing circular migrants to access formal tenure without needing to prove permanent intent [2]. This requires a digital-first approach to tenant management and a more flexible understanding of "urban citizenship."

Recommendations for Urban Local Bodies (ULBs)

For PMAY-U 2.0 to deliver on its promise, Urban Local Bodies and planners must take proactive steps:

  • Zoning Reforms: Introduce specific zoning for 'Dormitory-style Housing' and 'Social Rental Housing' in Master Plans to ensure these typologies are legally recognized and encouraged.
  • Affordable Housing Zones (AHZs): Designate AHZs specifically within industrial clusters and near transit corridors to minimize the distance between residence and livelihood.
  • Incentivizing the Private Sector: Offer 'Private Sector Parity,' including FSI boosts up to 50% and Transferable Development Rights (TDR) to incentivize developers to build and manage rental stock [4].
  • Operational Management: Partner with specialized social housing management agencies to handle the day-to-day operations of rental complexes, ensuring they do not fall into disrepair.
"Urban Local Bodies must introduce specific zoning for 'Dormitory-style Housing' and 'Social Rental Housing' in Master Plans to accommodate a transient workforce."

Frequently Asked Questions (FAQ)

Who is eligible for rental housing under PMAY-U 2.0?

The Affordable Rental Housing vertical targets urban migrants, industrial workers, street vendors, and working women who do not own a house in the city of their employment.

How is the rental housing funded?

It uses a mix of models, including the conversion of vacant government-funded houses and new construction through Public-Private Partnerships (PPP) with government grants and tax incentives.

What is the difference between ARHC and PMAY-U 2.0 rental housing?

ARHC was a sub-scheme launched during the pandemic, while the rental vertical in PMAY-U 2.0 is a core component of the mission with expanded funding and a focus on dormitory-style units for industrial workers.

References

  1. PIB (July 27, 2026). "PMAY-U 2.0 Launch and Sanction Progress." https://www.pib.gov.in/PressReleasePage.aspx?PRID=2289996
  2. India Development Review (August 26, 2026). "Reimagining Urban Housing for Migrant Workers." https://idronline.org/article/urban/reimagining-urban-housing-for-migrant-workers/
  3. The Secretariat (2026). "PMAY 2.0: Hits, Misses, and Obstacles to Affordable Housing in States." https://thesecretariat.in/article/pmay-2-0-hits-misses-obstacles-to-affordable-housing-in-states
  4. Ministry of Housing and Urban Affairs. "Affordable Rental Housing Complexes (ARHCs) - About." https://pmay-urban.gov.in/arhc-about

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