PMAY(U) Scam Exposes Union Govt’s Failure in Implementing Housing for All Scheme

Hyderabad: The recent FIR registered by the Central Bureau of Investigation (CBI) on March 24 against the directors of Dewan Housing and Finance Ltd (DHFL) and several unnamed officials for alleged fraud related to the central government scheme of housing for urban poor, Pradhan Mantri Awas Yojana (Urban) [PMAY(U)] – to the tune of thousands of crores – throws the spotlight on the fraudulent processes involved in the implementation of the flagship scheme of the Bharatiya Janata Party government.

During the period when the DHFL was allegedly defrauding the scheme, the Union Ministry of Housing and Urban Affairs had awarded the DHFL as the ‘Best Performing Primary Lending Institution Under CLSS (Credit Linked Subsidy Scheme) for MIG (Middle Income Group)’ for 2018-19. This is one of the awards that the Ministry grants to the stakeholders implementing PMAY(U) for better performance. 

The scam unearthed by the CBI raises doubts on both, the role of the institutions including the National Housing Bank and the Union Ministry of Housing and Urban Affairs in implementing the scheme, and on the performance of the scheme as claimed by the Union government while exposing the failure of government scrutiny.

In March 2020, the CBI began its investigation against DHFL, its promoters Kapil Wadhawan and Dheeraj Wadhawan, among others and subsequently arrested them for allegedly swindling Rs 3,700 crore loan amount raised from Yes Bank to a web of shell companies. Separately, the Enforcement Directorate (ED), the Serious Fraud Investigation Office (SFIO) and the Securities Exchange Board of India (SEBI) are also probing the non-banking financial company for alleged illegal financial irregularities.

Also read: DHFL Case: Auditor Grant Thornton Unearths Another Fraud Transaction of Rs 6,182 Cr

The CBI stated that the fresh case against DHFL promoters and unidentified public servants, is based on the new revelations of an forensic audit by auditor firm M/s Grant Thronton which audited the books of DHFL. According to the FIR, the audit report found that there was a non-existent Bandra branch of DHFL in which a whopping 2.6 lakh “fake and fictitious” home loan accounts were created between 2007 and 2019 for a total loan amounting to Rs 14,046 crore. 

“The branch created fake accounts using names of account holders who had already repaid loans in full to siphon off Rs 11,750 crore. Coding was done with the help of three software platforms to camouflage these transactions,” found the audit report. 

According to the CBI FIR, several of the bogus accounts in Bandra branch were opened under PMAY(U) and interest subsidies were claimed from “National Housing Bank with connivance of officials (of the bank) and thus committed fraud on the government exchequer”. 

Under the PMAY(U) scheme which was launched in 2015, the government grants financial assistance for economically weaker sections and low income groups through four different housing options. As per one of the options under the scheme, loans are granted to beneficiaries for buying housing units from private or public housing companies, through credit linked interest subsidy. 

Housing finance companies such as DHFL, grant loans to the beneficiaries (maximum loan amount eligible under the scheme id Rs 24 lakh) in accordance with the scheme guidelines. 

“DHFL, in an investors’ call with institutional investors or analysts of the company, itself claimed that till December 2018, it has processed 88,651 cases under PMAY scheme. It received Rs 539.40 crore interest subsidy and has to receive interest subsidy of Rs 1,347.80 crore, total Rs 1,887.20 crore from the Government of India on the loans disbursed by it under the PMAY scheme,” states the CBI FIR.

It is pertinent to note that the amendments made to the guidelines of the PMAY(U) scheme in 2017 by the Ministry of Housing and Urban Affairs had benefited DHFL in claiming the highest government subsidy under CLSS for MIG option of the scheme during 2018-19 as it was awarded for the same by the Ministry.

As per the amendments, the definition of the beneficiaries was broadened and the coverage area under the scheme was extended. However, the Ministry stated that the amendments were made based on the feedback from stakeholders including state governments, central nodal agencies for CLSS and HUDCO.

Also read: DHFL Scam: SEBI Takes Action Against 12 DHFL Promoters for Fraudulent Transactions

The scam also raises doubts over the PMAY(U) scheme achievements as claimed by the government. As per the Union Ministry, as on March 22, 2021, a total of 1.11 crore houses were sanctioned under various housing options of the scheme of which 45 lakh houses were completed. The central government has so far released Rs 93,433 crore as central assistance under the scheme. According to the government data, the construction of houses has increased significantly in the last two years – from 12.5 lakh completed houses in December 2018 to 45 lakh completed houses in March this year.

At the launch of the scheme in June 2015, PM Modi initially set up a target of constructing 2 crore houses by 2022 which was later reduced to 1 crore.

However, the CBI probe into DHFL has now raised questions over the performance and failed scrutiny of the Union government in the implementation of the scheme as an Aadhaar-based authentication system was made mandatory for the purposes of availing benefits under the scheme. 

After a series of financial irregularities emerged related to the transactions of DHFL, in November 2019, the Reserve Bank of India (RBI) superseded the DHFL board and appointed R Subramaniakumar as an administrator following which insolvency proceedings against the entity began in the National Company Law Tribunal (NCLT), Mumbai. Reportedly, the RBI in February, has approved a resolution plan submitted by the Piramal Group to the NCLT to revive the DHFL.

The total bank loans raised by the DHFL amounted to Rs 97,000 crore. Of this, about Rs 31,000 crore was allegedly siphoned off to shell companies.

Also read: ED Finds DHFL Misappropriated Funds Worth Rs 25,000 Crore