PMAY 2.0 Reveals Surprising Shift: How Home Loans Boost Digital Payments

The scheme, which provides affordable housing loans at subsidized interest rates, has become a catalyst for enhancing both discretionary and non-discretionary spending, says the report.

"PMAY is now acting as a change agent with it becoming a catalyst for enhanced discretionary and even non-discretionary spending with a demonstrated wealth effect, financial stability & well-being," noted the report. SBI Research attributes these trends to increased financial stability and inclusion, as access to affordable housing creates a sense of long-term security.

Launched on September 1, 2024, PMAY-U 2.0 aims to provide central assistance to one crore eligible urban families belonging to the Economically Weaker Section (EWS), Low-Income Group (LIG), and Middle-Income Group (MIG).

The study reveals that digital transactions, particularly UPI payments, have surged significantly among PMAY beneficiaries. On average, monthly UPI spending by borrowers increased by Rs 5,050 after loan disbursement, rising from Rs 40,032 to Rs 45,081, indicating a strong wealth effect and improved financial confidence.

However, interestingly, debit card spending remained largely stable, suggesting that while non-discretionary expenditure held steady, discretionary digital payments saw a marked rise.

According to the report, the perceived wealth effect of home ownership under subsidised interest rates plays a central role in this behavioural shift. Borrowers, especially at the lower end of the income spectrum, feel financially empowered as housing costs decline relative to market rates, freeing up liquidity for other transactions.

The report also finds that female borrowers demonstrated the most pronounced increase in digital payments. In keeping with PMAY's condition that the property must be registered in the name of a female head of household or jointly with her spouse, the average UPI spending among women rose by Rs 7,522 post-loan, almost double that of the rise seen among male borrowers.

"This conditionality has positive aspect on spending. The average monthly change of UPI spending of female borrowers is almost double than the male borrowers" the report noted.

This finding highlights the gender empowerment dimension of PMAY, linking property ownership with enhanced digital financial participation.

Further, borrowers from urban and semi-urban regions witnessed the largest gains in UPI transactions, increasing by Rs 6,093 and Rs 8,848, respectively. But metro borrowers showed marginal declines, likely due to higher living costs.

With over 1.2 crore houses sanctioned and 75 per cent construction completed, PMAY-U 2.0 is emerging not only as a housing success story but also as a key driver in India's digital economy, deepening the formal financial ecosystem for lower-income households.

- ANI