The Indira Awas Yojana (IAY) housing for targeted groups in rural areas in a grant-in-aid format has recognised the need for credit support to bridge the gap between available grant and actual construction cost in a rural situation.

Although both rural, as well as urban housing (low income) segments suffer from under penetration of financial services; the urban housing segment finds it relatively easier to tap institutional finance. Rural housing is largely supported by the government funds and not linked to national or private bank coffers for financial package in the first place. While affordable rural housing has become a focus point for accelerating social development with higher amount of budgetary allocations happening at both central and state government levels financial services accelerating this power are still inadequate.

Availability of Land for Housing: lack titles for land for housing. Homestead land is a grave concern as most homesteads are non-registered or in the name of past generations or under dispute with inadequate documentation. Ownership of land is crucial for obtaining finances under government schemes and accessing the financing arrangement of banks and financial intermediaries.

Lower penetration of institutional financing: Operations in rural areas involve high cost on account of wide dispersion of customers and lack of transportation amenities. This also impacts technical support services.

Lack of stability and security in income: This increases the difficulty in assessing the borrowing capacity of the borrower. On an average, around one third of the rural household income is contributed by crop cultivation followed by labour (wages) at around 29 per cent (Source: NCAER).

Lack of awareness of latest construction technologies: Problems in procuring building materials, finding skilled labour for construction and low awareness of cost-saving technologies increases the cost of construction.

Subsidy: The subsidy provided under government schemes is generally inadequate; as a result people seek funds from other sources and augment their own savings for financing their construction/purchase.

Credit for the rural transportation sector and rural retail sector are available. However, for the other segments of rural service sector, such as cheap rural housing, drinking water and sanitation systems, the credit flow is virtually non-existent. Unless lending to these sectors is stepped up, the quality of rural life will not improve and the unending migration of rural youngsters to urban areas, in search of livelihoods and jobs, will continue.

After independence, housing was accorded a relatively low priority in the National Development Programme in India, presumably with the objective of keeping it basically a private sector activity. The low-budgetary support given to the housing sector is evident from the fact that the First Five Year Plan of India allocated 7.4 per cent of the total plan resources for housing; the share of housing in the subsequent plan resources ranged between 1.2 per cent and 4.9 per cent. The governmental agencies, however, played a strong supporting role for the provision of housing for the poorer sections of the society, including allocation of land. Over the years, there has been a gradual shift in the role of the government from a ‘provider’ to a ‘facilitator’, ensuring access to developed land, basic services, building materials, technology, construction skills and finance so that housing can be undertaken as a people’s programme.

The facilitating approach aims at fostering strong public-private partnerships with the provision of appropriate incentives to the private sector, promotion of housing finance institutions, propagation of alternate building materials and technologies and extension of support to NGOs, CBOs, co-operatives and the private sector. The broad elements of the approach of the Government of India to tackle the problem of housing for the poor are: special programmes/targeted subsidy to the poor and vulnerable groups, loan assistance to governmental agencies/beneficiaries at below-market interest rate for housing and at normal rate for infrastructure through the Housing and Urban Development Corporation (HUDCO), creation of housing assets as part of employment and income generation programmes, promotion of cost-effective and eco-friendly building materials and technologies and creation of an enabling environment for private sector initiative.

Building materials account for about 60 per cent of the basic input in any housing programme and their costs can go as much as 75 per cent of the cost of a house for low-income groups. There is a growing concern that persisting shortage of cost-effective building materials for the vast majority of population is a serious impediment to improving the housing conditions of the people. While popular traditional materials are short in supply, high demand for them has resulted in their high prices and taking them out of the reach of the poor. In addition, conventional materials are energy and material resource intensive. Most of the new materials developed in recent past are cost-effective and environment-friendly. However, they are yet to be translated into marketable products for mass application. Except cement and steel, all other materials required for housing are likely to have constraints of supply.

Keeping the above aspects in view, the Government of India and many state governments have been promoting research in the fields housing and construction activities. This has led to a number of new alternative building materials and techniques aimed at reducing the cost of house construction and improving the performance of conventional building materials and techniques. Energy-efficient manufacturing processes and use of renewable raw material resources of wastes and byproducts of industry, agriculture and forestry, etc., have resulted in Cost-Effective and Eco-Friendly (CEEF) products. As it was seen, the use of CEEF building materials and techniques was hampered by the general lack of understanding on the part of beneficiaries due to ignorance and illiteracy. Rural masons are considered as the "rural housing engineers" by the beneficiaries and therefore training and motivating masons in addition to beneficiaries becomes imperative.

Under the budgetary initiatives in recent years, housing and construction have emerged as ‘top priority’ sectors for policy-makers. Faced with recession and slow-down of economic activities, the Government of India has realised that the construction industry can play a key role in jump-starting the economy and provide gainful employment to people. Housing construction has many forward and backward linkages and about 280 industries are directly or indirectly linked to housing activities. Moreover, construction is the second largest employment-generating sector in the country, next only to agriculture.

The campaign and proposal for the National Housing and Habitat Policy 2007 clearly recognises the role of the government as a ‘facilitator’ and a catalyst for promoting the development of housing in the country rather than a ‘provider’. The report takes note of the substantive gap between demand and supply, both for housing and basic services and gives a menu of actionable points which inter-alia includes promotion of Public-Private-Partnerships to facilitate the housing development.

Rural Housing has so far received impetus mainly on account of the special schemes designed by the central and state governments and housing credit by Nationalised and Rural Banks (RRB and SCARDB). The role of HFCs has been limited in this space as they have preferred to concentrate on urban areas. Microfinance companies have also commenced rural housing credit on an experimental basis, but are yet to make a meaningful contribution.

Both government and non-governmental organisations had been putting efforts to meet this challenge of facilitating the process leading to housing for the rural poor and are grappling with set of challenges. Development Alternatives has been working intensively to institutionalise a sustainable model for delivery of habitat products and services in Bundelkhand. For achieving the same, DA has developed a host of cost-effective and environment-friendly building products, sanitation systems and water purification systems. A network of local artisans - TARA Karigar Mandal- has been set up and is managed by Development Alternatives (DA). TARA Nirman Kendra (TNK) - a local building material production hub of DA provides habitat products and services to rural families in Bundelkhand.

Development Alternatives has collaborated with FEM and its partners Fondazione Maria Enrica, Associazione Microfionza e Sviluppo and Associazzione Riflessi to develop micro entrepreneurial models and services for the socio-economic development of the working poor in India. Presently in its initial stage, the project has been undertaken in the Bundelkhand area. This project forms a part of the larger rural habitat programme of The DA Group in the area.

The model will be implemented through specific action on four critical fronts (mentioned here as Drivers for Change) that have emerged, in DA’s experience, to be the critical factors, which can drive sustainable habitat delivery for the disadvantaged rural community in Bundelkhand. The following four factors are components of an integrated approach for delivery of rural habitat.

1. Availability of technology and efficient delivery mechanisms to ensure that technology options reach the users at affordable costs

2. Capacity building - knowledge and skills - of artisans and communities

3. Market creation (catalysing demand) and awareness for eco-building products, and

4. Availability of appropriate credit and bridging funds linked to eco-construction, to enhance its demand.

The comprehensive rural habitat model will put in place systems and processes that will enable action along the four drivers of change, mentioned above. The following are components of the model –

Eco-house options have been designed on the principles of low-energy construction to minimise the ecological burden of construction. This is being achieved by rationalising the use of both high-energy materials, which are commonly used to build durable houses and the local resource base of the region.

The mason or the building artisan, the untrained architect and engineer rolled into one, is a critical link in the delivery of rural habitat and therefore is an intrinsic part of the delivery model. A significant component of the programme is the training of these "delivery agents" as skilled workforce, as well as supervisors of construction and guides to customers/homeowners.

The two physical assets in the project - houses and toilets - will be constructed by manpower trained in the project, with quality control being supervised by trained mason supervisors guided by the project team. The role of a trained supervisor is specific, but a critical one, for ensuring quality of construction, especially in the use of alternative building technologies.

The project will serve to strengthen the building material production base in the region through the micro-enterprise route.

One of the most important components of the habitat delivery model is a credit mechanism, which enables disadvantaged rural families, with incomes of less than 40 Euro per month ((Rs 2433/month), to access adequate and safe habitat.

The following outcomes are envisaged through the project in three years-

At present, the project has, through engagement with the local Madhya Bharat Gramin Bank, developed loan products for rural families. The loans are expected to be disbursed very soon and there are high expectations amongst families and other stakeholdes for replicable models that would emerge from this experience.

The central theme of this initiative is to facilitate the implementation of a sustainable habitat delivery model for the rural community, in the socio-economic context of Bundelkhand. Addressing the gaps (availability of credit-flow linked to eco-construction; demonstration of eco-friendly technology options; and system for securitisation of micro-loans for the poor) will be core strategy in successful implementation of this delivery model aiming to provide ‘Affordable Green Habitat for the Rural Poor’. q

(Endnotes)
i Housing for Poor in India, Centre for Good Governance CGG Working Papers - 4/2003
Rural and Affordable Housing – Prospects and Challenges, CARE Ratings, Housing Finance Research
ii Rural and affordable Housing - prospects and Challenges, CARE Ratings, Housing Finance Research
iii Conference on Drivers and Challenges in India’s Rural Housing Development Program November 25, 2008 NCAER and Holcim

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