Experiences in
Rural Housing
Delivery and Finance
Presentation to
National Housing Bank
February 18th, 2011
Development Alternatives Group
Structure
 Rural housing issues and
challenges
 Finance for accelerating
housing development
 Rural housing finance –
experiences
 Gaps and potential
Enabling basic need of shelter
for rural communities
Rural housing issues and challenges
Scale and character
 Dispersed settlements, poor
connectivity, small volumes per
village, not aggregated for the
purpose of housing
 Low and unstable income
streams, often migrate for short or
long periods
 Large gap – large need, demand
is latent
 Wary of long term and large loans
 Inadequate collaterals,
guarantors, land titles, and bank
connectivity
Rural housing issues and challenges
Scale and character
 Piece-meal approach to
construction, standard designs
difficult – new construction
must fit into exiting space.
 Self construct in terms of labour
and collected materials (~30%),
local skilled labour (20%) and
bought materials (50%)
 Extremely price sensitive,
 Poor information about
possibilities of housing credit
and new technology
Rural housing issues and challenges
Availability concerns
 Inadequate availability of materials at scale
– both quality and quantity
 “pucca” as in conventional RCC out of
reach of poor families
 “pucca” – ecologically damaging - energy
and resource intensive
 Eco-friendly and cost efficient technologies
and services not available at scale,
services not available therefore more
expensive than conventional “pucca”
 Appreciation of new cost effective and ecofriendly technologies not there because of
lack of promotion and demonstration
Rural housing issues and challenges
Ecological and social
concerns
 Resource scarcity
 Energy intensity and CO2 emissions
 Pollution and wastes
 Disaster safety – quality and know – how
 Job creation
 Skill building
Key constraints in financing
 Land and identity
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Large proportion of households is landless
Village lands are generally fully used up for housing
Buying land implies higher cost of housing
Market for house sites is poorly developed and non-agricultural land titles are
difficult to establish – paperwork for KYC norms and NOCs are time consuming
 Materials and Technology
 The alternative technologies or building materials have not reached rural India
 Feasibility of prefabricated products and/or low cost alternative materials for
construction yet to be fully explored
 Skills and Information
 Formally trained masons, carpenters, electricians or plumbers are not available
in rural areas. This leads to inefficient use of resources and may also lead to
unsafe houses.
 Building contractors appropriate for rural areas yet to appear in large numbers
 Financing
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Irregularity of incomes / inadequate information on credit history
Land Title issues
Housing loans are long term and large – non productive
High interest of mfi loans, low servicing of hfcs and banks
Rural housing issues and challenges
Some responses
 Housing and public buildings in rural
areas can together form a market that
can provide scale
 Local skills can be upgraded towards
sustainability
 Local production of many new
technologies is viable at small and
medium scale – provided basic
production infrastructure is available
 Customized financial products suitable
for rural communities
Response required- looking to the future
 Reduce environmental costs
 Build local capacities
 Increase value to customer
Market
Creation
 Reduce costs of delivery –
decentralize supply
Sustainable
Habitat
Activity
 Aggregate the customer
 Introduce appropriate financing
instruments / arrangements while
reducing unit costs
Finance
Capacity
Building
Technology
 Introduce cost effective techniques
Response required
 Reach to the customer in the
remote village and small town
 Make materials and skills
available and accessible
 Seek new resources
 Make construction
technologies and indeed the
sector – Green
 Deal with housing for the poor
/IAY as a priority sub-set of
integrated rural housing and
infrastructure
Technology solutions: for walling
 Stabilized Compressed Earth
Blocks
 Concrete Blocks
 Fly-Ash based Blocks
 The Vertical Shaft Brick Kiln
Technology solutions - for roofing
 Micro-Concrete Roofing tiles
 Ferro-cement Roofing
channels
 RCC Planks and Joists
 Brick Arch Panel Roofing
Other elements
 RCC door and window frames
 Concrete paving systems
 Masonry Systems – domes,
vaults, jack-arches, rat-trap bond
 Water and grain storage tanks
 Roof water harvesting systems
 Smokeless cooking stoves
Finance for accelerating housing development
Demand side:
 Small quantum required:
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Rs. 30,000 to 1,00,000 for small home owners for new house construction
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Rs. 10,000 – 50,000 for up-gradation, roofing, flooring etc.
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Rs. 5,000 – 10,000 for toilets and bath construction
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EMI but savings for quarterly or six monthly top-up payments are a good idea
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Monthly outgoings not to exceed Rs. 500 and loan periods 7 years (10 years )
 Support for repayment in the form of livelihood loans and linkages accelerates
housing activity
 Technical services that would enable borrowers to take loans eg. Designs,
estimation, technology selection support, quality control and supervision supports,
paper work supports
 Connectivity to banks – opening of bank accounts
 Addressing risk – to customers and bankers – insurance, guarantees, social
guarantees, relaxing NPA norms, savings linked loans
Finance for accelerating housing development
Supply side
 Small scale enterprises for
manufacturing blocks, roofing tiles,
door-window frames, roofing elements
require financing ranging from 2,00,000
to 10,00,000
 Funds for establishing technical support
services for enterprises, skill building of
artisans, market development
promotion and linkages with supply
 Supports for preparing business reports
/ pans, credit proposals and linkage
with banks plus schemes for
establishing small businesses in
building materials supply
Rural housing finance experiences - availability
 Responding to latent demand
 Madhya Pradesh: bridge funds,
bridge loans- meeting the gap
linking with IAY, HFHI, FEM
 Aggregating customers
 Working with family clusters in
selected villages, working through
SHGs
 Design of finance products
 Working with banks (SBI, MBGB)
through NABARD support to
customize financial products to suit
needs of customer profiles
 Connecting families to finance
 Providing escort services
Rural housing finance experiences – access
 Educating the customer
–
Using demonstration, village meetings, radio,
pamphlets and wall paintings
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Organizing banker meetings
 Margin monies, leveraging part funds and
guarantees
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Insisting on registration amounts, initial savings,
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Establishing methods for evaluating self contribution in
materials and labour
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Linking with schemes
 Establishing identity
–
Paperwork for land records / sarpanch certificates
–
NOC supports for loan sanctions and paper work for
KYC
 Bundling of financial and technical services
–
Developing design options and technology options with
costs – decision support tools and assistance in
selection
Rural housing finance experiences - utilization
 Organizing supply of materials and
services
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TARA Nirman Kendra
Decentralized Micro-enterprises
TARA Karigar Mandal
Building Materials and Services Bank
Econ Enterprises
 Linking with materials and services
 Developing standard contracts between
families and masons
 Providing referral services
 Supports for repayment
 Regular motivation and peer pressure
 Linking with livelihood supports
 Collection service
 Ensuring quality in utilization
 Technical supervision
 Slab-wise payments
 Disbursal linked to service and material
providers
Rural housing finance experiences –
promoting sustainability
 Linking finance to energy and resource
efficient materials and techniques
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Demonstration through community buildings
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Making ecological quality mandatory
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Making sustainability competitive –
demonstrating quality and cost benefits
 Enabling sustainability through policy
support
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Information and technical inputs to
government of MP for revising SORs
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Supporting a large scale state level capacity
building and technology demonstration
exercise
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Providing technical supports and equipment
for production and supply of eco-building
products through building centers and
enterprises
Gaps and potential
– facilitating and supporting demand creation
 Clustering and aggregation of customers
 Mature self-help groups
 Targeted savings for housing (AP), rural housing cooperatives, Clustered IAY
savings groups
 Awareness creation
 About finance products
 About new technologies
 About materials and services delivery channels
 Bundling technical and financial services
 Technical centers linked to PLIs/ RRBs / housing loan desks in building centers /
rtechno-financial set-ups for housing loans in agri-service units
 Varied products suitable for rural poor, middle-class – housing, toilets, upgradation
Gaps and potential
- facilitating demand creation
 Sensitization and orientation of banking institutions
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Respecting time and distance constraints of customers
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Taking the service to the village
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Simpler paperwork and paper work services
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Connectivity – simply opening of accounts – using the kisan credit, NREGS routes
 Addressing land titles and insurance – reducing risk
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Land titles
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Guarantees – financial and social
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Use land title papers as notional securities
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Life and loan insurance
 Linking livelihoods with repayments
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Converging schemes of housing, SGSY etc (credit plans??)
 Dealing with leakages, improper utilization
Gaps and potential – deconstraining supply
 Financing Supply
 Enterprise development
 Linking supply centers to housing market
 Enlarging the market – bringing infrastructure and housing
together
 New models for delivery – micro-enterprises –
independent or franchised netwroks, artisan
associations, rural industrial zones for building materials
 Public – private partnerships for setting up materials
supply and services
Gaps and potential –promoting sustainability
 Promoting effective and efficient utilization of finance by linking with
cost effective and resource efficient construction – technologies and
materials
 Report on carbon and resource savings linked to financing –
incentivize efficiency
 Communication and information – simple messages, posters,
pamphlets, models, Radio, Demonstration
 Technical Services delivery – Community based teams, mason
supervisors, technical tools for design and estimation, costs for
services, training
 Credit – duration of loans, size of repayments, linked savings,
securitization, institutions for credit linkage??
 Thank You