Rural Housing

RURAL HOUSING

Piyush Tiwari

10

INTRODUCTION

Rural housing has been marginalized both in widerpolicy discussions as well as within the debate onrural issues because rural housing needs are generally

subordinated to urban housing needs in policy priority. Yethousing is essential for the well-being and social securityof rural households. Compared to urban areas, rural areassuffer more from the concentration of deprivation. Withincomes generally lower than the urban areas and seasonalunemployment, many households find it difficult to gainownership of homes. This has implications for social sustainabilityof rural communities and is causing increased polarization asyounger people migrate to the urban areas in search of jobsleaving behind their old folk and children resulting in negativeimpact on rural enterprise and economic viability.

Housing sector in general (rural housing in particular), hassuffered the lack of planned government resource mobilizationand implementation programmes. Although the governmenthas undertaken many one-off initiatives to promote ruralhousing, these have had limited impact on the widespreadshortfall. A general lack of resources has led to a self-help culturewithin rural communities and most of the houses are self-financed and often self-built. In rural areas 95.4 per cent ofthe households with homes, have ownership of the propertycompared to a figure of 71.5 per cent in urban areas in 2001(Census, 2001). Home ownership trend has remained moreor less stable over the last four decades.

It may be argued here that there can be no separate ruralhousing policy but a rural dimension to each aspect. The word‘rural’ encompasses villages, tribal areas, peri-urban areas, andlal dora/abadi area. There is so much heterogeneity acrossdifferent regions that local dimension to policy-making anddevolution attains much greater significance. One can argue

that most rural initiatives have not succeeded because thiskey feature of the rural housing sector has been neglected. Ifit is accepted that there cannot be a separate rural housingpolicy, the problem of defining rural areas, is avoided. Whatis required is the awareness of local dimension in broadhousing issues within the rural setting.

In this chapter we review the status of rural housing inIndia and present the rural demographic trends. We take stockof the quantity and quality of physical stock of housing anddiscuss household asset and liability structure. The role offinancial institutions has been reviewed further and variousinitiatives related to rural housing undertaken by the governmentare evaluated. In the end we suggest policy options availableto improve the rural housing scenario.

DEMOGRAPHIC TRENDS AND HOUSING NEEDS

Estimated population in India in 2001 was 1029 million, agrowth of 18.1 per cent from 1991. Nearly 72 per cent ofthe Indian population lives in rural areas. In 1951, the averagehousehold size in rural areas was 5.52, which increased to 6.03in 1981. This has declined to 5.50 in 2001, a consequence ofurbanization and formation of new households in rural areas.The total number of households in rural India is 143 million(Census, 2001).

Two trends, which will have significant impact on therural population are (i) declining fertility and (ii) increasingurbanization. The Total Fertility Rate (TFR) is expected todecline from 2.9 during 2001–5 to 2 during 2021–5. Withthis, the weighted TFR is projected to reach the replacementlevel of 2.1 by the period 2021. The urban population in thecountry, which was 28 per cent in 2001, is expected to increaseto 38 per cent by 2026 (National Commission on Population,2006). Out of the projected increase in total population of

248 India Infrastructure Report 2007

371 million during 2001–26 in the country, the share ofincrease in urban population is expected to be 249 million(67 per cent).Rural population is projected to be 862 millionin 2026. An important dimension of demographic trends isthat nearly half of the growth in population is expected tobe concentrated in the relatively deprived states of Bihar,Chhattisgarh, Jharkhand, Madhya Pradesh, Rajasthan, UttarPradesh, and Uttaranchal.

The total population in India that was in the age groupof 20 to 45 years (typical home buying age) was 36.6 per centin 2001 which is expected to rise to 40 per cent in 2026 (NCP,2006). Urban India would add much larger proportion in thisage group compared to the rural India raising important policyconcerns regarding an increasingly ageing rural population.

Housing Supply and Access

Table 10.1 presents the housing scenario in rural India andthe growth rate is shown in Figure 10.1. Since the 1980s,demographic trend has been towards the formation of newhouseholds. Addition to the housing stock has witnessedphenomenal growth, outpacing the rate of population andhousehold formation growth.

Table 10.2 presents the uses to which rural houses are putto. The table indicates that though there are 177.54 millionhouses in rural areas, only 135.1 million houses are used forresidential purposes. Nearly 5 per cent of houses were vacantand around 20 per cent of houses were put to non-residential

Table 10.1Stock of Housing and Growth

Population Houses Households(Million) (Million) (Million)

1981 1991 2001 1981 1991 2001 1981 1991 2001

523.9 628.7 742 114 143 178 89.3 111.5 138.3

Source: Census (2001) .

Source: Based on data from Census (2001).

Fig. 10.1 Growth Rate of Household and Housing Stock

Table 10.2Dwelling Units in Rural Areas by Use (in million)

1981 1991 2001

Total number of census 113.96 142.98 177.54houses (A)

Total number of 5.64 7.97 9.36vacant houses (B)

Total number of occupied 108.32 135.01 168.18houses (C) = (A) – (B)

Residential use (D) 80.93 103.06 129.05

Residential cum other use (E) 0.95 5.41 6.05

Non residential use (F) 26.44 26.54 33.08

Housing Stock = (D) + (E) 81.88 108.47 135.10

Source: Census (2001).

uses. The supply is 3.2 million houses short of the residentialrequirements.

A measure of housing construction activity, in rural India,is the number of new housing completions. During 1991–2001, 34.56 million new houses were added to the stock.During this period 25.61 million new households were formed.The trend indicates that the number of housing completionshas been higher than the number of new household formation.This trend was witnessed during the earlier decade as well.Translating these figures into number of houses completedper thousand people indicates that while in 1971–81, 3.66houses were completed per 1000 persons and the figure for1991–2001 is 4.65. The number of new house construction,at 4.65 houses per 1000 persons, is still quite low comparedto urban areas where new completions are around 7 housingunit per 1000 persons.

Based on a survey conducted by NSSO in 2002 (NSSO,2004), the average area of a rural house is 64 sq. m. Around 35per cent of the houses had a plinth area of 50 sq m or more inrural India. Around 10 per cent of dwelling units had plintharea of over 100 sq m. Over time the plinth area of the houseshas been reducing gradually. In 1993, the proportion of houseswith plinth area of over 100 sq m was 15 per cent.

The proportion of houses over 20 years old but in good orsatisfactory condition is the lowest for kutcha structures, followedby semi-pucca, and pucca. About 32 per cent of the dwellingunits in rural areas were constructed more than 20 years ago.So far as the condition of the houses is concerned, the situationhas remained more or less the same as in 1993 when the structureof about 25 per cent dwelling units was reported as good and59 per cent as satisfactory in the rural areas. (NSSO, 2004)

Land holding per capita in rural areas is higher than theurban areas. Rural households construct their houses on theirown land (NSSO, 2004). This leads to variability in the quality

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Rural Housing 249

of the houses with regard to materials used for constructionand the facilities available in the dwelling units.

Tenure

Home ownership is the dominant form of tenure in ruralIndia with more than 95 per cent households owning theirhomes (Table 10.3). The percentage of rental tenure is 4.6per cent. These are mainly the houses rented to farm workersby landlords.

The second measure of quality of housing is the numberof rooms per house. In 2001, 39.8 per cent of rural householdslived in one-room houses, 68.5 per cent of households wereliving in houses with one or two rooms. Though there has beenprogress, the average size of rural homes is disproportionatelysmall compared to the average size of households (Figure10.3). For an average household size of 5.2, the sizes of homesare small. Overcrowding in existing homes is the main causeof new household formation and this is driving the demandfor new houses in the rural areas.

Table 10.3Housing tenure (Percentage)

1961 1981 2001

Owner 93.6 93.0 95.4

Rental 6.4 7.0 4.6

Source: Census (2001).

Housing Conditions

Mismatch between housing stock and the number of householdsrepresents only one aspect of housing inadequacy. The otheraspect of housing inadequacy is reflected in the mismatchbetween desired and actual housing quality. In rural India,mismatch between required and available housing stock isnot as stark as urban areas but the quality of house leaves muchto be desired. As a first measure of quality, Figure 10.2 presentshousing by type of structure. Based on building materials usedfor construction of structure, houses have been classified aspucca (building materials used for construction are brick andmortar and other permanent materials), semi-pucca (buildingmaterials used for part of the construction of either the roofor the walls are mud or thatch) and kutcha (materials usedfor construction are mud and thatch). The trend indicatesthat the share of pucca houses in total has increased from18.5 per cent in 1971 to 35.4 per cent in 2001.

Source: Census 2001.

Fig. 10.2 Housing by Construction Type

Source: Census, 2001.

Fig. 10.3 Trends in Size of Houses

The third measure of housing quality is the structuralcondition. According to Census (2001), only 45 per cent (58.10million) of residential and 42.2 per cent (2.52 million) of non-residential houses are in good condition. 48.7 per cent (62.81million) of residential and 53.3 per cent (3.2 million) of non-residential houses have been classified as livable. 6.3 per cent(8.14 million) of residential and 4.5 per cent (0.27 million) ofnon-residential houses are in dilapidated condition. Replacementneeds for dilapidated and a part of livable houses would add tothe demand for housing in rural areas in the future.

The fourth measure of housing quality is the presence ofexclusive amenities such as drinking water, toilet and electricityconnection. According to Census (2001), nearly 80.5 per centof households had access to safe drinking water in 2001. Therehas been steady progress in access to safe drinking water overthe two decades preceding 2001. In 1981, only 26.3 per centof households had access to safe drinking water. The situationof access to exclusive toilet is shabby and in 2001, only 21.9per cent of households had access to toilet facilities. As forelectricity connection, only 43 per cent of houses hadelectricity connection in 2001, though this proportion hasincreased from 14 per cent in 1981.

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1-Room 2-Room 3-Room 4+Room


To summarize, though at an aggregate level, rural housingstock seems adequate but the quality of housing leaves muchto be desired. A sizeable proportion of houses is smaller thanhousehold needs with poor structural condition, constructedwith non-permanent material and providing inadequateamenities. The data, released by Census (2001) on houses,households, amenities, and assets for 2001, indicate that totalnumber of rural households was 138.27 million as againstthe availability of 135.05 million houses (residential and non-residential), of which nearly 11.4 million houses were non-serviceable kutcha/temporary houses needing replacement.Adding absolute shortage of 3.2 million to non-serviceablekutcha houses of 11.4 million indicates that there is a shortageof 14.6 million units in rural India. Besides the absoluteshortage, if congestion and obsolescence are taken into account,rural India has a shortage of 24 million houses (NHB, 2005).

HOUSEHOLD ASSET AND LIABILITY STRUCTURE

Understanding of asset holding and liability structure ofhouseholds is important for understanding their wealth statusand debt leveraging potential. A popular criticism for the lackof penetration of formal finances (housing and non-housing)in rural areas is that formal institutions perceive the creditworthiness of the borrowers in rural areas as significant risk.It is, therefore, pertinent to understand the wealth position ofrural households. The average value of financial and physicalassets owned by a rural household in 2002 was Rs 2.66 lakh,around 63 per cent of the figure for urban households (NSSO,2005). Among rural households, a cultivator1 household, onan average, owned assets of Rs 3.73 lakh, which was threeand half time that owned by a non-cultivator2 household (Rs1.07 lakh). The variability across states is quite substantial.Asset holding per rural household was the highest in Punjab(Rs 9.04 lakh), followed by Haryana (Rs 7.16 lakh), Jammu& Kashmir (Rs 6.15 lakh) and Kerala (Rs 5.10 lakh) whileOrissa had the lowest asset holding with Rs 0.98 lakh perhousehold and close to it were Andhra Pradesh (Rs 1.35 lakh),Assam (Rs 1.46 lakh), West Bengal and Jharkhand (each Rs1.52 lakh) (NSSO, 2005).

The percentage of households grouped according to theirasset holding is shown in Figure 10.4. In the rural areas, 7.6 percent of the households owned assets as low as Rs 15,000 oreven less, valued at 2002 prices. Another 8.3 per cent householdsbelonged to the asset group of Rs 15,000–30,000. Thus, in2002, less than one-sixth of the rural households owned assetsworth Rs 30,000 or less. On the other hand, about 23 percent of rural households owned assets amounting to Rs 3

lakh and more. Central 60 per cent of households had assetsranging from Rs 30 thousand to Rs 3 lakh.

The two major components of household assets are landand building, accounting for 87 per cent of total assets of ruralhouseholds (Figure 10.5). The value of average land holdingwas around Rs 1.67 lakh and the value of buildings was aroundRs 0.64 lakh. Average asset holding of households, in nominalterms, has increased from Rs 36,000 in 1981 to Rs 2.66 lakhin 2002. However, the rural–urban disparity in asset holdinghas widened. Average value of household asset in the ruralareas in 1981 was 87 per cent of the average value of householdasset in urban areas. However, this proportion was only 63per cent in 2002. Percentage share of asset holding in differentasset classes is shown in Figure 10.5. The percentage share ofland and building in total assets has not changed much during1971–2002 for both rural and urban households.

There are substantial asset inequalities among ruralhouseholds. The value of asset holding of the upper-mostincome class (with monthly per capita expenditure of more

1Rural households operating at least 0.002 hectare of land during the365 days preceding the date of survey are treated as ‘cultivator households’.

2Rural households operating no land or having land less than 0.002hectare are considered to be non-cultivator households.

Source: NSSO (2005).

Fig. 10.4 Rural Households Distribution by Asset Holdings

Fig. 10.5 Assets held by Asset Class in 2002


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Rural Housing 251

than Rs 615) is five times the asset holding of lowest incomeclass (with monthly per capita expenditure of less than Rs300) in 2002 (NSSO, 2005). Figure 10.5 presents the patternsof asset holding of rural and urban households. As one wouldexpect, rural households have a much large proportion of theirwealth invested in land (both farm and non-farm). Urbanhouseholds require land for housing and business activities.The average land holding of households in urban areas aresmaller than rural areas. One striking feature that emerges fromFigure 10.5 is that the wealth portfolio of both urban andrural households is highly undiversified and is heavily skewedtowards real assets (Figure 10.5). Financial asset holdings arehigher in urban areas than in rural areas, but as a proportionof overall wealth, these are small components.

On the liability side, nearly 27 per cent of rural householdshad outstanding cash loans and the average size of debtamounted to around Rs 28,449 (NSSO, 2005). The ratio ofaverage outstanding cash loan to average value of asset suggeststhat as a proportion of their total assets the poor take higheramount of cash loans (Figure 10.6).

Asset position of households suggest that the average assetholding in rural areas is around 63 per cent of asset held inurban areas but generally rural households have low cash debtas a percentage of their assets. In addition, in percentage termshigher net worth households have low percentage of cashdebt but when we convert this into value terms, householdshave fairly low cash debt in relation to their asset holdings(NSSO, 2005).

RURAL HOUSING FINANCE

Rural houses are financed by formal and informal sourcesof finance. At present, a house being a preponderous assetof a household, people build their houses gradually as their

savings and availability of funds from informal sourcespermit them.

House Construction Activity and Expenditure

A survey on construction activity by households during thefive year period 1997–2002 reports that about 25 per centrural households had initiated some form of constructionactivity. A total of 41 million rural constructions were initiatedduring this period. Among the initiated constructions, 82per cent were completed during the five years preceding thesurvey (NSSO, 2004), showing a two-fold increase comparedto the period of earlier survey, i.e., 1989–93.

Construction activity was more common in the householdswhich were less well off as observed from their householdexpenditure (NSSO, 2004). This could be because mosthouseholds in rural areas use their own funds for construction.Access to formal sources of borrowings is limited. Better-offhouseholds, who have improved access to the sources of finance,usually build satisfactory homes in one go. Low-incomehouseholds build their houses incrementally and keepupgrading their houses as they save money. It is quite likelythat the dwellings of the poor required frequent constructionactivity of the ‘major repair’ kind. Figure 10.7 presents thepercentage of households in each monthly per capita expenditureclass who initiated new construction during 1997–2002.

It would be interesting to see what is being constructed.Figure 10.8 shows that alteration/improvement/major repairdominated the volume of the constructions in terms of number,comprising as much as 55 per cent in rural areas. Amongkutcha constructions, repairs and improvements constitutedabout 79.6 per cent. Among the pucca structures, construction

Fig. 10.7 Percentage of Households who undertookHouse Construction during 1997–2002


Fig. 10.6 Average Cash Debt as Percentage of AverageValue of Asset for Rural Households


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Fig. 10.8 Distribution of type of House Constructionaccording to Structural Type during 1997–2002

of new building was a major activity in the rural areas. Asignificant shift was observed in the pattern of preferencetowards the structural type of housing units. In rural areas,about 38 per cent of the constructions completed were puccaand about 40 per cent were kutcha, as against 34 per centand 45 per cent observed during 1989–93.

The size of the structures constructed and the cost ofconstruction based on NSSO (2004) for the period 1997–2002 show that the cost varied widely across the different typesof construction, as well as types of structure (Table 10.4). Theaverage area constructed was highest for the pucca structuresand the least in the case of kutcha structures, probably becausethe floor area constructed was directly correlated to theeconomic class of the household (Table 10.4). On an average,a rural household spent about Rs1.13 lakh for a pucca newbuilding with an average floor area of 42 sq. m and about Rs21,000 for repair of a pucca structure. Compared to this theaverage cost of construction of new pucca building in urbanareas is Rs 2.63 lakh for an average floor area of 53 sq m. The

construction cost per square meter is higher in the urban areaprobably due to more expensive material used for construction.

NSSO (2004) survey also indicates that households areconstructing smaller houses compared to earlier periods,probably for the affordability reasons. However, the extent ofaddition to existing living space at 20 sq m on an average, wasmore or less the same during the survey periods (1989–93 and1997–2002).

Sources of Finance for House Construction

Households spend monetary and non-monetary (materialsfrom home, own labour, and free material) resources to completetheir construction. Monetary component is financed byhouseholds through their own resources or through interest-bearing or interest-free loans from different sources.

As shown in Table 10.5, in rural areas in 1997–2002, about97 per cent of construction expenditure involved was incurredin monetary terms. Households financed around 66 per centof construction costs from their own resources. Friends andrelatives contributed to the extent of 9 per cent. Individuals,operating as moneylenders, financed about 9 per cent of theconstruction cost. Government institutions, financial and non-financial, financed 8 per cent expenses. The scenario is notvery different from urban areas where formal public sectorfinancial institutions provided 14 per cent of construction cost.The presence of private financial and non-financial institutionsin residential construction remains restricted to 2 per cent inrural areas and 4.5 per cent in urban areas (NSSO 2005).

The role of private moneylenders is more apparent whenthe construction is classified by the type of structure. Privatemoneylenders contribute as much as 15.2 per cent of the totalfinance required for kutcha constructions in the rural areas.

It may, however, be emphasized here that the share of ownfinances has played a large role in financing construction. Theshare of formal sector finances (excluding private money-lenders) in construction cost in rural and urban India hasnot been dominant. The share of formal finance in rural areasis 13.4 per cent as against 23.6 per cent in urban areas.

Institutional Finance in Rural India

Table 10.6 presents the sources of institutional finance in ruralIndia. Care must be exercised in interpreting the percentageshares indicated in the table as the borrowings included hereare for all purposes—business, non-business, and otherhousehold needs including housing. Table 10.6 also showcasesthe share of different institutions for urban areas for comparison.The largest amount of institutional borrowings of ruralhouseholds were from ‘cooperative societies’, although its sharein total cash borrowings rose from 14.9 per cent during1971–2 to 26.3 per cent during 1981–2 but fell marginally to

100%

40%

60%

80%

0%

20%

Pucca Semi-pucca Kutcha

29.5

53.3

79.618.7

11.5

3.9

16.3

35.251.8

New building Addition to floor space Alteration/Improvement/Repairs

Table 10.4Average Floor Area (square meter) and Average Cost (Rs thousand)

per completed house construction during 1997–2002

New Addition to Repair/building floor space alteration

Floor Cost Floor Cost Floor Costarea (Rs area (Rs area (Rs

(sq m) thousand) (sq m) thousand) (sq m) thousand)

Pucca 42 113 21 46 29 21Semi-pucca 29 22 16 13 29 6Kutcha 20 8 12 4 21 2


Rural Housing 253

in terms of their activities in rural areas. In general, insurancecompanies and provident funds are not a major source offinance for households in either rural or urban areas.

One of the reasons for the limited role of financialcorporations/institutions in rural areas is the high operationalcost per loan in rural areas and the other is the perceived notionthat rural borrowers are high risk borrowers because of theseasonality attached to their income, and that, too, is weatherdependent. Table 10.7 presents the loan repayment patternsof households in urban and rural areas. The table indicatesthat while the average institutional loan per household in ruralareas is far lower than urban areas, non-institutional loanis higher in rural than urban areas. Repayment-wise theperformance is better in urban areas. The numbers presentedin the table do not indicate that rural households are defaultingon loans. The low repayment could also be because of preferentialinterest rate terms in rural areas or the term structure of loans.As was indicated earlier, a large part of institutional financein rural areas comes from cooperative banks and scheduledcommercial banks. Closer examination of the percentagerepaid reveals that the repayment pattern of households forloans raised from institutions is only slightly better than loansraised from non-institutional sources.

Borrowings require some form of security from borrowers.The types of securities against which households borrow inrural and urban areas are quite similar (Table 10.8). The tableindicates that an overwhelmingly large population of house-holds has borrowed against personal guarantee. Mortgage onimmovable property has been the second largest security inrural and urban areas.

In short, the role of finance companies/institutions inproviding credit for housing has been low in rural areas.Scheduled commercial banks and cooperative banks haveplayed rather similar roles in rural and urban areas. Insurancecompanies and provident funds have not been a major providerof finances for households. Surprisingly, the governmenthas been a relatively bigger player in urban markets. Loan

Table 10.5Sources of Finance (Percentage of Monetary Cost on Construction) during 1997–2002

Friends/ Private Private Money-Own relatives Cooperative Government financial non-financial lenders

Construction typeNew building 64.8 9.3 3.2 9.0 1.9 0.6 8.8Addition to floor space 70.0 7.3 3.1 6.5 0.5 0.1 10.1Maintenance/Repair 71.0 8.0 3.3 4.4 0.4 0.4 10.1

By structure typePucca 65.3 9.2 3.1 8.4 2.0 0.4 9.3Semi-pucca 67.3 8.3 1.6 8.0 0.4 0.9 11.3Kutcha 70.3 8.2 0.6 2.3 0.2 0.3 15.2


Table 10.6Share of Different Institutional Sources of Finances (percentage)

Rural Urban

Agency 1971–2 1981–2 1991–2 2002–3 2002–3

Government 3.1 4.2 3.9 2.7 6.2

Co-operative 14.9 26.3 25.7 28.0 22.0societies/banks

Commercial 1.7 23.1 20.7 22.7 30.6banks

Insurance 0.1 0.3 0.3 1.5

Provident fund 0.8 1.3 1.0 3.0

Financial 1.4 10.9corporation/Institutions/Companies

Other institutions 1.4 1.0 1.5

Non-institut- 80.3 44.4 42.3 42.8 24.2ional finance*

Note: *Non-institutional sources of finance include landlord,agricultural moneylenders, professional moneylenders, traders,relatives, and others.Source: NSSO (2006).

25.7 per cent during 1991–2 with a substantial rise thereafter(NSSO, 2006).

Since the 1980s, the role of the commercial bank hassubstantially expanded in rural India. ‘Commercial banks’ hada share of around 22.7 per cent in total commercial borrowingsof rural households in 2002–3. The share of governmentdepartments was around 2.7 per cent in the same year.

The share of non-institutional finance in rural areas hasdeclined from 80.3 per cent in 1971–2 to 42.8 per cent in2002–3. The share of institutional finance in rural areas was57.2 per cent in 2002–3. There is not much difference in theshare of banks and cooperatives in rural and urban areas butfinancial corporations/institutions are comparatively limited


Table 10.7Loan Repayment Pattern of Households

(average per household figures in Rs)

Average Average Percentage Percentagecash Average repayment of loan of loan

borrowings repayment during outstanding borrowedAverage during during ’02–03 prior to ’02– during ’02–

outstanding 1.7.02– ’02–03 (for (for loans 03, repaid 03, repaiddebt as on 30.6.03 all loans) taken during during during

Agency 30.6.02 (Rs) (Rs) (Rs) ’02–03) (Rs) ’02–03 ’02–03

Rural

Institutional 4302 2130 1016 280 17.11% 13.15%

Non-institutional 3237 1596 666 202 14.33% 12.66%

All 7539 3726 1682 481 15.93% 12.91%

Urban

Institutional 8843 4668 2475 578 21.45% 12.38%

Non-institutional 2926 1494 848 256 20.23% 17.14%

All 11771 6162 3326 834 21.17% 13.53%


Table 10.8Percentage share in Total Borrowings by type of Security and Occupation

Rural Urban

Culti- Non- Self-vators cultivators All employed Others All

Personal guarantee 44.6 59.7 49.0 36.8 47.0 43.3

Surety 6.9 11.0 8.1 9.2 9.7 9.5

Crop 7.2 0.1 5.1 0.4 0.1 0.2

First charge on immovable property 12.5 7.1 10.9 10.9 9.8 10.2

Mortgage on immovable property 19.3 12.2 17.2 29.2 24.5 26.2

Bullion/Ornament 3.0 6.2 3.9 4.1 2.1 2.8

Equities 0.6 0.7 0.6 0.9 1.1 1.1

Agriculture commodities 1.4 0.0 1.0 0.1 0.1 0.1

Others 4.5 2.9 4.1 8.4 5.6 6.6


repayment pattern in rural areas has not been substantiallydifferent from urban areas for institutional finance. Nearly40–50 per cent of households in urban and rural areas haveused personal guarantee as a security for loans. Mortgage ofimmovable property is more prevalent in urban areas.

Magnitude of Household Credit to Rural Areas

The present outreach of formal housing finance institutionsin the rural areas is minimal. Initiatives were undertaken bythe Ministry of Rural Development to enhance the role offormal housing finance institutions in rural areas through

provision of equity capital to HUDCO. However, only Rs50 million out of a total authorized capital of Rs 3840 millionwas contributed by the ministry. This imposed limits on theextent to which HUDCO could possibly raise resources fromthe open market to channelise into housing in the rural areas.During the Ninth Five Year Plan, the equity support forHUDCO by the Ministry of Rural Development wasenhanced to Rs 3500 million. It was anticipated that as aresult of this, HUDCO would be able to raise additional Rs28000 million from the market for lending in the rural areasand will be able to finance the construction of additional 6lakh housing units annually in the rural areas. However, till

Rural Housing 255

2005, HUDCO was only financing the construction of about2 to 3 lakh houses.

HUDCO offers financial assistance to state governmentagencies such as housing board, rural housing board, districtboards, panchayat, taluka development board and so on, whichare nominated by the state govt. for undertaking rural housingschemes. The focus group of these schemes are the economicallyweaker sections and the assistance is offered for new constructionas well as repairs. By the end of 31st July 2006, HUDCOextended Rs 49,330 million through 2049 schemes.

Scheduled commercial banks and Rural Regional Banks(RRBs) have significant retail presence in rural areas and arequite active in agricultural and rural credit delivery (NHB,2005). However, their lending for rural housing has not beenmore than 10 per cent of total loan extended for housing inIndia (Table 10.9).

As discussed earlier, lending agencies have usually assignedhigh credit risk to rural housing portfolios. Census data andrecent household surveys, however, do not find enough evidenceof differences in credit risk or repayment pattern between urbanand rural India. If the rural lending market has to be developedfurther the following characteristics of the rural market needto be integrated into the formulation of the lending strategy.1. The level of income of the borrowers, particularly agri-

culturists, fluctuates due to vagaries of nature.2. Lending institutions are not able to assess the income of

the rural borrowers.3. Non-availability of tangible securities for housing loans

and enforcement of securities in rural areas.4. Non-availability of title deeds.5. High cost of stamp duty towards creation of simple

mortgage (NHB, 2005).

Microfinance

In response to perceived low bankability and non-availabilityof tangible collateral of low-income households, as required

by the formal financial sector, in rural, semi-urban and urbanslums, institutionalized microfinance systems have emergeddriven by endeavours of NGOs. The objective of themicrofinance system is not to deliver credit solely for housingbut includes finance for all aspects of livelihood and social needs.Housing is nevertheless an important component and it wouldbe important to review the contribution of microfinance inrural India. In recent years, microcredit and microfinance inthe form of group-lending without collateral has been aremarkable success. The performance related to microfinance,of organizations like SEWA in Western India and SHAREand BASIX in Southern India, has provided convincingproof that microfinance can expand as a financial system inIndia (Box 10.1).

Over the past decade, NABARD’s ‘SHG-Bank LinkageProgramme’ aimed at connecting self-help groups of poorpeople with banks, has created the largest microfinance networkin the world. Self-Help Groups (SHGs), usually at the behestof certain developmental non-governmental organizations(NGOs), have quietly mushroomed in most districts of Indiaover the last few years. Millions of poor, predominantly women,are now members of thousands of SHGs (Chakrabarti, 2004)(Box 10.2).

Self-Help Groups (SHGs) are the basic constituent unitsof the microfinance system. An SHG is a group of a fewindividuals—usually poor and often women—who pool theirsavings into a fund from which they can borrow as and whennecessary. Such a group is linked with a bank—a rural, co-operative, or commercial bank—where they maintain a groupaccount. Over time the bank begins to lend to the group as aunit, without collateral, relying on self-monitoring and peerpressure within the group for repayment of these loans. Loansare then given out to individual members from these fundsupon application and unanimous resolution drawn at a groupmeeting. The bank permits withdrawal from the group accounton the basis of such resolutions. Such loans, fully funded outof the savings generated by the group members themselves,are called ‘interloans’. The repayment period of loans isusually short, 3–6 months. After regular loan issuance andrepayment for six months, the bank considers making abank loan to the SHG. The maximum loan amount is amultiple (usually 4:1) of the total funds in the group account(Box 10.3).

NABARD’s Bank Linkage Programme, pilot-tested in1991–2 and launched in full vigour in 1996, has been a majoreffort to connect thousands of SHGs across the country withthe formal banking system. By late 2002, it connected abouthalf a million SHGs to the banking system with total loandisbursement of about Rs 1026 crore. Efforts of otherorganizations supplement that of NABARD. By March 2001,SIDBI, for instance, had disbursed over Rs 30 crore to SHGsthrough 142 MFIs–NGOs.

Table 10.9Outstanding Housing Loans (million rupees)

2002 2003 2004

SBI & Associates 10792.8 23887.5 27686.5

Nationalized Banks 14809.7 21235.2 33547.3

Foreign Banks 45.4 45.6 38.2

RRBs 4307.7 5869.8 8494.8

Other SCBs 1643.1 2829.6 7354.1

Total – Rural 31598.7 53867.7 77120.9

Rural as percentage 9.62% 10.97% 9.0%of all India

Source: NHB (2005).


Box 10.1The Naya Ghar Project of the Mahila Housing Sewa Trust

T. Bhogal*

The Mahila Housing Sewa Trust works to improve the housing and infrastructure conditions of poor women working in the informalsector. It has successfully developed and implemented housing finance schemes for women hawkers & vendors, construction workers,head loaders, hand cart pullers, bidi workers and others. These housing finance schemes have adopted an integrated approach andapart from providing finance, have also provided technical and social support.

The trust is itself an offshoot of SEWA. SEWA is a Trade Union, based in Ahmedabad, and operating in many parts of Gujarat andIndia; it has been in operation since 1972. Its members consist of poor self-employed women working in the informal sector. In orderto consolidate its housing related activities, SEWA set up the Mahila Housing Sewa Trust in 1994.

The Naya Ghar Project of the Mahila Housing Sewa Trust started in 2001, in response to the devastating earthquake in whichmore than 60,000 SEWA members had lost their homes and workplaces. The project was implemented through a four-step process:Damage Assessment, Training, Design Finalization, and Construction.

The first step of Damage Assessment was conducted in collaboration with the Government of Gujarat. This stage included damageassessment surveys, categorization, resource mapping, education, and awareness raising about the government packages.

In the second step of Training, orientation and training was provided to Engineers working with the Trust (at the Disaster MitigationInstitute and the People’s Science Institute); to about 5000 masons employed for the construction; and finally, to the beneficiaries. Thebeneficiaries, in particular, were trained in quality check procedures, monitoring of construction work, financial and material record-keeping, and checking material used in each house.

The third step of the project consisted of finalizing the design of the house kit, in consultation with house owners and villagecommunities. The design was sensitive to traditional materials, existing house forms, common housing patterns, conventional andtraditional construction methods, and not the least, the importance of being disaster proof.

The final step was the implementation with the help of Naya Ghar Samitis. The role of these Samitis has been to motivate homeowners to remove debris and clear the site; facilitate the salvaging of material from the debris, procurement, distribution and safekeeping of raw material, and not the least, facilitating the work of the engineers in preparing plot sketches, as well as in the monitoringof quality and daily work progress.

There are two striking features of this project. First, the whole initiative is managed by the representatives of the poor self-employed SEWA members. Second, the initiative is financed through housing and infrastructure loans where no collateral is required.

The loans to the women, as indicated earlier, have been provided by the Mahila Housing Sewa Trust. The money for such loanswas provided from the revolving fund that the Trust had built since 1994—the year it came into existence. This revolving fund itselfhad been managed by the SEWA Bank—the financial wing of SEWA—before the Mahila Housing Sewa Trust came into existence.

By 2004, this programme had completed the construction of 10,000 houses. It is envisaged that the trust will also take upconstruction of new houses in villages.

Note: Views expressed here are of the author.Source: Dolly Jain and Zeenat Niazi (Editors) (2005). Participatory Rural Habitat Processes: Emerging Trends, Development Alternatives,New Delhi.

Box 10.2Gram Vikas Housing Programme

T. Bhogal

The Gram Vikas Housing Programme integrates water and sanitation with housing. Its most significant feature is the ‘all or none’approach, which provides housing for every single family through participatory processes of community mobilization, empowermentstrategies for women, and micro-credit.

The all or none approach is considered necessary because unhygienic conditions created by a few non-participating families in thevillage can affect other participating families adversely, nullifying the positive effect of the programme. In addition, the village cannotbe disaster proof unless all the families have safe, permanent houses.

The process is initiated by the setting up of a village society: a village society that has all the adults of the village as its members. Itis this society that takes the responsibility for all development in the village. Next, each family deposits an amount of Rs 3 to 5thousand against the construction of their house. Another Rs 1,000 goes into a village corpus fund: a fund that is used to extend watersupply and sanitation facilities to all the families in the village.

Gram Vikas arranges for the collective purchase of raw materials; and also organizes masons for the construction of houses.Concurrent training of local persons in masonry, wire bending and so on, is also organized. All families participate actively in the

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construction process; the construction process itself is managed and monitored locally by a committee of the village society. Theconstruction has to be completed in six months, after which the loans are frozen.

The loans for the construction are being provided by Gram Vikas. Gram Vikas has, in turn, accessed loans from the Kreditanstaltfur Wiederaubau (KfW), a German Bank, (as it is not easy to access money directly through a German bank, the Housing DevelopmentFinance Corporation (HDFC) has been used as a conduit for these loans). As Gram Vikas underwrites the loans, bearing the entirerisk and responsibility for proper disbursal and recovery, people are able to access the loan without the need to provide any collateral.The entire loan is repayable over fifteen years, at the standard interest rates charged in housing loans (Gram Vikas does not charge anyadditional amount to the villagers).

Of the total estimated cost of Rs 46,500 per house (the size of each house is 50 sq m each house has two rooms, a kitchen/diningroom, a front verandah, a toilet and a bathing room), the loan amount comes to approximately Rs 31,500 (including the initial contributionamount). The rest of the cost is met with by the beneficiaries themselves in the form of labour and locally available materials—theamount spent on labour and locally available material is considered as being the initial contribution amount.


Box 10.3Grameen Bank Housing Project of Bangladesh

T. Bhogal

The Grameen Bank of Bangladesh provides credit to the rural, landless poor for income generating activities: credit is providedwithout any collateral required from its customers. Credit is provided to individuals through small savings groups; these groups alsooversee punctual repayment by their members.

Grameen Bank has been hugely successful in providing such credit: As of January 2004, there were as many as 31.2 lakh borrowersfrom the Bank, of which 95 per cent were women.

Building on the success of the Banking programme, a housing loan facility was started that allowed the borrowers to meet theirneed for better housing. Till September 2003, this project had been able to support the building of over 5 lakh houses.

In this project (known as Grameen Bank II) funds are made available to GB members either for building new houses, or reinforcingold ones towards flood and water resistance. As the sums involved were much larger than the ones available through the general loanprogramme, new lending strategies were set up. Preference was given to the ‘most needy’, and those who had repaid their previousloans on time. Each borrower received, along with a housing loan, four concrete columns, a prefabricated sanitary slab and twenty-sixcorrugated iron roofing sheets. The structural system was based on a standard module, and the pre-cast building materials are massproduced off site and made available to the self-builders at low prices.

The house design is such that it can be built, rebuilt and repaired relatively quickly and simply, with no technical complexity. Itprovides effective protection from rain and the reduction in instances of damage from floods is significant.

There is also flexibility in the terms offered for the housing loans. Individual borrowers can return the loans either in one year, or,if they acquire greater experience and confidence in handling the credit repayment schedule, over longer periods of time.


Microfinance institutions have been playing a very importantrole in community development as they have inculcatedsavings and credit behaviour in their members. SHGs arematuring over time to handle housing credit (NHB, 2005).Excluding NABARD, which is a formal financial institution,and which has tried to incorporate some lessons from thesuccess of microfinance in its lending procedures, it may bepointed out that MFIs are not linked to the wider financialstructure of the country and have limited capabilities in termsof raising resources.

GOVERNMENT HOUSING INITIATIVES

In India, the provision of housing is largely placed within thedomain of the private sector, with home ownership as thedominant form of tenure. While the government has playedthe role of a social developer of housing to a limited extentin urban areas, it never really acquired the status of a sociallandlord in the countrywide sense. The consequences of thishave been seen in housing access, tenure mix, and quality asdiscussed earlier.


The government has formulated various initiatives targettedtowards rural housing but a comprehensive rural housing policy,which is well integrated within rural development policy/strategy is missing. While the National Agenda for Governancefocuses on ‘Housing for All’ as a priority theme, there has beenlittle deliberation on how to achieve this objective in ruralareas. Governmental initiatives such as Indira Awas Yojanawhich are targetted towards rural poor do not provide neces-sary resources and mechanisms to enable local inhabitants,Gram Sabhas, lending institutions (such as HUDCO whichhave been provided with equity assistance), rural buildingcentres and so on to tackle rural housing needs effectively.

A positive aspect of this is that there is no imposition of acentrally determined ‘rural housing strategy’ on states/districtresponsible for formulating strategies at village level. In orderto address housing shortage (both absolute shortage as wellas inadequate quality standards), the National Housing andHabitat Policy in 1998 envisaged construction of 20 lakh (13lakh in rural areas and 7 lakh in urban areas) homes annually.However, the responsibility of delivery has been left to thelending institutions.

The Ministry of Rural Development has formulated anAction Plan for Rural Housing that consists of the followingprogrammes:1. Provision for upgrading unserviceable kutcha houses under

the Indira Awas Yojana (IAY) in addition to the newconstruction.

2. Credit cum subsidy scheme for rural housing.3. Innovative scheme for rural housing and habitat

development.4. Setting up of rural building centres.5. Samagra Awas Yojana.6. Enhancement of equity contribution by the Ministry of

Rural Development to HUDCO.7. National Mission for Rural Housing and Habitat.8. Two Million Housing Programme.

Indira Awas Yojana (IAY)

IAY is being implemented since 1985–6. The focus of thisscheme is to provide assistance to rural households who areeconomically classified as below poverty line or belong toschedule caste/scheduled tribe or are freed bonded labourers.The Planning Commission allocates the funds for this schemeto states based on set criteria. Since 1993–4, the scope of thepolicy was extended to all households who are below povertyline subject to the condition that not more than 40 per centof the allocated fund could be utilized for non-SC/SThouseholds. The scheme has also been extended to familiesof ex-servicemen killed in action. Three per cent of total housesare reserved for physically and mentally challenged persons

who are below poverty line. Other guidelines for assistanceunder this scheme are: (i) the maximum amount of constructionassistance should not exceed Rs 20,000 for plain areas andRs 22,000 for hilly areas, (ii) limit on improvement fromkutcha to semi-pucca or pucca houses is Rs 10,000, (iii) theallotment of house should be in the name of female memberof household, and (iv) Gram Sabha (Village Council) isempowered to select the beneficiaries. Since inception Rs13,840 crore have been spent under this scheme. A total of10.34 million units have been constructed/upgraded underthis scheme up to 2003–4 (NHB, 2004 and NHB, 2005).

Credit-cum-Subsidy Scheme

This was a means tested scheme initiated in 1999 targettinghouseholds with annual income of less than Rs 32,000.Assistance was in the form of loan and subsidy. The subsidycomponent was less than Rs 10,000 and maximum permissibleloan amount was Rs 40,000. District Rural DevelopmentAgencies (DRDAs) were responsible for making loanarrangements for the beneficiaries through commercial banks,RRBs, and housing finance institutions. The subsidy part ofthe scheme was funded through shared allocation from centreand state contributing in the ratio of 75:25. Since its inception,the scheme funded 85,564 houses incurring an expenditureof Rs 77.79 crore. From the year 2002–3, the scheme hasbeen merged with IAY (NHB, 2004).

Innovation Scheme for Rural Housingand Habitat Development

This scheme was launched in 1999–2000 with the objectiveof promoting cost effective, environmentally sound constructiontechnologies. Potential beneficiaries under this scheme includerecognized educational/technical institutions, corporatebodies, government, autonomous societies, developmentinstitutions, and credible non-government organizations withproven record in the field of rural housing. Maximum limitfor assistance for non-government organizations is Rs 20 lakhand for government institutions the limit is Rs 50 lakh. Nearly125 projects have been approved for funding under thisscheme (NHB, 2004).

Setting up of Rural Building Centre

Government provides an assistance of Rs 15 lakh to set uprural building centres. Objective of rural building centres isto provide technology transfer and information dissemination,skill enhancement, and to produce cost effective buildingmaterials. Since 2002–3, ninety-four project proposals forsetting up of rural building centres have been approved (NHB,2004 and NHB, 2005).

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Samagra Awaas Yojana

This scheme was launched in 1999–2000 and is aimed atcomprehensive development of shelter, sanitation, anddrinking water facilities. In its first phase, one block eachfrom twenty-five districts of twenty-four states and one unionterritory was identified for implementing the scheme. Acentral assistance of Rs 25 lakh was provided for each blockto undertake overall habitat development, information,education, and communication activities with the requirementthat 10 per cent contribution should come from people.During 2002–3, thirty-three proposals were approved andan amount of Rs 0.43 crore released (NHB, 2004).

National Mission for Rural Housing and Habitat

This mission has been set up by the Ministry of RuralDevelopment to facilitate the induction of science andtechnology inputs on a continuous basis to provide affordableshelter for all in rural areas within a specified time framethrough community participation. A Working Group wasformed to specify the aims and objectives, formulate a roadmap for private capital to flow in housing development inrural areas, and shortlist agencies that could undertake the taskof preparing techno-legal regime for rural planning (NHB,2004). The action plan prepared by the Working Group isunder consideration.

Two Million Housing Programme

As part of this programme, primary lending institutions areexpected to finance an additional 2 million houses annuallywith a focus on economically weaker and low income grouphousing. Of the 2 million houses, 1.3 million are to be financedannually in rural areas. During 1998–2004, HUDCO hassanctioned loans for 3.3 million houses in rural areas (NHB,2005). It is difficult to exactly state the number of housesfinanced by other lending institutions during this period. Areport by NHB (2004) indicates that during 2000–3, primarylending institutions (excluding HUDCO) financed around5.44 lakh houses (NHB, 2004).

Golden Jubilee Rural Housing Finance Scheme

In order to improve access to institutional finance in the ruralareas, NHB launched the Golden Jubilee Rural HousingFinance Scheme in 1997. The scope of the scheme was forconstruction of new houses or improvement of existing ruralhouses. The scheme required lending institutions to undertakeappropriate diligence with regard to viability and bankabilityof projects. This is essentially a refinance scheme, wherein

institutions making loan for housing construction in ruralareas to the extent of Rs 10 lakh (now the limit has beenenhanced to Rs 15 lakh) could be refinanced by NHB. Therefinance is also available for improvements in existing homes.Since 2004, NHB offered 0.5 per cent concession on normalrefinance rates for lending to rural areas. As part of the scheme,1.1 million houses have been financed during 1997–2004(NHB, 2005).

APPRAISAL OF RURAL HOUSING INITIATIVES

One of the main objectives of the rural housing policy is tomake a contribution to wider rural development process andto raise income and living standards. Decisions about ruralhousing would have implications for rural employment,opportunities, and for maintenance of rural services such asschools, hospitals, and shops. Traditionally, in rural areas, thehome and the workplace are linked. The rural housinginitiatives, which have been undertaken by the governmentlack connectivity with wider rural development policies suchas rural employment guarantee schemes or various otheragriculture policies. It would be imperative for the success ofhousing initiatives that various agencies collaborate andformulate a housing policy that fits squarely within ruraldevelopment policies. If one of the objectives of rural housinginitiatives is to contribute towards development of the ruraleconomy, this should be explicitly stated and reflected inconcerted approach towards rural area development and thelinkages strengthened with the help of gram panchayats (GPs)(Box 10.4).

The second most important objective of housing initiativesundertaken has been to directly help poor households in afocused way. It is important, therefore, for the policy makersto have clear knowledge of the pattern of rural housingdisadvantage. The success of rural policies can only be gaugedif it is known which sections of rural society are facing difficultyin accessing adequate accommodation and such policies canonly be formulated once the mechanism of access to ruralhousing is understood. As discussed earlier, the dominanttenure in rural areas is homeownership, nearly 95 per cent.Kutcha and semi-pucca houses constitute nearly 64.6 per centof housing stock. The common mode of house constructionis self-building leading to poor quality of houses. Housinginadequacy in terms of lack of amenities is also pressing.Houses are small compared to the requirements of householdsize. Housing disadvantage is not only limited to SC/ST orEWS (economically weaker sections)/LIG (low income group)households but to a much larger proportion of ruralhouseholds. Many of the groups who have been barred fromaccessing good housing in rural areas have been constrainedeither by low income or by their ineligibility in formal lending


market. Acquiring land is not easy in rural areas and this hasposed a constraint to the development of private rentalhousing. Social housing does not exist in either rural or urbanIndia. Absence of other forms of tenure such as private rentalor social housing has put immense pressure on householdsto build own houses irrespective of the quality. Young families,in particular, are disadvantaged in their pursuit for housingbecause of their lack of purchasing power. Private sectordevelopers have displayed a uniform lack of interest in

providing rural housing except for a few states like Kerala,primarily because of lack of availability of formal sector financefor rural households. There are no effective regulationspertaining to building standards in rural areas as there are inurban areas. A large proportion of houses lacks structuralquality and basic amenities (Box 10.5).

Initiatives, so far, have been marked by a fragmentedapproach with multiplicity of institutions at centre, state, andlocal levels which are responsible for the formulation of

Box 10.4KESNIK Nirmithi Kendra

T. Bhogal

In 1985, the district of Kollam, in Kerala, was affected by floods. In response to this situation, the Collector of Kollam promoted aninitiative in which the affected families were themselves involved in the process of designing and building shelters and homes. Thisinitiative was named the Nirmithi Kendra.

The success of this initiative led to the promotion of various District Nirmithi Kendras across the state. Subsequently, in order toprovide technical support to these District level Nirmithi Kendras, a body called the Kerala State Nirmithi Kendra or KESNIK was set up.

Ever since its establishment, KESNIK has taken up a wide variety of activities for the promotion of CEEF (Cost Effective andEnvironmental Friendly) technologies. These include:1. Manufacturing and sale of CEEF materials.2. Promotion of small enterprises in the CEEF material sector.3. Awareness generation among public through various measures.4. Setting up information and guidance centres and conducting exhibitions.5. Construction of demonstration units.6. Training of both existing artisans and unskilled persons in CEEF technologies.7. Orientation of Panchayati Raj representatives and officials.

The success of the initial approach to popularizing CEEF housing is best demonstrated in the case of Karinkunnam Gram Panchayat(GP) in Idukki district. The district, located along the hilly eastern region of Kerala, is among the more backward areas in the State.The GP was selected for implementation of Building Material’s projects, supported by the Swiss Agency for Development Cooperation(SDC), in view of a complete absence of CEEF awareness among the people. Based on the findings of a survey done by KESNIK staff,a multi-pronged strategy was devised to increase the acceptance of CEEF materials in the area. Activities undertaken included:1. Intensive interactions with elected representatives and staff of the GP.2. Distribution of information booklets.3. Nirmithi Vahini exhibitions in all wards of the GP.4. Discussions with the public following Vahini exhibition.

The services of a local NGO, the Peerumade Development Society, were utilized in gaining access to the people. Engineering staffof KESNIK spent considerable time, along with the NGO staff in meeting people and providing information.

A CEEF materials production centre was started in a village under the auspices of the GP. As the demand for CEEF materialsspread, private entrepreneurs started setting up their own production units. Over a period of less than five years, more than 100houses were built in the panchayat using CEEF technologies. The private material production units continue to do brisk businessas well.

The panchayat committee identified 138 families as being needy. Prior to the selection, intensive parleys were held, by KESNIKand Kudumbashree functionaries, with the members of the panchayat committee. Certain specific criteria were developed to identifythe really needy families.

The Kudumbashree unit then linked up with a local bank to provide loan support to the families. All the selected beneficiarieswere members of the Kudumbashree-sponsored neighbourhood groups. Repayment of the loans is linked to their group activity.KESNIK’s local production centres provided CEEF materials for construction. The families were trained by KESNIK as part of itsactivities in the panchayat. Its technical staff also provided the necessary guidance.

Note: Views expressed here are of the author.Source: ‘A Fine Balance’ facilitated by Liby T. Johnson (unpublished).

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objectives, criteria, delivery and monitoring mechanisms.Limited scope of these initiatives and weak linkage with broadrural development and agriculture policies have led to onlypartial success of these initiatives.

It must be emphasized here that rural areas are highlydiverse and capable of considerable adaptation, which aredifficult to easily encompass within general policies and the‘sectoral’ organization of government. Existing governmentaladministration hinders the holistic perspective that must betaken for rural communities. A housing policy for rural areasmust recognize special circumstances of existing dwellings,identify local problems, recognize small scale of schemes andlocal housing and incorporate flexibility linked to broadersocioeconomic problems and opportunities, providing financialresources from public and private lending institutions,setting up building bylaws and standards for rural housingand facilitating the development of other forms of tenurein rural areas.

RURAL INSTITUTIONAL FRAMEWORK

Institutions play an important role in shaping housingoutcomes. In the rural housing context, the objective of an

Box 10.5Orissa Development Technocrats’ Forum—From Mason to Engineer

T. Bhogal

Orissa Development Technocrats’ Forum (ODTF) is an organization of architects and engineers that came into existence in 1999,after the super-cyclone in Orissa supported by UNDP and SDC. The organization’s initial focus was on ensuring supply of qualitybuilding material. Over a period of time, however, the ODTF developed considerable expertise in promoting cost-effective disaster-resistant construction technologies. Examples of such technologies included: rat-trap bond walling with anchorage and filler slabroofing; and arches for windows and in verandahs. These technologies have succeeded in ensuring cost effectiveness, in appealing tothe aesthetic sense of the rural people (both rich and poor) and in ensuring structural soundness in a disaster-prone area.

ODTF has adopted a two-step method to broad-base the technology in the state. As a first step it has trained over 5000 masonsacross the state to implement such technologies. In the second step, ODTF masons and other artisans train a large number of ArtisanSelf Help Groups (ASHGs). In order to help establish these ASHGs, ODTF3 helps them in a variety of ways. It helps ASHGs innegotiating with banks to access loans; in facilitating linkages between the ASHGs and the Government/Civil Society Organizations/Panchayats; and finally it helps these ASHGs to get contracts for construction.

An example of a successfully promoted ASHG is the ‘Haraparvati Kusali Karigara Sangha’. This ASHG has 14 members: masonsand allied construction artisans (masons, bar-benders, carpenters, electricians, and so on); all residents of a single Panchayat. ThisSangha started with very little savings (Rs 50/-per head) every month. However, it was able to take off successfully, as their Sangha gota contract to erect more than 120 houses using these appropriate disaster-resistant technologies in and around their block.

Subsequently, with support from Care Today (the India-Today Group) and UNDP, this ASHG also got a project for constructinga multi purpose community building in a neighbouring Panchayat on a turn-key basis. This, for the Sangha has been a big break as ithas provided them with an opportunity to showcase as a Group the kind of skills they have, and the kind of technology they are ableto use in construction. The success of this venture has, in turn, helped the group to negotiate with the bank where they have openedan ASHG savings account. The bank has agreed to provide a loan for setting up a brick manufacturing unit and a sanitary mart.

Note: Views expressed here are of the author.Source: From Mason to Engineer by Anindya Kumar and N.P. Panigrahi (unpublished).

3Or at times its primary donors, the UNDP and SDC.

institutional framework would be to develop long term housingstrategies that would improve access and conditions of housing,ensure that housing strategies are an integral part of achievingsustainable rural development, involve a range of stakeholdersin developing housing strategies and identify resources thatcan be utilized to deliver rural housing issues.

We briefly review the developments in rural institutionalstructure that could help in integrating policies in rural housing.

Panchayati Raj Institutions and their Role in Housing

Local institutions (PRIs) came into existence in 1959, whenthe failures of state planning made it necessary to establishpeople’s participation in development. However, PRIs werelargely dysfunctional. According to Baumann (1998), ‘Themain justification for not fully adopting Panchayati Raj, wasthe view that the development has to proceed without beingpolitically corrupted. The state did recognize the practicaland political need to involve local people in developmentand made sporadic moves at establishing Panchayati Raj’. PRIswere not accorded much political or fiscal power to plan andimplement projects and they became bodies which weredependent on the government for their survival. From theSixth Five Year Plan onwards, the planning process becameincreasingly centralized and programmes and the selective


distribution of these benefits became part of the process bywhich the GOI retained political control. Many of the povertyalleviation programmes started during this period were directedstraight to the DRDAs, registered societies under the Collectorestablished for the primary purpose of implementing centrallysponsored programmes. The Gram Panchayats became partof the delivery system, and a means through which to harnessvotes. Most programmes established their own institutionsat the village level for the implementation of the project.

After the 73rd CAA, PRIs have been given powers andresponsibilities to prepare and implement plans for economicdevelopment and social justice in twenty-nine subjects (whichinclude, among others, rural housing, sanitation, water,electrification, and conservation and sustainable utilizationof natural resources) given in the Eleventh Schedule of theConstitution. The PRIs can now levy, collect, and appropri-ate taxes, duties, tolls, and fees. Power of property taxation iswith village level panchayat. But, panchayats, as effective toolsof local self governance and means to further economic growthand social justice, have remained largely immature andineffective except in few states (Behar and Kumar, 2002 andBaumann, 1998).

It may be argued here that PRI framework, notwithstandingits ineffectiveness so far, is possibly the best suited for theimplementation of rural housing policies such that ruraldiversity, local needs, and socially and economically backwardclasses are not excluded, and local stakeholders are part ofthe wider consultation process involved in the formulationof rural housing initiatives (Box 10.1). Though there may beconcerns about PRIs’ current role in the implementationprocess, the institutional structure can be expected to maturewith time and be able to appropriately shoulder the oneroustask of addressing rural housing problems. The DistrictPlanning Committees, which are responsible for making plansfor the rural areas could, in consultation with Gram Sabhas/Gram Panchayats, identify housing problems at local level anddesign strategies for their improvement. Moreover, since theplans made by DPCs include all aspects of rural development,as specified in Schedule XI, housing would integrate withwider rural development policies.

Local level initiatives for rural housing would also be ableto develop mechanisms for addressing impediments (such asproblems with titles) by building capacities to develop a titlerecord system. Building quality is also a major issue in ruralareas due to absence of building bylaws. Developing buildingbylaws is not sufficient. Monitoring adherence could be apart of the PRI agenda similar to municipalities in cities.

PRIs could be entrusted the role of developing, managing,and allocating social housing units. PRIs’ capabilities asdeveloper or as real estate manager could be in some doubtbut the implementation of social housing could well be executed

through public-private-partnership, where concessions aregranted to private developers who would have responsibilityto develop and maintain social housing for the period forwhich concession is granted. The role of PRIs could be toidentify social groups for allocation of these houses on rentalbasis and also to collect rent.

Non-governmental Organizations

In the absence of effective institutional framework in rural areas,NGOs have played a very important role in rural development.These are non-profit organizations and work with low capitalbase largely through networking. It is difficult to categoriseNGOs into groups either sectorally or in their coverage. Thevarious types of NGOs that have emerged can be categorizedbased on their approaches, functions, deliveries, and sectoraland spatial coverages (Rahman, 2002). However, manyencompass more than one area. NGOs could be grouped intothe following broad categories:1. NGOs with social mobilization,2. NGOs offering micro-credit,3. NGOs offering sectoral deliveries (such as health and

sanitation, education, natural resources management, andawareness raising),

4. Science based policy research NGOs, and5. Networking and advocacy organizations (Rahman, 2002).

NGOs such as SEWA, BASIX, PRADHAN, SHARE,MRYADA and so on have created institutions which haveassisted the government in delivering rural programmes anddeveloping institutions that have helped in linking formalfinance to rural poor and have enhanced the rural develop-mental cause (Box 10.1 and 10.5).

WAY FORWARD

It is important to view rural housing within the wider contextof rural development and to understand and link other ruraldevelopment policies with housing. A more integrated approachis required which may practically be achieved perhaps throughthe Ministry of Rural Development or Ministry of PanchayatiRaj in conjunction with states (as land is a state subject) wherethere is smooth co-ordination between these two ministriesat national level and corresponding agencies at the state level.However, this can provide no more than a policy frameworkfor PRIs which are actively at the grassroots and consequently,are the most appropriate institutions for implementing ruraldevelopment and housing policies.

While it is argued that policy should be issue-based withawareness of rural dimensions and the circumstances ofparticular localities, in practice, it is difficult to take these intoaccount in nationwide policy formulation. To ensure flexibility

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of response at the local level, a basic policy framework fromcentral/state government is a primary requirement. However,this raises the question, how much governmental involvementis appropriate. Though flexibility in policy is important, toomuch flexibility could become a convenient cover for central/state government to abrogate responsibility. A policy commitmentrequires a funding commitment. Vagueness in policy could leadto negligence of funding which exactly the present scenario is.

In the whole discussion about devolution of power at locallevel, the core issue of funding is being marginalized. Whateverbe the level of devolution of power, adequate funding is aprerequisite. Decades of negligence of funding in the housingsector and low incomes have all contributed to present problemswith rural housing. Low-income households would require

investment in social housing to eliminate poor quality kutchahousing. PRIs without adequate fiscal clout cannot be expectedto sort out housing and other related problems. It is importantto recognize that rural housing problem is a national problemand cannot be funded only at the local level.

PRIs could play an important coordinating, strategic, andperhaps initiating role and would need to adopt a flexibleapproach at the village level where the action is. NGOs haveplayed an important role in capacity building in rural areasand their existence does not get marginalized with the creationof new legal institutions (PRIs) at the local level. In fact, withdevolution of power to local levels, their role becomes muchmore important as they are repositories of capacities in dealingwith development issues at the local level.


REFERENCES

Baumann, P. (1998). ‘Panchayati Raj and Watershed Management inIndia: Constraints and Opportunities’, Overseas DevelopmentInstitute, WP 114, London.

Behar, A. and Y. Kumar (2002). Decentralization in Madhya Pradesh,India: from Panchayati Raj to Gram Swaraj, Overseas DevelopmentInstitute, WP 170, London.

Census (2001). Census of India 2001, Office of the Registrar GeneralIndia, New Delhi.

Chakrabarti, R. (2004). ‘The Indian Micro-finance Experience—Accomplishments and Challenges’, mimeo. SDC-Rural HousingProject, New Delhi.

Jain, Dolly and Zeenat Niazi (editors) (2005). ‘Participatory RuralHabitat Processes: Emerging Trends’, Development Alternatives,New Delhi.

Johanson, Liby T. (2006). ‘A Fine Balance’, KESNIK NirmithiKendra, Kolam (unpublished).

National Commission on Population (2006). ‘Population Projectionsfor India and States’, Report of the Technical Group on PopulationProjections, New Delhi.

NHB (2004). Report on Trend and Progress of Housing in India,2003. (2005). Report on Trend and Progress of Housing in India,

2004.NSSO (2004). Housing Construction in India, National Sample

Survey Organization, Report No 488 (58/1.2/1). (2005). Household Assets and Liabilities, National Sample

Survey Organization, Report No 500 (59/18.2/1). (2006). Household Borrowing and Repayment in India, National

Sample Survey Organization, Report No 502 (59/18.3/2)Rahman, A.A. (2002). Role of NGOs in advocacy: Lessons learnt from

Bangladesh and South Asian countries, mimeo, Bangladesh Centrefor Advanced Studies.

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Rural Housing