Opinion Editorial
Published: December 15, 2012 01:32 IST | Updated: December 15,
2012 01:32 IST
Sheltering the urban poor
Seven years after it first mooted the idea, the UPA government
has set up a Credit Risk Guarantee Fund with aninitial corpus of
Rs.1000 crore that will encourage banks to offer home loans to the
poor. In a recent written reply toa question raised in Parliament,
the government stated that it has notified the scheme and
registered a trust toadminister the fund. This is the second scheme
promoted to help low-income groups access funds to buy houses.The
Interest Subsidy Scheme for Housing the Urban Poor, launched in
2008, hardly had an impact and achievedonly one-third of the
target. Sadly, the new scheme is unlikely to do any better. Recent
estimates show that thehousing shortage is a staggering 18.78
million units, 95 per cent of which pertains to low-income groups.
Thegovernment believes credit barriers for the poor fuel this
persisting shortage. Banks do not consider low-incomegroups
households which earn less than Rs. 2 lakh per annum as credit
worthy and are reluctant to offer loans.The government has thus
assured lending agencies that the new fund would cover any risk of
default in loans givento the poor and hence they should not
hesitate to support their efforts to acquire homes. This is sound
in theory, butineffective in practice.
The guarantee fund, as the accompanying conditions state, would
be available only for housing units which areabout 430 square feet
in size and for loan amounts that do not exceed Rs 5 lakh. There
are two problems with this.There is hardly any supply of
small-sized dwelling units in most of our cities; and even if they
were available, priceswould far exceed the affordability threshold,
which is four times an applicants annual gross income. Hence,
loanapplications would cross the cut-off figure, and the poor would
not benefit from the fund. The scheme may work insmall towns, but
the housing deficit is not acute there. At the root of the housing
crisis is inadequate supply createdby non-availability of cheap
land. This is where lessons from cities such as So Paulo could help
improve thesituation. Indian city managers could demarcate
low-income housing areas as Special Zones of Social Interest
andapply revised planning standards to produce lower plot sizes,
create higher densities and optimise land use. Whencities apply
this concept to new areas, they can reserve more land for social
housing. Simultaneously, they shouldimprove schemes to help the
poor buy small land parcels and build self-help housing. In
addition, the governmentshould implement the National Urban Housing
and Habitat Policy (2007) recommendation to reserve 15 per cent
ofdeveloped land in all housing colonies for low-income
housing.
Keywords: Credit Risk Guarantee Fund, low-income group, Interest
Subsidy Scheme, UPA, government schemes
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