Conference on

Drivers and Challenges in Indias Rural Housing Development Program

November 25, 2008 A Summary of Discussions 1

The discourse on rural housing in India is often dominated by concerns of poverty alleviation and the effectiveness of the delivery systems of the Indira Awas Yojana or Bharat Nirman development programmes aimed at securing minimum levels of pucca housing to the belowpoverty line population. The presence of a plurality of income groups which goes into making a vibrant market for housing in rural India is generally missed. Infrastructural lacunae put this market beyond the reach of new ideas for construction as well as financial products. Now, the findings of a NCAER study, Rural Housing in India: Challenges and Opportunities, sponsored by Holcim Ltd., has opened a new chapter in our understanding of the rural reality in general and the changing scenario for rural housing in particular. NCAER has a rich experience of household characteristics and markets of rural India, borne out by five decades of research into many aspects of the economy savings patterns, agriculture, purchase and consumption of consumer goods, access to health and education services, etc. The Rural Housing project had a sample size of 3,000 household s spread over 150 villages all over India. Preceding it, NCAERs National Income Survey of Households (2007) had revealed the huge disparity between rural and urban earnings: the average annual income of the urban Indian is 84.6 per cent higher than his rural counterpart. In addition, Census and National Sample Survey Organisation figures bear out the inescapable reality that rural housing lags behind urban, both in terms of the current and future scenarios. A day- long conference on Drivers and Challenges in Indias Rural Housing Development was held on November 25 to launch the report. The event attracted a large number of experts from banking, financial institutions, media and planning and development, apart from government institutions. This was only fitting because, as Dr Bimal Jalan, former NCAER president and Rajya Sabha MP, pointed out in his inaugural remarks, rural housing development takes within its scope the entire gamut of issues related to progress for 750 million Indians. Mr Suman Bery, Director-General, NCAER, highlighted the importance of distinguishing between housing upgradation and new housing, which is not very easy in the rural setting. The speakers in the technical sessions mostly focused on that segment of the population (45 per cent, according to Mr S. Sridhar, Chairman, National Housing Bank) that has an economic demand for housing finance, whether for upgrade from kutcha or brand new constructions. Presently, owing to the absence of delivery mechanisms, less than 10 per cent of all housing
1

Prepared by Udayan Namboodiri and Shashanka Bhide

loan applications come from villages. Even here, said Ms. Renu Sud Karnad, Executive Director, Housing Development Finance Corporation, most loan takers are urban folks intending to develop their rural housing. Like with everything Indian, the rural reality is vastly unique in many respects, the chief ones being: a. Infrequent registration of holdings. Ancestral properties are seldom recorded in terms intelligible to present day financial institutions. Delineation is often done on the basis of mutual understanding. Title is often vague, a problem that could only be mitigated by the entry of title insurers. b. Difficulties faced in estimating rural incomes. Cash upfront transactions are the norm, which pushes up the cost of finance as EMIs must be collected physically by sending representatives (experience related by an official of Mahindra Rural Housing Finance). Mr K. Muralidharan of National Housing Bank said incremental housing is not encouraged at present. Dr Shashanka Bhide (Project Leader, NCAER) and Arun Kumar, President of Development Alternatives pointed out that group housing could be a good entry point. Prof. Nilima Risbud from School of Planning and Architecture highlighted cultural norms that militated against people building houses far from their social moorings. c. Government is yet to identify incentives for entering the rural housing business. Many State laws forbid the mortgaging of agricultural lands. Mr Muralidharan, General Manager, National Housing Bank, added that securitisation is a problem as there are social bars on auctioning of property acquired from defaulters. d. The very concept of rural housing is vague (experienced architect Ranjit Sabhiki). Professional inputs to service typical rural needs practically absent its as if the village doesnt exist in the architects concept of India. The conference saw the interplay of a large number of possible suggestions to resolve the delivery problem. Dr. Jalan, in his Address challenged the key stake holders to come up with ideas that can develop an effective distributional system for rural housing. He gave the example of milk revolution in India through which an effective distribution system for milk was established in the country and thought that home depots which can service a cluster of villages could be one such idea. He also proposed a bigger role for microfinance-based Self Help Groups (SHGs), a medium that has proved quite effective in a large number of states. But, Mr Santosh Mehrotra, Senior Adviser, Planning Commission, thought that rural SHGs are presently too caught up in meeting day-to-day consumption requirements. Mr Muralidharan echoed the view that membership attrition is quite high in SHGs. Besides, microfinance would hardly be adequate to address the large funds requirements. Several speakers spoke of the need to stop ignoring the human resource factor in housing development in rural India. While there may be abundance of labour, skilled labour is always in short supply. Amanullah Khan, Director, India Development Foundation, stressed the need to factor the issue of sanitation in rural housing as this aspect is often ignored completely. Mr Sabhiki reminded the experts that rural societies and their particular cultures should be protected because too often the construction of infrastructure leads to the distortion of traditional habitation patterns. What is most important, urban India should not impose its standards of perfect house-building on rural India. Mrs Neelam Sawhney and Mrs Sunita Khurana, Joint Secretary and Director respectively in the Ministry of Rural Housing, stressed on the salient points of the Indira Awas Yojana and the

parameters of the emerging National Rural Housing Policy. The lack of adequate land for fulfilling the housing requirements of rural India, which has come across in the NCAER report has not been addressed yet by the Central Government because land issues are often left to the states. Prof. Kirit Parikh, Member, Planning Commission, pointed to the greater understanding today of the role of housing in improving both the productivity of labour and also the need for matching the household preferences with the solutions through policy. Mr. Prabhu Ghate, a panelist highlighted the importance of relieving the land constraint and said that this is of greater importance than the significant constraint of credit. Ms. Zeenat Niazi, Development Alternatives, noted that subsidy schemes as they are now implemented do not address the whole problem of rural housing. They are seen more as doles rather than providing a comprehensive solution. Knowledge and know-how of rural housing are missing in such subsidy schemes. She also stressed the need for clarifying the role of village panchayat bodies in rural housing. Prof. D.B. Gupta noted some successful initiatives of NGOs in rural housing and felt that greater emphasis should be provided on rural planning. Mr. Urs Schottli, international journalist, comparing India and China, drew attention to the need for finding solutions that are sustainable. Mr. Paul Hugentobler, Holcim, noted that there is no single solution to the complex issue of rural housing solutions but that housing finance is a key instrument in moving towards a solution.