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Alternative Habitat Finance

by Bhairab Giri Goswami last modified 2010-12-20 15:47

Rural India requires at least 14.6 million housingDisaster safe

units (11.4 million on account of replacement and additional 3.2 million new units). If congestion and obsolescence factors as well as damage of houses due to disasters  is also considered, the housing requirement in rural areas is estimated at about 24 million.


Besides state specific housing schemes, Indira Awas Yojana, the most popular social housing scheme in India provides a grant assistance to the BPL. Under IAY, the BPL families receive an assistance of Rs 45,000 in plain areas and Rs 48,500 in hilly and difficult areas. For upgradation of unserviceable households an assistance of Rs 15,000 is provided. Banks have been also advised to include  IAY houses under the Differential Rate of Interest (DRI) scheme for lending upto Rs.20, 000/- per housing unit at interest rate of 4%. For upgradation of kutcha houses, the financial assistance is Rs. 15,000/- per unit.


Despite the quick and successive revisions in IAY assistance, the grant is still not enough for the construction of a disaster safe and adequate house. The uptake of the DRI scheme has been extremely low for various reasons both at the end of the bank as well as the BPL families hoping to access the loan.


There is much scope for promoting diverse financing options that rural families may access. Habitat for Humanity has been providing housing assistance to the poor through a model based on contribution in the form of cash and / or sweat equity by the families. Different loan products have also been developed by some banks such as the State Bank of India, for different segments of rural families besides the BPL. For encouraging effective conversion of house asset as productive housing NHB has been promoting ‘Productive Housing in Rural Areas (PHIRA)’ in partnership with banks and micro-financing institutions. Micro-finance institutions have also been providing finance to poor families but there is a long way to go before a combination of solutions tailored to the needs and realities of the poor can be developed and implemented.

Besides housing, there is a gap in habitat infrastructure at the village level. Meeting these needs in a manner that is effective and lasting also requires sufficient financial resources. While there are government schemes for provision of specific  infrastructure elements  such as lighting, sanitation, potable water, convergence of these at the same place, at the same time has not happened in many places. This affects the overall quality of life in villages.

Constitutionally, Gram panchayats are the bodies of local governance in rural India vested with powers and responsibilities to foster economic development and social justice. The statutory functions of gram panchayats, include the provision and maintenance of public infrastructure and services such as roads and streets, water supply, garbage disposal, street lights and rural housing. Besides the state and central schemes, the PRI act provides for a number of levers of financing to gram panchayats. These range from revenues such house tax, and water charges that a gram Panchayat is empowered to levy, assigned and devolved revenues that can be channeled back to the gram Panchayat through the state revenue system as well as loans. To be able to effectively use these channels of financing, there is a need to develop the capacity of panchayats. 

basin South Asia 2009 Designed and supported by OneWorld South Asia