ural housing has been marginalized both in wider
policy discussions as well as within the debate on
rural issues because rural housing needs are generally
subordinated to urban housing needs in policy priority. Yet
housing is essential for the well-being and social security
of rural households. Compared to urban areas, rural areas
suffer more from the concentration of deprivation. With
incomes generally lower than the urban areas and seasonal
unemployment, many households find it difficult to gain
ownership of homes. This has implications for social sustainability
of rural communities and is causing increased polarization as
younger people migrate to the urban areas in search of jobs
leaving behind their old folk and children resulting in negative
impact on rural enterprise and economic viability.
Housing sector in general (rural housing in particular), has
suffered the lack of planned government resource mobilization
and implementation programmes. Although the government
has undertaken many one-off initiatives to promote rural
housing, these have had limited impact on the widespread
shortfall. A general lack of resources has led to a self-help culture
within rural communities and most of the houses are self-
financed and often self-built. In rural areas 95.4 per cent of
the households with homes, have ownership of the property
compared to a figure of 71.5 per cent in urban areas in 2001
(Census, 2001). Home ownership trend has remained more
or less stable over the last four decades.
It may be argued here that there can be no separate rural
housing policy but a rural dimension to each aspect. The word
‘rural’ encompasses villages, tribal areas, peri-urban areas, and
lal dora/abadi area. There is so much heterogeneity across
different regions that local dimension to policy-making and
devolution attains much greater significance. One can argue
that most rural initiatives have not succeeded because this
key feature of the rural housing sector has been neglected. If
it is accepted that there cannot be a separate rural housing
policy, the problem of defining rural areas, is avoided. What
is required is the awareness of local dimension in broad
housing issues within the rural setting.
In this chapter we review the status of rural housing in
India and present the rural demographic trends. We take stock
of the quantity and quality of physical stock of housing and
discuss household asset and liability structure. The role of
financial institutions has been reviewed further and various
initiatives related to rural housing undertaken by the government
are evaluated. In the end we suggest policy options available
to improve the rural housing scenario.
DEMOGRAPHIC TRENDS AND HOUSING NEEDS
Estimated population in India in 2001 was 1029 million, a
growth of 18.1 per cent from 1991. Nearly 72 per cent of
the Indian population lives in rural areas. In 1951, the average
household size in rural areas was 5.52, which increased to 6.03
in 1981. This has declined to 5.50 in 2001, a consequence of
urbanization and formation of new households in rural areas.
The total number of households in rural India is 143 million
Two trends, which will have significant impact on the
rural population are (i) declining fertility and (ii) increasing
urbanization. The Total Fertility Rate (TFR) is expected to
decline from 2.9 during 2001–5 to 2 during 2021–5. With
this, the weighted TFR is projected to reach the replacement
level of 2.1 by the period 2021. The urban population in the
country, which was 28 per cent in 2001, is expected to increase
to 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 of
increase in urban population is expected to be 249 million
(67 per cent).Rural population is projected to be 862 million
in 2026. An important dimension of demographic trends is
that nearly half of the growth in population is expected to
be concentrated in the relatively deprived states of Bihar,
Chhattisgarh, Jharkhand, Madhya Pradesh, Rajasthan, Uttar
Pradesh, and Uttaranchal.
The total population in India that was in the age group
of 20 to 45 years (typical home buying age) was 36.6 per cent
in 2001 which is expected to rise to 40 per cent in 2026 (NCP,
2006). Urban India would add much larger proportion in this
age group compared to the rural India raising important policy
concerns regarding an increasingly ageing rural population.
Housing Supply and Access
Table 10.1 presents the housing scenario in rural India and
the growth rate is shown in Figure 10.1. Since the 1980s,
demographic trend has been towards the formation of new
households. Addition to the housing stock has witnessed
phenomenal growth, outpacing the rate of population and
household formation growth.
Table 10.2 presents the uses to which rural houses are put
to. The table indicates that though there are 177.54 million
houses in rural areas, only 135.1 million houses are used for
residential purposes. Nearly 5 per cent of houses were vacant
and around 20 per cent of houses were put to non-residential
Stock 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
Dwelling Units in Rural Areas by Use (in million)
1981 1991 2001
Total number of census 113.96 142.98 177.54
Total number of 5.64 7.97 9.36
vacant houses (B)
Total number of occupied 108.32 135.01 168.18
houses (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 residential
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 completions
has 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 completed
per thousand people indicates that while in 1971–81, 3.66
houses were completed per 1000 persons and the figure for
1991–2001 is 4.65. The number of new house construction,
at 4.65 houses per 1000 persons, is still quite low compared
to urban areas where new completions are around 7 housing
unit 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 35
per cent of the houses had a plinth area of 50 sq m or more in
rural India. Around 10 per cent of dwelling units had plinth
area of over 100 sq m. Over time the plinth area of the houses
has been reducing gradually. In 1993, the proportion of houses
with plinth area of over 100 sq m was 15 per cent.
The proportion of houses over 20 years old but in good or
satisfactory condition is the lowest for kutcha structures, followed
by semi-pucca, and pucca. About 32 per cent of the dwelling
units in rural areas were constructed more than 20 years ago.
So far as the condition of the houses is concerned, the situation
has remained more or less the same as in 1993 when the structure
of about 25 per cent dwelling units was reported as good and
59 per cent as satisfactory in the rural areas. (NSSO, 2004)
Land holding per capita in rural areas is higher than the
urban areas. Rural households construct their houses on their
own land (NSSO, 2004). This leads to variability in the quality
1971–81 1981–91 1991–2001
Population Households Housing stock
Rural Housing 249
of the houses with regard to materials used for construction
and the facilities available in the dwelling units.
Home ownership is the dominant form of tenure in rural
India with more than 95 per cent households owning their
homes (Table 10.3). The percentage of rental tenure is 4.6
per cent. These are mainly the houses rented to farm workers
The second measure of quality of housing is the number
of rooms per house. In 2001, 39.8 per cent of rural households
lived in one-room houses, 68.5 per cent of households were
living in houses with one or two rooms. Though there has been
progress, the average size of rural homes is disproportionately
small compared to the average size of households (Figure
10.3). For an average household size of 5.2, the sizes of homes
are small. Overcrowding in existing homes is the main cause
of new household formation and this is driving the demand
for new houses in the rural areas.
Housing tenure (Percentage)
1961 1981 2001
Owner 93.6 93.0 95.4
Rental 6.4 7.0 4.6
Source: Census (2001).
Mismatch between housing stock and the number of households
represents only one aspect of housing inadequacy. The other
aspect of housing inadequacy is reflected in the mismatch
between desired and actual housing quality. In rural India,
mismatch between required and available housing stock is
not as stark as urban areas but the quality of house leaves much
to be desired. As a first measure of quality, Figure 10.2 presents
housing by type of structure. Based on building materials used
for construction of structure, houses have been classified as
pucca (building materials used for construction are brick and
mortar and other permanent materials), semi-pucca (building
materials used for part of the construction of either the roof
or the walls are mud or thatch) and kutcha (materials used
for construction are mud and thatch). The trend indicates
that the share of pucca houses in total has increased from
18.5 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 structural
condition. According to Census (2001), only 45 per cent (58.10
million) of residential and 42.2 per cent (2.52 million) of non-
residential houses are in good condition. 48.7 per cent (62.81
million) 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) of
non-residential houses are in dilapidated condition. Replacement
needs for dilapidated and a part of livable houses would add to
the demand for housing in rural areas in the future.
The fourth measure of housing quality is the presence of
exclusive amenities such as drinking water, toilet and electricity
connection. According to Census (2001), nearly 80.5 per cent
of households had access to safe drinking water in 2001. There
has been steady progress in access to safe drinking water over
the two decades preceding 2001. In 1981, only 26.3 per cent
of households had access to safe drinking water. The situation
of access to exclusive toilet is shabby and in 2001, only 21.9
per cent of households had access to toilet facilities. As for
electricity connection, only 43 per cent of houses had
electricity connection in 2001, though this proportion has
increased from 14 per cent in 1981.
Kutcha Semi-Pucca Pucca
1971 1981 1991 2001
1971 1981 1991 2001
1-Room 2-Room 3-Room 4+Room
250 India Infrastructure Report 2007
To summarize, though at an aggregate level, rural housing
stock seems adequate but the quality of housing leaves much
to be desired. A sizeable proportion of houses is smaller than
household needs with poor structural condition, constructed
with non-permanent material and providing inadequate
amenities. The data, released by Census (2001) on houses,
households, amenities, and assets for 2001, indicate that total
number of rural households was 138.27 million as against
the 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-serviceable
kutcha houses of 11.4 million indicates that there is a shortage
of 14.6 million units in rural India. Besides the absolute
shortage, 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 of
households is important for understanding their wealth status
and debt leveraging potential. A popular criticism for the lack
of penetration of formal finances (housing and non-housing)
in rural areas is that formal institutions perceive the credit
worthiness of the borrowers in rural areas as significant risk.
It is, therefore, pertinent to understand the wealth position of
rural households. The average value of financial and physical
assets 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 cultivator
an average, owned assets of Rs 3.73 lakh, which was three
and half time that owned by a non-cultivator
1.07 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) while
Orissa had the lowest asset holding with Rs 0.98 lakh per
household and close to it were Andhra Pradesh (Rs 1.35 lakh),
Assam (Rs 1.46 lakh), West Bengal and Jharkhand (each Rs
1.52 lakh) (NSSO, 2005).
The percentage of households grouped according to their
asset holding is shown in Figure 10.4. In the rural areas, 7.6 per
cent of the households owned assets as low as Rs 15,000 or
even less, valued at 2002 prices. Another 8.3 per cent households
belonged to the asset group of Rs 15,000–30,000. Thus, in
2002, less than one-sixth of the rural households owned assets
worth Rs 30,000 or less. On the other hand, about 23 per
cent of rural households owned assets amounting to Rs 3
lakh and more. Central 60 per cent of households had assets
ranging from Rs 30 thousand to Rs 3 lakh.
The two major components of household assets are land
and building, accounting for 87 per cent of total assets of rural
households (Figure 10.5). The value of average land holding
was around Rs 1.67 lakh and the value of buildings was around
Rs 0.64 lakh. Average asset holding of households, in nominal
terms, has increased from Rs 36,000 in 1981 to Rs 2.66 lakh
in 2002. However, the rural–urban disparity in asset holding
has widened. Average value of household asset in the rural
areas in 1981 was 87 per cent of the average value of household
asset in urban areas. However, this proportion was only 63
per cent in 2002. Percentage share of asset holding in different
asset classes is shown in Figure 10.5. The percentage share of
land and building in total assets has not changed much during
1971–2002 for both rural and urban households.
There are substantial asset inequalities among rural
households. The value of asset holding of the upper-most
income class (with monthly per capita expenditure of more
Rural households operating at least 0.002 hectare of land during the
365 days preceding the date of survey are treated as ‘cultivator households’.
Rural households operating no land or having land less than 0.002
hectare 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
Source: NSSO (2005).
0 10 20 30 40 50 60 70
Thousands of Rs
Rural Housing 251
than Rs 615) is five times the asset holding of lowest income
class (with monthly per capita expenditure of less than Rs
300) in 2002 (NSSO, 2005). Figure 10.5 presents the patterns
of asset holding of rural and urban households. As one would
expect, rural households have a much large proportion of their
wealth invested in land (both farm and non-farm). Urban
households require land for housing and business activities.
The average land holding of households in urban areas are
smaller than rural areas. One striking feature that emerges from
Figure 10.5 is that the wealth portfolio of both urban and
rural households is highly undiversified and is heavily skewed
towards real assets (Figure 10.5). Financial asset holdings are
higher in urban areas than in rural areas, but as a proportion
of overall wealth, these are small components.
On the liability side, nearly 27 per cent of rural households
had outstanding cash loans and the average size of debt
amounted to around Rs 28,449 (NSSO, 2005). The ratio of
average outstanding cash loan to average value of asset suggests
that as a proportion of their total assets the poor take higher
amount of cash loans (Figure 10.6).
Asset position of households suggest that the average asset
holding in rural areas is around 63 per cent of asset held in
urban areas but generally rural households have low cash debt
as a percentage of their assets. In addition, in percentage terms
higher net worth households have low percentage of cash
debt but when we convert this into value terms, households
have fairly low cash debt in relation to their asset holdings
RURAL HOUSING FINANCE
Rural houses are financed by formal and informal sources
of finance. At present, a house being a preponderous asset
of a household, people build their houses gradually as their
savings and availability of funds from informal sources
House Construction Activity and Expenditure
A survey on construction activity by households during the
five year period 1997–2002 reports that about 25 per cent
rural households had initiated some form of construction
activity. A total of 41 million rural constructions were initiated
during this period. Among the initiated constructions, 82
per cent were completed during the five years preceding the
survey (NSSO, 2004), showing a two-fold increase compared
to the period of earlier survey, i.e., 1989–93.
Construction activity was more common in the households
which were less well off as observed from their household
expenditure (NSSO, 2004). This could be because most
households in rural areas use their own funds for construction.
Access to formal sources of borrowings is limited. Better-off
households, who have improved access to the sources of finance,
usually build satisfactory homes in one go. Low-income
households build their houses incrementally and keep
upgrading their houses as they save money. It is quite likely
that the dwellings of the poor required frequent construction
activity of the ‘major repair’ kind. Figure 10.7 presents the
percentage of households in each monthly per capita expenditure
class 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 repair
dominated the volume of the constructions in terms of number,
comprising as much as 55 per cent in rural areas. Among
kutcha constructions, repairs and improvements constituted
about 79.6 per cent. Among the pucca structures, construction
Fig. 10.7 Percentage of Households who undertook
House Construction during 1997–2002
Source: NSSO (2004).
Fig. 10.6 Average Cash Debt as Percentage of Average
Value of Asset for Rural Households
Source: NSSO (2005).
Monthly per capita consumption exp (Rupees)
252 India Infrastructure Report 2007
Source: NSSO (2004).
Fig. 10.8 Distribution of type of House Construction
according to Structural Type during 1997–2002
of new building was a major activity in the rural areas. A
significant shift was observed in the pattern of preference
towards the structural type of housing units. In rural areas,
about 38 per cent of the constructions completed were pucca
and about 40 per cent were kutcha, as against 34 per cent
and 45 per cent observed during 1989–93.
The size of the structures constructed and the cost of
construction based on NSSO (2004) for the period 1997–
2002 show that the cost varied widely across the different types
of construction, as well as types of structure (Table 10.4). The
average area constructed was highest for the pucca structures
and the least in the case of kutcha structures, probably because
the floor area constructed was directly correlated to the
economic class of the household (Table 10.4). On an average,
a rural household spent about Rs1.13 lakh for a pucca new
building with an average floor area of 42 sq. m and about Rs
21,000 for repair of a pucca structure. Compared to this the
average cost of construction of new pucca building in urban
areas 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 area
probably due to more expensive material used for construction.
NSSO (2004) survey also indicates that households are
constructing smaller houses compared to earlier periods,
probably for the affordability reasons. However, the extent of
addition to existing living space at 20 sq m on an average, was
more or less the same during the survey periods (1989–93 and
Sources of Finance for House Construction
Households spend monetary and non-monetary (materials
from home, own labour, and free material) resources to complete
their construction. Monetary component is financed by
households 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, about
97 per cent of construction expenditure involved was incurred
in monetary terms. Households financed around 66 per cent
of construction costs from their own resources. Friends and
relatives contributed to the extent of 9 per cent. Individuals,
operating as moneylenders, financed about 9 per cent of the
construction cost. Government institutions, financial and non-
financial, financed 8 per cent expenses. The scenario is not
very different from urban areas where formal public sector
financial institutions provided 14 per cent of construction cost.
The presence of private financial and non-financial institutions
in residential construction remains restricted to 2 per cent in
rural areas and 4.5 per cent in urban areas (NSSO 2005).
The role of private moneylenders is more apparent when
the construction is classified by the type of structure. Private
moneylenders contribute as much as 15.2 per cent of the total
finance required for kutcha constructions in the rural areas.
It may, however, be emphasized here that the share of own
finances has played a large role in financing construction. The
share of formal sector finances (excluding private money-
lenders) in construction cost in rural and urban India has
not been dominant. The share of formal finance in rural areas
is 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 rural
India. Care must be exercised in interpreting the percentage
shares indicated in the table as the borrowings included here
are for all purposes—business, non-business, and other
household needs including housing. Table 10.6 also showcases
the share of different institutions for urban areas for comparison.
The largest amount of institutional borrowings of rural
households were from ‘cooperative societies’, although its share
in total cash borrowings rose from 14.9 per cent during
1971–2 to 26.3 per cent during 1981–2 but fell marginally to
Pucca Semi-pucca Kutcha
New building Addition to floor space Alteration/Improvement/Repairs
Average 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 Cost
area (Rs area (Rs area (Rs
(sq m) thousand) (sq m) thousand) (sq m) thousand)
Pucca 42 113 21 46 29 21
Semi-pucca 29 22 16 13 29 6
Kutcha 20 8 12 4 21 2
Source: NSSO (2004).
Rural Housing 253
in terms of their activities in rural areas. In general, insurance
companies and provident funds are not a major source of
finance for households in either rural or urban areas.
One of the reasons for the limited role of financial
corporations/institutions in rural areas is the high operational
cost per loan in rural areas and the other is the perceived notion
that rural borrowers are high risk borrowers because of the
seasonality attached to their income, and that, too, is weather
dependent. Table 10.7 presents the loan repayment patterns
of households in urban and rural areas. The table indicates
that while the average institutional loan per household in rural
areas is far lower than urban areas, non-institutional loan
is higher in rural than urban areas. Repayment-wise the
performance is better in urban areas. The numbers presented
in the table do not indicate that rural households are defaulting
on loans. The low repayment could also be because of preferential
interest rate terms in rural areas or the term structure of loans.
As was indicated earlier, a large part of institutional finance
in rural areas comes from cooperative banks and scheduled
commercial banks. Closer examination of the percentage
repaid reveals that the repayment pattern of households for
loans raised from institutions is only slightly better than loans
raised from non-institutional sources.
Borrowings require some form of security from borrowers.
The types of securities against which households borrow in
rural and urban areas are quite similar (Table 10.8). The table
indicates that an overwhelmingly large population of house-
holds has borrowed against personal guarantee. Mortgage on
immovable property has been the second largest security in
rural and urban areas.
In short, the role of finance companies/institutions in
providing credit for housing has been low in rural areas.
Scheduled commercial banks and cooperative banks have
played rather similar roles in rural and urban areas. Insurance
companies and provident funds have not been a major provider
of finances for households. Surprisingly, the government
has been a relatively bigger player in urban markets. Loan
Sources of Finance (Percentage of Monetary Cost on Construction) during 1997–2002
Friends/ Private Private Money-
Own relatives Cooperative Government financial non-financial lenders
New building 64.8 9.3 3.2 9.0 1.9 0.6 8.8
Addition to floor space 70.0 7.3 3.1 6.5 0.5 0.1 10.1
Maintenance/Repair 71.0 8.0 3.3 4.4 0.4 0.4 10.1
By structure type
Pucca 65.3 9.2 3.1 8.4 2.0 0.4 9.3
Semi-pucca 67.3 8.3 1.6 8.0 0.4 0.9 11.3
Kutcha 70.3 8.2 0.6 2.3 0.2 0.3 15.2
Source: NSSO (2004).
Share of Different Institutional Sources of Finances (percentage)
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 22.0
Commercial 1.7 23.1 20.7 22.7 30.6
Insurance 0.1 0.3 0.3 1.5
Provident fund 0.8 1.3 1.0 3.0
Financial 1.4 10.9
Other institutions 1.4 1.0 1.5
Non-institut- 80.3 44.4 42.3 42.8 24.2
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
Since the 1980s, the role of the commercial bank has
substantially expanded in rural India. ‘Commercial banks’ had
a share of around 22.7 per cent in total commercial borrowings
of rural households in 2002–3. The share of government
departments was around 2.7 per cent in the same year.
The share of non-institutional finance in rural areas has
declined from 80.3 per cent in 1971–2 to 42.8 per cent in
2002–3. The share of institutional finance in rural areas was
57.2 per cent in 2002–3. There is not much difference in the
share of banks and cooperatives in rural and urban areas but
financial corporations/institutions are comparatively limited
254 India Infrastructure Report 2007
Loan Repayment Pattern of Households
(average per household figures in Rs)
Average Average Percentage Percentage
cash Average repayment of loan of loan
borrowings repayment during outstanding borrowed
Average during during ’02–03 prior to ’02– during ’02–
outstanding 1.7.02– ’02–03 (for (for loans 03, repaid 03, repaid
debt 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
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%
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%
Source: NSSO (2006).
Percentage share in Total Borrowings by type of Security and Occupation
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
Source: NSSO (2006).
repayment pattern in rural areas has not been substantially
different from urban areas for institutional finance. Nearly
40–50 per cent of households in urban and rural areas have
used personal guarantee as a security for loans. Mortgage of
immovable property is more prevalent in urban areas.
Magnitude of Household Credit to Rural Areas
The present outreach of formal housing finance institutions
in the rural areas is minimal. Initiatives were undertaken by
the Ministry of Rural Development to enhance the role of
formal housing finance institutions in rural areas through
provision of equity capital to HUDCO. However, only Rs
50 million out of a total authorized capital of Rs 3840 million
was contributed by the ministry. This imposed limits on the
extent to which HUDCO could possibly raise resources from
the open market to channelise into housing in the rural areas.
During the Ninth Five Year Plan, the equity support for
HUDCO by the Ministry of Rural Development was
enhanced to Rs 3500 million. It was anticipated that as a
result of this, HUDCO would be able to raise additional Rs
28000 million from the market for lending in the rural areas
and will be able to finance the construction of additional 6
lakh housing units annually in the rural areas. However, till
Rural Housing 255
2005, HUDCO was only financing the construction of about
2 to 3 lakh houses.
HUDCO offers financial assistance to state government
agencies such as housing board, rural housing board, district
boards, panchayat, taluka development board and so on, which
are nominated by the state govt. for undertaking rural housing
schemes. The focus group of these schemes are the economically
weaker sections and the assistance is offered for new construction
as well as repairs. By the end of 31st July 2006, HUDCO
extended Rs 49,330 million through 2049 schemes.
Scheduled commercial banks and Rural Regional Banks
(RRBs) have significant retail presence in rural areas and are
quite active in agricultural and rural credit delivery (NHB,
2005). However, their lending for rural housing has not been
more than 10 per cent of total loan extended for housing in
India (Table 10.9).
As discussed earlier, lending agencies have usually assigned
high credit risk to rural housing portfolios. Census data and
recent household surveys, however, do not find enough evidence
of differences in credit risk or repayment pattern between urban
and rural India. If the rural lending market has to be developed
further the following characteristics of the rural market need
to 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).
In response to perceived low bankability and non-availability
of tangible collateral of low-income households, as required
by the formal financial sector, in rural, semi-urban and urban
slums, institutionalized microfinance systems have emerged
driven by endeavours of NGOs. The objective of the
microfinance system is not to deliver credit solely for housing
but includes finance for all aspects of livelihood and social needs.
Housing is nevertheless an important component and it would
be important to review the contribution of microfinance in
rural India. In recent years, microcredit and microfinance in
the form of group-lending without collateral has been a
remarkable success. The performance related to microfinance,
of organizations like SEWA in Western India and SHARE
and BASIX in Southern India, has provided convincing
proof that microfinance can expand as a financial system in
India (Box 10.1).
Over the past decade, NABARD’s ‘SHG-Bank Linkage
Programme’ aimed at connecting self-help groups of poor
people with banks, has created the largest microfinance network
in the world. Self-Help Groups (SHGs), usually at the behest
of certain developmental non-governmental organizations
(NGOs), have quietly mushroomed in most districts of India
over the last few years. Millions of poor, predominantly women,
are now members of thousands of SHGs (Chakrabarti, 2004)
Self-Help Groups (SHGs) are the basic constituent units
of the microfinance system. An SHG is a group of a few
individuals—usually poor and often women—who pool their
savings into a fund from which they can borrow as and when
necessary. Such a group is linked with a bank—a rural, co-
operative, or commercial bank—where they maintain a group
account. Over time the bank begins to lend to the group as a
unit, without collateral, relying on self-monitoring and peer
pressure within the group for repayment of these loans. Loans
are then given out to individual members from these funds
upon application and unanimous resolution drawn at a group
meeting. The bank permits withdrawal from the group account
on the basis of such resolutions. Such loans, fully funded out
of the savings generated by the group members themselves,
are called ‘interloans’. The repayment period of loans is
usually short, 3–6 months. After regular loan issuance and
repayment for six months, the bank considers making a
bank loan to the SHG. The maximum loan amount is a
multiple (usually 4:1) of the total funds in the group account
NABARD’s Bank Linkage Programme, pilot-tested in
1991–2 and launched in full vigour in 1996, has been a major
effort to connect thousands of SHGs across the country with
the formal banking system. By late 2002, it connected about
half a million SHGs to the banking system with total loan
disbursement of about Rs 1026 crore. Efforts of other
organizations supplement that of NABARD. By March 2001,
SIDBI, for instance, had disbursed over Rs 30 crore to SHGs
through 142 MFIs–NGOs.
Outstanding 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).
256 India Infrastructure Report 2007
The Naya Ghar Project of the Mahila Housing Sewa Trust
The Mahila Housing Sewa Trust works to improve the housing and infrastructure conditions of poor women working in the informal
sector. 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 and
apart 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 and
India; it has been in operation since 1972. Its members consist of poor self-employed women working in the informal sector. In order
to 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 which
more 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 damage
assessment 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 Mitigation
Institute and the People’s Science Institute); to about 5000 masons employed for the construction; and finally, to the beneficiaries. The
beneficiaries, 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 village
communities. The design was sensitive to traditional materials, existing house forms, common housing patterns, conventional and
traditional 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 home
owners to remove debris and clear the site; facilitate the salvaging of material from the debris, procurement, distribution and safe
keeping of raw material, and not the least, facilitating the work of the engineers in preparing plot sketches, as well as in the monitoring
of 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 loans
was provided from the revolving fund that the Trust had built since 1994—the year it came into existence. This revolving fund itself
had 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 up
construction 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,
Gram Vikas Housing Programme
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, empowerment
strategies for women, and micro-credit.
The all or none approach is considered necessary because unhygienic conditions created by a few non-participating families in the
village can affect other participating families adversely, nullifying the positive effect of the programme. In addition, the village cannot
be 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. It
is this society that takes the responsibility for all development in the village. Next, each family deposits an amount of Rs 3 to 5
thousand against the construction of their house. Another Rs 1,000 goes into a village corpus fund: a fund that is used to extend water
supply 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
Rural Housing 257
construction process; the construction process itself is managed and monitored locally by a committee of the village society. The
construction 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 Kreditanstalt
fur Wiederaubau (KfW), a German Bank, (as it is not easy to access money directly through a German bank, the Housing Development
Finance Corporation (HDFC) has been used as a conduit for these loans). As Gram Vikas underwrites the loans, bearing the entire
risk 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 any
additional 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/dining
room, a front verandah, a toilet and a bathing room), the loan amount comes to approximately Rs 31,500 (including the initial contribution
amount). The rest of the cost is met with by the beneficiaries themselves in the form of labour and locally available materials—the
amount spent on labour and locally available material is considered as being the initial contribution amount.
Note: Views expressed here are of the author.
Source: Dolly Jain and Zeenat Niazi (Editors) (2005). Participatory Rural Habitat Processes: Emerging Trends, Development Alternatives,
Grameen Bank Housing Project of Bangladesh
The Grameen Bank of Bangladesh provides credit to the rural, landless poor for income generating activities: credit is provided
without any collateral required from its customers. Credit is provided to individuals through small savings groups; these groups also
oversee 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 borrowers
from 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 their
need 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 reinforcing
old ones towards flood and water resistance. As the sums involved were much larger than the ones available through the general loan
programme, new lending strategies were set up. Preference was given to the ‘most needy’, and those who had repaid their previous
loans on time. Each borrower received, along with a housing loan, four concrete columns, a prefabricated sanitary slab and twenty-six
corrugated iron roofing sheets. The structural system was based on a standard module, and the pre-cast building materials are mass
produced 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. It
provides 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.
Note: Views expressed here are of the author.
Source: Dolly Jain and Zeenat Niazi (Editors) (2005). Participatory Rural Habitat Processes: Emerging Trends, Development Alternatives,
Microfinance institutions have been playing a very important
role in community development as they have inculcated
savings and credit behaviour in their members. SHGs are
maturing 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 the
success of microfinance in its lending procedures, it may be
pointed out that MFIs are not linked to the wider financial
structure of the country and have limited capabilities in terms
of raising resources.
GOVERNMENT HOUSING INITIATIVES
In India, the provision of housing is largely placed within the
domain of the private sector, with home ownership as the
dominant form of tenure. While the government has played
the role of a social developer of housing to a limited extent
in urban areas, it never really acquired the status of a social
landlord in the countrywide sense. The consequences of this
have been seen in housing access, tenure mix, and quality as
258 India Infrastructure Report 2007
The government has formulated various initiatives targetted
towards rural housing but a comprehensive rural housing policy,
which is well integrated within rural development policy/
strategy is missing. While the National Agenda for Governance
focuses on ‘Housing for All’ as a priority theme, there has been
little deliberation on how to achieve this objective in rural
areas. Governmental initiatives such as Indira Awas Yojana
which are targetted towards rural poor do not provide neces-
sary resources and mechanisms to enable local inhabitants,
Gram Sabhas, lending institutions (such as HUDCO which
have been provided with equity assistance), rural building
centres and so on to tackle rural housing needs effectively.
A positive aspect of this is that there is no imposition of a
centrally determined ‘rural housing strategy’ on states/district
responsible for formulating strategies at village level. In order
to address housing shortage (both absolute shortage as well
as inadequate quality standards), the National Housing and
Habitat Policy in 1998 envisaged construction of 20 lakh (13
lakh in rural areas and 7 lakh in urban areas) homes annually.
However, the responsibility of delivery has been left to the
The Ministry of Rural Development has formulated an
Action Plan for Rural Housing that consists of the following
1. Provision for upgrading unserviceable kutcha houses under
the Indira Awas Yojana (IAY) in addition to the new
2. Credit cum subsidy scheme for rural housing.
3. Innovative scheme for rural housing and habitat
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 this
scheme is to provide assistance to rural households who are
economically classified as below poverty line or belong to
schedule caste/scheduled tribe or are freed bonded labourers.
The Planning Commission allocates the funds for this scheme
to states based on set criteria. Since 1993–4, the scope of the
policy was extended to all households who are below poverty
line subject to the condition that not more than 40 per cent
of the allocated fund could be utilized for non-SC/ST
households. The scheme has also been extended to families
of ex-servicemen killed in action. Three per cent of total houses
are reserved for physically and mentally challenged persons
who are below poverty line. Other guidelines for assistance
under this scheme are: (i) the maximum amount of construction
assistance should not exceed Rs 20,000 for plain areas and
Rs 22,000 for hilly areas, (ii) limit on improvement from
kutcha to semi-pucca or pucca houses is Rs 10,000, (iii) the
allotment of house should be in the name of female member
of household, and (iv) Gram Sabha (Village Council) is
empowered to select the beneficiaries. Since inception Rs
13,840 crore have been spent under this scheme. A total of
10.34 million units have been constructed/upgraded under
this scheme up to 2003–4 (NHB, 2004 and NHB, 2005).
This was a means tested scheme initiated in 1999 targetting
households with annual income of less than Rs 32,000.
Assistance was in the form of loan and subsidy. The subsidy
component was less than Rs 10,000 and maximum permissible
loan amount was Rs 40,000. District Rural Development
Agencies (DRDAs) were responsible for making loan
arrangements for the beneficiaries through commercial banks,
RRBs, and housing finance institutions. The subsidy part of
the scheme was funded through shared allocation from centre
and state contributing in the ratio of 75:25. Since its inception,
the scheme funded 85,564 houses incurring an expenditure
of Rs 77.79 crore. From the year 2002–3, the scheme has
been merged with IAY (NHB, 2004).
Innovation Scheme for Rural Housing
and Habitat Development
This scheme was launched in 1999–2000 with the objective
of promoting cost effective, environmentally sound construction
technologies. Potential beneficiaries under this scheme include
recognized educational/technical institutions, corporate
bodies, government, autonomous societies, development
institutions, and credible non-government organizations with
proven record in the field of rural housing. Maximum limit
for assistance for non-government organizations is Rs 20 lakh
and for government institutions the limit is Rs 50 lakh. Nearly
125 projects have been approved for funding under this
scheme (NHB, 2004).
Setting up of Rural Building Centre
Government provides an assistance of Rs 15 lakh to set up
rural building centres. Objective of rural building centres is
to provide technology transfer and information dissemination,
skill enhancement, and to produce cost effective building
materials. Since 2002–3, ninety-four project proposals for
setting up of rural building centres have been approved (NHB,
2004 and NHB, 2005).
Rural Housing 259
Samagra Awaas Yojana
This scheme was launched in 1999–2000 and is aimed at
comprehensive development of shelter, sanitation, and
drinking water facilities. In its first phase, one block each
from twenty-five districts of twenty-four states and one union
territory was identified for implementing the scheme. A
central assistance of Rs 25 lakh was provided for each block
to undertake overall habitat development, information,
education, and communication activities with the requirement
that 10 per cent contribution should come from people.
During 2002–3, thirty-three proposals were approved and
an 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 Rural
Development to facilitate the induction of science and
technology inputs on a continuous basis to provide affordable
shelter for all in rural areas within a specified time frame
through community participation. A Working Group was
formed to specify the aims and objectives, formulate a road
map for private capital to flow in housing development in
rural areas, and shortlist agencies that could undertake the task
of preparing techno-legal regime for rural planning (NHB,
2004). The action plan prepared by the Working Group is
Two Million Housing Programme
As part of this programme, primary lending institutions are
expected to finance an additional 2 million houses annually
with a focus on economically weaker and low income group
housing. Of the 2 million houses, 1.3 million are to be financed
annually in rural areas. During 1998–2004, HUDCO has
sanctioned loans for 3.3 million houses in rural areas (NHB,
2005). It is difficult to exactly state the number of houses
financed by other lending institutions during this period. A
report by NHB (2004) indicates that during 2000–3, primary
lending institutions (excluding HUDCO) financed around
5.44 lakh houses (NHB, 2004).
Golden Jubilee Rural Housing Finance Scheme
In order to improve access to institutional finance in the rural
areas, NHB launched the Golden Jubilee Rural Housing
Finance Scheme in 1997. The scope of the scheme was for
construction of new houses or improvement of existing rural
houses. The scheme required lending institutions to undertake
appropriate diligence with regard to viability and bankability
of projects. This is essentially a refinance scheme, wherein
institutions making loan for housing construction in rural
areas to the extent of Rs 10 lakh (now the limit has been
enhanced to Rs 15 lakh) could be refinanced by NHB. The
refinance is also available for improvements in existing homes.
Since 2004, NHB offered 0.5 per cent concession on normal
refinance rates for lending to rural areas. As part of the scheme,
1.1 million houses have been financed during 1997–2004
APPRAISAL OF RURAL HOUSING INITIATIVES
One of the main objectives of the rural housing policy is to
make a contribution to wider rural development process and
to raise income and living standards. Decisions about rural
housing would have implications for rural employment,
opportunities, and for maintenance of rural services such as
schools, hospitals, and shops. Traditionally, in rural areas, the
home and the workplace are linked. The rural housing
initiatives, which have been undertaken by the government
lack connectivity with wider rural development policies such
as rural employment guarantee schemes or various other
agriculture policies. It would be imperative for the success of
housing initiatives that various agencies collaborate and
formulate a housing policy that fits squarely within rural
development policies. If one of the objectives of rural housing
initiatives is to contribute towards development of the rural
economy, this should be explicitly stated and reflected in
concerted approach towards rural area development and the
linkages strengthened with the help of gram panchayats (GPs)
The second most important objective of housing initiatives
undertaken has been to directly help poor households in a
focused way. It is important, therefore, for the policy makers
to have clear knowledge of the pattern of rural housing
disadvantage. The success of rural policies can only be gauged
if it is known which sections of rural society are facing difficulty
in accessing adequate accommodation and such policies can
only be formulated once the mechanism of access to rural
housing is understood. As discussed earlier, the dominant
tenure in rural areas is homeownership, nearly 95 per cent.
Kutcha and semi-pucca houses constitute nearly 64.6 per cent
of housing stock. The common mode of house construction
is self-building leading to poor quality of houses. Housing
inadequacy in terms of lack of amenities is also pressing.
Houses are small compared to the requirements of household
size. Housing disadvantage is not only limited to SC/ST or
EWS (economically weaker sections)/LIG (low income group)
households but to a much larger proportion of rural
households. Many of the groups who have been barred from
accessing good housing in rural areas have been constrained
either by low income or by their ineligibility in formal lending
260 India Infrastructure Report 2007
market. Acquiring land is not easy in rural areas and this has
posed a constraint to the development of private rental
housing. Social housing does not exist in either rural or urban
India. Absence of other forms of tenure such as private rental
or social housing has put immense pressure on households
to build own houses irrespective of the quality. Young families,
in particular, are disadvantaged in their pursuit for housing
because of their lack of purchasing power. Private sector
developers 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 finance
for rural households. There are no effective regulations
pertaining to building standards in rural areas as there are in
urban areas. A large proportion of houses lacks structural
quality and basic amenities (Box 10.5).
Initiatives, so far, have been marked by a fragmented
approach with multiplicity of institutions at centre, state, and
local levels which are responsible for the formulation of
KESNIK Nirmithi Kendra
In 1985, the district of Kollam, in Kerala, was affected by floods. In response to this situation, the Collector of Kollam promoted an
initiative in which the affected families were themselves involved in the process of designing and building shelters and homes. This
initiative 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 to
provide 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 and
Environmental 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 staff
of 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 materials
spread, private entrepreneurs started setting up their own production units. Over a period of less than five years, more than 100
houses were built in the panchayat using CEEF technologies. The private material production units continue to do brisk business
The panchayat committee identified 138 families as being needy. Prior to the selection, intensive parleys were held, by KESNIK
and Kudumbashree functionaries, with the members of the panchayat committee. Certain specific criteria were developed to identify
the really needy families.
The Kudumbashree unit then linked up with a local bank to provide loan support to the families. All the selected beneficiaries
were 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 its
activities 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).
Rural Housing 261
objectives, criteria, delivery and monitoring mechanisms.
Limited scope of these initiatives and weak linkage with broad
rural development and agriculture policies have led to only
partial success of these initiatives.
It must be emphasized here that rural areas are highly
diverse and capable of considerable adaptation, which are
difficult to easily encompass within general policies and the
‘sectoral’ organization of government. Existing governmental
administration hinders the holistic perspective that must be
taken for rural communities. A housing policy for rural areas
must recognize special circumstances of existing dwellings,
identify local problems, recognize small scale of schemes and
local housing and incorporate flexibility linked to broader
socioeconomic problems and opportunities, providing financial
resources from public and private lending institutions,
setting up building bylaws and standards for rural housing
and facilitating the development of other forms of tenure
in rural areas.
RURAL INSTITUTIONAL FRAMEWORK
Institutions play an important role in shaping housing
outcomes. In the rural housing context, the objective of an
Orissa Development Technocrats’ Forum—From Mason to Engineer
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 quality
building 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 slab
roofing; and arches for windows and in verandahs. These technologies have succeeded in ensuring cost effectiveness, in appealing to
the 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 masons
across the state to implement such technologies. In the second step, ODTF masons and other artisans train a large number of Artisan
Self Help Groups (ASHGs). In order to help establish these ASHGs, ODTF
helps them in a variety of ways. It helps ASHGs in
negotiating 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: masons
and allied construction artisans (masons, bar-benders, carpenters, electricians, and so on); all residents of a single Panchayat. This
Sangha started with very little savings (Rs 50/-per head) every month. However, it was able to take off successfully, as their Sangha got
a 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 constructing
a multi purpose community building in a neighbouring Panchayat on a turn-key basis. This, for the Sangha has been a big break as it
has provided them with an opportunity to showcase as a Group the kind of skills they have, and the kind of technology they are able
to use in construction. The success of this venture has, in turn, helped the group to negotiate with the bank where they have opened
an 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).
Or at times its primary donors, the UNDP and SDC.
institutional framework would be to develop long term housing
strategies that would improve access and conditions of housing,
ensure that housing strategies are an integral part of achieving
sustainable rural development, involve a range of stakeholders
in developing housing strategies and identify resources that
can be utilized to deliver rural housing issues.
We briefly review the developments in rural institutional
structure 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, when
the failures of state planning made it necessary to establish
people’s participation in development. However, PRIs were
largely dysfunctional. According to Baumann (1998), ‘The
main justification for not fully adopting Panchayati Raj, was
the view that the development has to proceed without being
politically corrupted. The state did recognize the practical
and political need to involve local people in development
and made sporadic moves at establishing Panchayati Raj’. PRIs
were not accorded much political or fiscal power to plan and
implement projects and they became bodies which were
dependent on the government for their survival. From the
Sixth Five Year Plan onwards, the planning process became
increasingly centralized and programmes and the selective
262 India Infrastructure Report 2007
distribution of these benefits became part of the process by
which the GOI retained political control. Many of the poverty
alleviation programmes started during this period were directed
straight to the DRDAs, registered societies under the Collector
established for the primary purpose of implementing centrally
sponsored programmes. The Gram Panchayats became part
of the delivery system, and a means through which to harness
votes. Most programmes established their own institutions
at the village level for the implementation of the project.
After the 73rd CAA, PRIs have been given powers and
responsibilities to prepare and implement plans for economic
development and social justice in twenty-nine subjects (which
include, among others, rural housing, sanitation, water,
electrification, and conservation and sustainable utilization
of natural resources) given in the Eleventh Schedule of the
Constitution. The PRIs can now levy, collect, and appropri-
ate taxes, duties, tolls, and fees. Power of property taxation is
with village level panchayat. But, panchayats, as effective tools
of local self governance and means to further economic growth
and social justice, have remained largely immature and
ineffective except in few states (Behar and Kumar, 2002 and
It may be argued here that PRI framework, notwithstanding
its ineffectiveness so far, is possibly the best suited for the
implementation of rural housing policies such that rural
diversity, local needs, and socially and economically backward
classes are not excluded, and local stakeholders are part of
the wider consultation process involved in the formulation
of rural housing initiatives (Box 10.1). Though there may be
concerns about PRIs’ current role in the implementation
process, the institutional structure can be expected to mature
with time and be able to appropriately shoulder the onerous
task of addressing rural housing problems. The District
Planning Committees, which are responsible for making plans
for the rural areas could, in consultation with Gram Sabhas/
Gram Panchayats, identify housing problems at local level and
design strategies for their improvement. Moreover, since the
plans made by DPCs include all aspects of rural development,
as specified in Schedule XI, housing would integrate with
wider rural development policies.
Local level initiatives for rural housing would also be able
to develop mechanisms for addressing impediments (such as
problems with titles) by building capacities to develop a title
record system. Building quality is also a major issue in rural
areas due to absence of building bylaws. Developing building
bylaws is not sufficient. Monitoring adherence could be a
part 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 as
developer or as real estate manager could be in some doubt
but the implementation of social housing could well be executed
through public-private-partnership, where concessions are
granted to private developers who would have responsibility
to develop and maintain social housing for the period for
which concession is granted. The role of PRIs could be to
identify social groups for allocation of these houses on rental
basis and also to collect rent.
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 capital
base largely through networking. It is difficult to categorise
NGOs into groups either sectorally or in their coverage. The
various types of NGOs that have emerged can be categorized
based on their approaches, functions, deliveries, and sectoral
and spatial coverages (Rahman, 2002). However, many
encompass more than one area. NGOs could be grouped into
the 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, and
4. Science based policy research NGOs, and
5. Networking and advocacy organizations (Rahman, 2002).
NGOs such as SEWA, BASIX, PRADHAN, SHARE,
MRYADA and so on have created institutions which have
assisted the government in delivering rural programmes and
developing institutions that have helped in linking formal
finance to rural poor and have enhanced the rural develop-
mental cause (Box 10.1 and 10.5).
It is important to view rural housing within the wider context
of rural development and to understand and link other rural
development policies with housing. A more integrated approach
is required which may practically be achieved perhaps through
the Ministry of Rural Development or Ministry of Panchayati
Raj in conjunction with states (as land is a state subject) where
there is smooth co-ordination between these two ministries
at national level and corresponding agencies at the state level.
However, this can provide no more than a policy framework
for PRIs which are actively at the grassroots and consequently,
are the most appropriate institutions for implementing rural
development and housing policies.
While it is argued that policy should be issue-based with
awareness of rural dimensions and the circumstances of
particular localities, in practice, it is difficult to take these into
account in nationwide policy formulation. To ensure flexibility
Rural Housing 263
of response at the local level, a basic policy framework from
central/state government is a primary requirement. However,
this raises the question, how much governmental involvement
is appropriate. Though flexibility in policy is important, too
much flexibility could become a convenient cover for central/
state government to abrogate responsibility. A policy commitment
requires a funding commitment. Vagueness in policy could lead
to negligence of funding which exactly the present scenario is.
In the whole discussion about devolution of power at local
level, the core issue of funding is being marginalized. Whatever
be the level of devolution of power, adequate funding is a
prerequisite. Decades of negligence of funding in the housing
sector and low incomes have all contributed to present problems
with rural housing. Low-income households would require
investment in social housing to eliminate poor quality kutcha
housing. PRIs without adequate fiscal clout cannot be expected
to sort out housing and other related problems. It is important
to recognize that rural housing problem is a national problem
and cannot be funded only at the local level.
PRIs could play an important coordinating, strategic, and
perhaps initiating role and would need to adopt a flexible
approach at the village level where the action is. NGOs have
played an important role in capacity building in rural areas
and their existence does not get marginalized with the creation
of new legal institutions (PRIs) at the local level. In fact, with
devolution of power to local levels, their role becomes much
more important as they are repositories of capacities in dealing
with development issues at the local level.
264 India Infrastructure Report 2007
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