Experiences in Rural Housing Delivery and Finance

1. Experiences in Rural Housing Delivery and Finance Presentation to National Housing Bank February 18th, 2011 Development Alternatives Group

2. Structure • Rural housing issues and challenges • Finance for accelerating housing development • Rural housing finance – experiences • Gaps and potential • Enabling basic need of shelter for rural communities

3. Rural housing issues and challenges Scale and character • Dispersed settlements, poor connectivity, small volumes per village, not aggregated for the purpose of housing • Low and unstable income streams, often migrate for short or long periods • Large gap – large need, demand is latent • Wary of long term and large loans • Inadequate collaterals, guarantors, land titles, and bank connectivity

4. Rural housing issues and challenges Scale and character • Piece-meal approach to construction, standard designs difficult – new construction must fit into exiting space. • Self construct in terms of labour and collected materials (~30%), local skilled labour (20%) and bought materials (50%) • Extremely price sensitive, • Poor information about possibilities of housing credit and new technology

5. Rural housing issues and challenges Availability concerns • Inadequate availability of materials at scale – both quality and quantity • “pucca” as in conventional RCC out of reach of poor families • “pucca” – ecologically damaging - energy and resource intensive • Eco-friendly and cost efficient technologies and services not available at scale, services not available therefore more expensive than conventional “pucca” • Appreciation of new cost effective and eco-friendly technologies not there because of lack of promotion and demonstration

6. Rural housing issues and challenges Ecological and social concerns • Resource scarcity • Energy intensity and CO2 emissions • Pollution and wastes • Disaster safety – quality and know – how • Job creation • Skill building

7. Key constraints in financing • Land and identity • Large proportion of households is landless • Village lands are generally fully used up for housing • Buying land implies higher cost of housing • Market for house sites is poorly developed and non-agricultural land titles are difficult to establish – paperwork for KYC norms and NOCs are time consuming • Materials and Technology • The alternative technologies or building materials have not reached rural India • Feasibility of prefabricated products and/or low cost alternative materials for construction yet to be fully explored • Skills and Information • Formally trained masons, carpenters, electricians or plumbers are not available in rural areas. This leads to inefficient use of resources and may also lead to unsafe houses. • Building contractors appropriate for rural areas yet to appear in large numbers • Financing • Irregularity of incomes / inadequate information on credit history • Land Title issues • Housing loans are long term and large – non productive • High interest of mfi loans, low servicing of hfcs and banks

8. Rural housing issues and challenges Some responses • Housing and public buildings in rural areas can together form a market that can provide scale • Local skills can be upgraded towards sustainability • Local production of many new technologies is viable at small and medium scale – provided basic production infrastructure is available • Customized financial products suitable for rural communities

9. Technology Sustainable Habitat Activity Market Creation Capacity Building Finance Response required- looking to the future • Reduce environmental costs • Introduce cost effective techniques • Reduce costs of delivery – decentralize supply • Build local capacities • Increase value to customer • Aggregate the customer • Introduce appropriate financing instruments / arrangements while reducing unit costs

10. Response required • Reach to the customer in the remote village and small town • Make materials and skills available and accessible • Seek new resources • Make construction technologies and indeed the sector – Green • Deal with housing for the poor /IAY as a priority sub-set of integrated rural housing and infrastructure

11. Technology solutions: for walling • Stabilized Compressed Earth Blocks • Concrete Blocks • Fly-Ash based Blocks • The Vertical Shaft Brick Kiln

12. Technology solutions - for roofing • Micro-Concrete Roofing tiles • Micro-Concrete Roofing tiles • Ferro-cement Roofing channels • RCC Planks and Joists • Brick Arch Panel Roofing

13. Other elements • RCC door and window frames • Concrete paving systems • Masonry Systems – domes, vaults, jack-arches, rat-trap bond • Water and grain storage tanks • Roof water harvesting systems • Smokeless cooking stoves

14. Finance for accelerating housing development Demand side: • Small quantum required: • Rs. 30,000 to 1,00,000 for small home owners for new house construction • Rs. 10,000 – 50,000 for up-gradation, roofing, flooring etc. • Rs. 5,000 – 10,000 for toilets and bath construction • EMI but savings for quarterly or six monthly top-up payments are a good idea • Monthly outgoings not to exceed Rs. 500 and loan periods 7 years (10 years ) • Support for repayment in the form of livelihood loans and linkages accelerates housing activity • Technical services that would enable borrowers to take loans eg. Designs, estimation, technology selection support, quality control and supervision supports, paper work supports • Connectivity to banks – opening of bank accounts • Addressing risk – to customers and bankers – insurance, guarantees, social guarantees, relaxing NPA norms, savings linked loans

15. Finance for accelerating housing development Supply side • Small scale enterprises for manufacturing blocks, roofing tiles, door-window frames, roofing elements require financing ranging from 2,00,000 to 10,00,000 • Funds for establishing technical support services for enterprises, skill building of artisans, market development promotion and linkages with supply • Supports for preparing business reports / pans, credit proposals and linkage with banks plus schemes for establishing small businesses in building materials supply

16. Rural housing finance experiences - availability • Responding to latent demand • Madhya Pradesh: bridge funds, bridge loans- meeting the gap linking with IAY, HFHI, FEM • Aggregating customers • Working with family clusters in selected villages, working through SHGs • Design of finance products • Working with banks (SBI, MBGB) through NABARD support to customize financial products to suit needs of customer profiles • Connecting families to finance • Providing escort services

17. Rural housing finance experiences – access • Educating the customer • Using demonstration, village meetings, radio, pamphlets and wall paintings • Organizing banker meetings • Margin monies, leveraging part funds and guarantees • Insisting on registration amounts, initial savings, • Establishing methods for evaluating self contribution in materials and labour • Linking with schemes • Establishing identity • Paperwork for land records / sarpanch certificates • NOC supports for loan sanctions and paper work for KYC • Bundling of financial and technical services • Developing design options and technology options with costs – decision support tools and assistance in selection

18. Rural housing finance experiences - utilization • Organizing supply of materials and services • TARA Nirman Kendra • Decentralized Micro-enterprises • TARA Karigar Mandal • Building Materials and Services Bank • Econ Enterprises • Linking with materials and services • Developing standard contracts between families and masons • Providing referral services • Supports for repayment • Regular motivation and peer pressure • Linking with livelihood supports • Collection service • Ensuring quality in utilization • Technical supervision • Slab-wise payments • Disbursal linked to service and material providers

19. Rural housing finance experiences – promoting sustainability • Linking finance to energy and resource efficient materials and techniques • Demonstration through community buildings • Making ecological quality mandatory • Making sustainability competitive – demonstrating quality and cost benefits • Enabling sustainability through policy support • Information and technical inputs to government of MP for revising SORs • Supporting a large scale state level capacity building and technology demonstration exercise • Providing technical supports and equipment for production and supply of eco-building products through building centers and enterprises

20. Gaps and potential – facilitating and supporting demand creation • Clustering and aggregation of customers • Mature self-help groups • Targeted savings for housing (AP), rural housing cooperatives, Clustered IAY savings groups • Awareness creation • About finance products • About new technologies • About materials and services delivery channels • Bundling technical and financial services • Technical centers linked to PLIs/ RRBs / housing loan desks in building centers / rtechno-financial set-ups for housing loans in agri-service units • Varied products suitable for rural poor, middle-class – housing, toilets, up-gradation

21. Gaps and potential - facilitating demand creation • Sensitization and orientation of banking institutions • Respecting time and distance constraints of customers • Taking the service to the village • Simpler paperwork and paper work services • Connectivity – simply opening of accounts – using the kisan credit, NREGS routes • Addressing land titles and insurance – reducing risk • Land titles • Guarantees – financial and social • Use land title papers as notional securities • Life and loan insurance • Linking livelihoods with repayments • Converging schemes of housing, SGSY etc (credit plans??) • Dealing with leakages, improper utilization

22. Gaps and potential – deconstraining supply • Financing Supply • Enterprise development • Linking supply centers to housing market • Enlarging the market – bringing infrastructure and housing together • New models for delivery – micro-enterprises – independent or franchised netwroks, artisan associations, rural industrial zones for building materials • Public – private partnerships for setting up materials supply and services

23. Gaps and potential –promoting sustainability • Promoting effective and efficient utilization of finance by linking with cost effective and resource efficient construction – technologies and materials • Report on carbon and resource savings linked to financing – incentivize efficiency • Communication and information – simple messages, posters, pamphlets, models, Radio, Demonstration • Technical Services delivery – Community based teams, mason supervisors, technical tools for design and estimation, costs for services, training • Credit – duration of loans, size of repayments, linked savings, securitization, institutions for credit linkage??

24. Thank You