Publications

REPORT ON TREND AND PROGRESS OF HOUSING IN INDIA - JUNE, 2001-02

NATIONAL HOUSING BANK (NHB)

NHB's ACTIVITIES Promotion and Development

The National Housing Policy(NHP) was first formulated in 1988. The long term goal of NHP was to provide housing and minimum level of related amenities and services to the masses and to improve the housing conditions of the inadequately housed. It recognized that housing sector needs concerted efforts from both channels i.e. from formal and informal channels.

The National Housing and Habitat Policy, 1998 evolved after thorough review. It focused on the issues of sustainable development, infrastructure development and advocated for public private partnerships to achieve the objective of Shelter to All. It aims at facilitating construction of 20 lakh additional housing units (13 lakh in Rural Areas and 7 lakh in Urban Areas) annually with an emphasis on extending benefits to the poor and the deprived. Government is committed to the goal of ending all shelterlessness by the end of the 10th Plan Period. For achieving these objectives various action plans under the Ministry of Urban Development and Poverty Alleviation and Ministry of Rural Development have gone on-stream.

Urban Housing

Urbanisation is one of characteristic phenomenon related with the ongoing industrial development and expanding population. India is going through this transition phase and the process of urbanisation is picking up fast. According to Census of India, 2001 the urban population constituted 27.8% of total population of India on 1st March, 2001. There was net addition of 68 million people in the population of urban areas in last decade. The factors like ongoing industrialization in urban areas, population pressure on the agricultural land and dearth of employment opportunities in rural areas forced the emigration of rural population into the urban areas. This influx of human population to urban areas created an acute problem in the Housing and related sectors. The Government has come up with several schemes and initiatives to redress the problems related to Housing and basic infrastructure especially being faced by urban poor.

Valmiki Ambedkar Awas Yojana (VAMBAY)

Prime Minister of India announced a Centrally Sponsored Scheme called Valmiki Ambedkar Awas Yojana (VAMBAY) on the 15th August, 2001 to provide shelter and upgrade the existing shelter for the urban slum dwellers living below poverty line. The Scheme was formally launched by the Hon’ble Prime Minister on December 2, 2001 at Hyderabad. The Scheme was first of its kind in India exclusively meant for slum dwellers with a Government of India subsidy of 50%. The balance 50% is expected to be arranged by the State Governments with funds from any source in the form of subsidy or loan from HUDCO or any other agency. Reputed NGOs can also be associated with Scheme, especially in regard to the National City Sanitation Project viz., Nirmal Bharat Abhiyan, which is an integral part of VAMBAY.

The response from the State / UT Governments to the Scheme has been overwhelming. Against the Government of India’s allocation of Rs.69 crore during 2001-02, huge demands from 16 States/ UTs necessitated release of additional amount of Rs.4.56 crore, with the final figure reaching Rs.73.56 crore.

Urban Reforms Incentives Fund (URIF)

An Urban Reforms Incentive Fund (URIF) has been set up with an initial outlay of Rs. 500 crore to provide reforms linked assistance to States in the housing and real estate sector.

Building Centres and Technology Extension

The National Network of Nirman Kendras (Building Centres) has been established to impart training to artisans in low cost construction skills and produce building materials and components by utilizing agro-industrial wastes. As on 07.12.2001, under this scheme, 572 centres have been sanctioned out of which 436 centres have become functional. These centres have imparted training to more than 2.10 construction workers and artisans. Government of India has provided grant amounting to Rs. 15.12 crore to such centres.

Night shelter and Sanitation facility for Urban Footpath Dwellers

The objective of this Centrally sponsored scheme is to provide adequate shelter to the footpath dwellers in all the urban areas. It has per capita cost of Rs. 20,000/- with 50% coming as subsidy from Central Government and rest 50% flowing in from implementing agencies or through HUDCO. Since April, 1991, out of total 115 schemes sanctioned by HUDCO, 23 schemes have been completed with 8,340 beds, 3,937 WC, 435 baths and 313 urinals. The 115 schemes, when completed, would provide 16,959 beds, 28,980 WC, 2,147 baths and 1,928 urinals.

Housing Scheme for Economically Weaker Sections (EWS)
This programme was launched to provide housing to the economically weaker segment of the urban populace. Apart from investments made by State and UT Governments, this programme is supported by Institutional finance. Refinance is also provided by National Housing Bank to the States, Co-operatives and other oraganisations involved in EWS housing. The annual target for the year 2002-03 is 96,571 dwelling units.

Yearly performance under EWS Housing Scheme

Year Target Achievement
1996-97 1,16,950 92,000
1997-98 1,68,075 81,592
1998-99 1,18,000 1,17,000
1999-00 69,000 1,02,000
2000-01 1,96,000 2,39,000
2001-02 2,48,000 19,000*
*Till August 2001; Source : Ministry of Urban Development & Poverty Alleviation

Housing Scheme for Low Income Group (LIG)

This is primarily a long-term scheme which is being executed by the State Governments/UTs through Housing Boards and Housing Departments. The Budget provisions are supplemented by Institutional finance. The income eligibility which was Rs.701-1500 during 7th FYP was raised to Rs.1250 under 8th FYP. For HUDCO schemes month income limit is Rs.2501-5500 per month and loan component is Rs.125000 for construction and Rs.62500 for repairs/ upgradation. The performance of the Scheme against the target allocated during the last five years is given below:

Yearly performances under LIG Housing Scheme

Year Target Achievement
1997-98 37,541 16,967
1998-99 57,828 41,244
1999-00 44,000 27,000
2000-01 27,000 17,000
2001-02 44630 2277*
* Till August, 2001; Source: Ministry of Urban Development & Poverty Alleviation

The annual target for the year 2002-03 is 27,443 housing units.

Environmental Improvement of Urban Slums (EIUS)

This scheme was formulated with a objective to ameliorate the degrading environmental conditions of and around the urban slum areas. The aim of this scheme is to provide and improve the infrastructural amenities, viz., water supply, sewerage and other drains, community baths & latrines, street lighting, pathways etc. for slum dwellers. The performance of the Scheme against the target allocated during the last five years is given below:

Yearly performance under EIUS Scheme

Year Target Achievement
1997-98 11,89,898 8,84,822
1998-99 43,30,000 33,44,000
1999-00 47,05,000 55,73,000
2000-01 50,97,000 60,88,000
2001-02 60,83,000 12,92,000*
* Till August 2001; Source: Ministry of Urban Development & Poverty Alleviation

The target number of individuals to be covered by this scheme in the year 2002-03 is 5,428,332.

Besides above programmes, various other initiatives are being undertaken by government solely or with international assistance for development of slums and housing and urban infrastructure.

Rural Housing

According to the Census, 2001 rural population in India is 741,660,293 which is around 72% of total population of India. Thus, without the upliftment and development of rural masses and rural areas, India can not march ahead in the global competition for economic and human development. To meet this need, Government of India has accorded high priority status to Agriculture and Rural development in its various plans and programmes.

Housing is the basic need for sustenance, security and development of a human being. But still, after 5 decades of independence, the condition of housing and related amenities needs much attention and improvement. Government of India has come up with various rural housing schemes to cater the housing needs of rural masses. The Ministry of Rural Development is executing the following programmes to provide shelter for all in the rural expanse.

The Elements of Action Plan for Rural Housing

  • Provision for upgradation of unserviceable kutcha houses in the Indira Awaas Yojana (IAY) in addition to the new construction.
  • Credit-cum- Subsidy Scheme for Rural Housing.
  • Innovative Stream for Rural Housing & Habitat Development.
  • Rural Building Centres.
  • Samagra Awaas Yojana.
  • Enhancement of equity contribution by Ministry of Rural Development to HUDCO.
  • National Mission for Rural Housing & Habitat.

    Indira Awas Yojana (IAY)

    This scheme is being implemented by the Government of India since the year 1985-86. The basic objective of the scheme is to provide assistance primarily to the below poverty line (BPL) rural households concentrating more on the Scheduled Castes, Scheduled Tribes and freed bonded labour categories. Subject to the condition that benefits to non SC/STs shall not exceed more than 40%, benefits of the scheme have also been extended to non-categorised rural poor and to the families of the ex-servicemen of the armed and paramilitary forces killed in action. 3% of the houses are reserved for the BPL physically and mentally challenged persons living in rural areas. One of the allotees, under the scheme, should necessarily be female member of the beneficiary household. Further, under the IAY, Gram Sabha is empowered to select the beneficiaries. Allocation of funds under Indira Awaas Yojana to the States/UTs is made based on the poverty ratios as approved by the Planning Commission and the rural housing shortage as per the Census 1991. Both parameters are given equal weightage.

    Physical and Financial Achievements under Indira Awas Yojana

    Year(For last 5 years) No. of Houses Built Expenditure (Rs. in Crores)
    1997-98 770936 1591.48
    1998-99 835770 1803. 88
    1999-2000 925679 1907.63
    2000-2001 1170926 2185.80
    2001-2002* 1171081 2149.55
    * Provisional; Source: Ministry of Rural Development

    Innovative Stream for Rural Housing and Habitat Development

    This programme was launched in 1999-2000 with a goal of promoting and propagating the cost effective and environmental friendly construction technologies, materials, designs, etc. for suitable rural human settlements consistent with agro-climatic variation and natural disaster proneness. It is being implemented through both, informal and formal agencies on project basis. The maximum permissible assistance in case of an NGO/autonomous society is Rs. 20.00 lakh and for Government Agencies is Rs. 50.00 lakh.

    Setting up of Rural Building Centres

    It is a project based demand driven Scheme. The Rural Building Centres are established to attain following goals:
    (a) Technology transfer and information dissemination
    (b) Skill upgradation through training
    (c)Production of cost effective & environment friendly materials/components.

    For setting up a Building Centre, a one time grant of Rs.15 lakh is provided by HUDCO.

    Samagra Awaas Yojana

    Samagra Awaas Yojana is a comprehensive housing Scheme launched in 1999-2000. It was rolled-out with a view to ensuring integrated provision of shelter, sanitation and drinking water. During the first phase of implementation of the Samagra Awaas Yojana, it has been decided to employ the scheme in one block each of 25 districts of 24 States and one Union Territory which have been identified for implementing participatory approach under the Accelerated Rural Water Supply Programme. Apart from housing, drinking water and sanitation, which follow the normal funding pattern, a special central assistance of Rs.25 lakhs is provided to each block for undertaking the overall habitat development and Information, Education and Communication (IEC) activities with 10% contribution coming from the people.

    Pradhan Mantri Gramodaya Yojana (Gramin Awaas)

    Pradhan Mantri Gramodaya Yojana : Gramin Awaas (PMGY:GA) was launched in the year 2000-2001 to achieve the objective of sustainable human development in rural sector. During 2001-02, an amount of Rs. 280 crore was earmarked for this component of PMGY.

    Equity Support to HUDCO

    To fulfill the housing needs of EWS and LIG segments in rural areas and to improve the outreach of housing finance in rural areas, equity support to HUDCO has been hiked from Rs. 5 crore to Rs. 355 crore during the Ninth Five Year Plan period. The entire added amount of Rs. 350 crore has been released.

    National Mission for Rural Housing and Habitat
    The Ministry of Rural Development has constituted a National Mission for Rural Housing and Habitat to facilitate a constant flow of science and technology inputs into the housing sector. It will work towards convergence of technology, habitat and energy-related issues in order to provide affordable shelter for all in the rural areas, within a specified time-frame, and through community participation. To meet this objective, an Executive Council under the Chairmanship of the Minister of Rural Development and an Empowered Committee under the Chairmanship of Secretary (Rural Development) has been constituted. The Action Plan prepared by its Working Group is under consideration.

    NABARD’s refinance for rural housing

    During the year 2001-02, the National Housing Bank for Agriculture and Rural Development (NABARD) decided to include rural housing as an eligible activity for extension of refinance against loans extended by all eligible banks. Individuals, cooperative housing societies, public bodies, housing boards, housing development authorities, improvement trusts, local bodies, voluntary agencies and non-government organizations registered with the National Housing Bank would be eligible for borrowing for construction of new as well as renovation of existing houses in rural areas.

    Other Initiatives

    National Agenda for Governance- 2 Million Housing Programme

    The National Agenda for Governance has taken up Housing as priority area. The Agenda envisages to give major thrust on housing for vulnerable and deprived sections. In order to meet this objective Government has launched the 2 Million Housing Programme (2 MHP) in 1998. Under this programme, target taken up is of 20 lakh additional housing units every year with a focus on EWS & LIG housing. Out of this 20 lakh units, 7 lakh are reserved for Urban areas and 13 lakh units are to be constructed in Rural areas.

    Yearly Performance under NAG-2MHP
    (Amount in Rs. crore)
    1999-2000 2000-2001 2001-2002
    Units Amount Units Amount Units Amount
    Public Sector Banks 128080 5603.04 225205 5202.79 263314 6548.56
    HFCs* 182424 4382.93 224370 5586.35 323242 8646.59
    TOTAL 310504 9985.97 449575 10789.14 586556 15195.15
    * excluding HUDCO

    Chapter VIII

    Assessment & Prospect

    The housing finance disbursement continued to grow at a steady pace during the year 2001-02. However, the presence of formal financial mechanism continued to be felt mainly in the urban and metropolitan areas. The rural areas still remained relatively underserved by the specialised housing finance institutions. While the keen interest evinced by the banking fraternity for housing finance might go a long way in addressing the problem of rural housing shortage by virtue of considerable presence of commercial banks, specially those in the public sector in rural India, the problem for the formal sector institutions to lend in the rural areas still persists due to lack of suitable security. Usually, the formal sector financing institutions insist on mortgage of the property as security for the loan. But in most cases, due to non availability of land records, it is not possible to verify the title to the land on which the house has been constructed. There is thus an urgent need to have these records created, preferably a computerised one for easy retrieval. The Government of India had introduced a scheme for the purpose. While some of the states have done well in computerising the land records in the rural areas, some other states are yet to do so. Early implementation of this scheme in all the states would lead to a better flow of institutional credit for housing in the rural areas where the shortage of housing is more.

    With a view to addressing the twin problems of ‘affordability” and “accessibility” that thwart the progress of housing in the country, NHB is contemplating to introduce mortgage insurance in India. Significant advancement towards this objective has been made during the current year. Besides the Canada Mortgage and Housing Corporation, the Asian Development Bank, the International Finance Corporation and the United Guarantee Mortgage Indemnity Company, a member of the American International Group Incorporated have expressed their interest to participate in this venture. With the introduction of mortgage credit guarantee, it is expected that the housing finance market will expand and the section of the population which hitherto could not access credit from an institution in the formal sector will be in a position to do so through the scheme, making the dream of “housing for all” a reality.

    With the commercial banks entering the housing finance market with renewed vigour which is partly attributable to factors like low level of NPAs in this sector and partly the lack of demand for funds from the other sectors of the economy, the ultimate borrower is benefited because of wider choice. Further, the cost of funds for the commercial banks being lower than that of the HFCs, the borrowers are also given the benefit of lower rate of interest. In addition, banks have also waived some other charges like the processing fee and done away with certain other requirements like the guarantor etc. This has triggered a price war among the institutions extending housing loans and quite a good number of loans have been refinanced. In a highly fragmented and segmented market, the profit margins could be driven down to survival levels when volume drops precipitously. Fortunately, the volume of new loans disbursed especially to the individual segment has maintained a steady growth during the year. The number of refinanced loans is expected to come down in the coming year as the rate differential among the institutions would be narrowed down owing to intense competition and more efficient functioning of the market in terms of information symmetry etc. and there would be more number of loans being originated at the new low level with less chance of being refinanced.

    Any economic activity undertaken is beset with risk and the business of extending housing loans is no exception. It is in this context, the National Housing Bank has introduced the Asset Liability Management guidelines for the housing finance companies which are more or less on the similar lines issued by the Reserve Bank of India to the commercial banks and the non-banking financial companies. Asset Liability Management is an effective tool for the overall risk management and the HFCs are expected to implement this during the year 2002-2003.

    The next year could also see a series of mortgage backed securities issue in view of the significant concessions extended to the banking system by the Reserve Bank of India regarding their investment in such securities. Further the notification of the rules and procedures for recovery of housing loans as envisaged under the National Housing Bank (Amendment) Act, 2002 should also strengthen the confidence of the investors.

    Thus, with the introduction of a mortgage credit guarantee scheme and the scheme for recovering the loans from wilful defaulters being made easy, the housing finance sector is expected to witness further growth during the coming years. With the mortgage backed securitisation picking up, the much needed long term resources should also be available for the sector.