Affordable Rural Housing Market:

Challenges and Opportunities

1. Introduction

Housing is one of the most serious challenges of many developing countries in the
world including India. Shelter remains beyond the reach of millions in India and
the issue of housing is more complex especially in the rural areas where about
70% of the Indian population resides.

The Eleventh Five year plan has estimated the housing shortage in the Eleventh
Plan Period (2007-2012) at a total of 73.96 million units, of which 47.43 million
units pertain to Rural Housing alone. More than 90% of the rural housing
requirement pertains to Below Poverty Line Households. As per NHB estimates
the funds required to meet the housing shortage during the Eleventh Plan period
is likely to exceed Rs.10 lakh crore.

2. Constraints to Rural Housing Development

The development of rural housing in a manner that results in adequate, quality

shelter for the rural masses is a challenge before the nation. What are the issues
confronting rural housing development in India? The litany of its woes is endless.
At first impression, rural housing is vulnerable to weaknesses in the delivery
system for housing materials and services. Gradually, it dawns that the sector is
deeply affected by the infrastructure deficit – roads, electricity supply, drinking
water and sanitation. It has been bypassed by the numerous economic
revolutions that have made India a vibrant economic superpower. For instance
housing finance, which played a key role in the urban housing explosion, is
conspicuous by its absence in the rural setting. Additionally, the limited mobility
of rural households, the lack of vibrancy in the market for village properties and
the marked volatility in agricultural incomes combine to dampen the prospects of
this nebulous sector.

2.1 Land regulations and availability of land

A major problem is control over land which is essential for availing government
financial assistance. Only people who have in situ rights are selected, thereby
excluding those without land possession from the scheme’s purview. Not only was
land possession mandatory, often they had to be of a certain minimum size. The
existing social housing schemes are concerned only with house construction, not
with land. For changing the pattern of land use, i.e. from agricultural to housing,
official permission from tehsildar or some senior revenue official is needed which
is not easy to get. This is an area requiring government intervention.

2.2 Physical infrastructure including amenities like water,

electricity and sanitation

Most rural houses lack some basic amenities like safe drinking water, electricity
and sanitation. However, there are substantial variations across villages in this
respect. As far as drainage is concerned, most villages are devoid of it.

Overall, one finds little attempt at integrating rural housing programmes with
other existing schemes for providing drainage, drinking water, internal roads and
electricity. One possible reason could be the absence of proper planning and
development authorities in the rural areas.

2.3 Building materials, construction labour and technology

The traditional mode of construction for individual houses comprising load bearing
walls with an appropriate roof above or reinforced concrete (RC) framed structure
construction with infill masonry walls would be totally inadequate for mass
housing construction industry in view of the rapid rate of construction.

People are more worried about the rising prices of building materials and
increasing wages. The high cost of building materials is considered another
obstacle to housing construction. The prices of various building materials have
risen substantially, incomes have not.

On construction labour, the problem is more complex. In rural India, there are
pockets where skilled construction labour is either non-existent or expensive. And
even when they are available their skills are found to be primitive as they have
no formal training. Most construction labourers had acquired skills while on the
job or from their parents and other elders. And have not received any formal
technical training in the varied skills associated with house building.

2.4 Rural Housing Finance

One of the major problems in is the low affordability for housing in rural India.
This is because of the nature of earnings of people in the rural areas which is
characterised by various uncertainties.

Rural Housing has so far received impetus mainly on account of the special
schemes designed by the Central and State Governments and housing credit by
Nationalised and Rural Banks. The role of banks and other formal financial
institutions as providers of funds for house construction is woefully minimal as the
conditions for accessing such funds are quite stringent, thereby keeping away
many potential loan seekers. HFCs penetration in this market has been limited as
they have preferred to concentrate on urban areas. Microfinance companies have
also commenced rural housing credit on an experimental basis but are yet to
make a meaningful contribution.

To access loans one needs to provide several documents including proof of

address, income and land ownership, plan of the house, estimates of construction
costs and a non-encumbrance certificate. This again is a problem as most
villagers are unable to provide income proof. They also have problems with
mortgaging lal dora land on which most villagers construct houses.

3. Key Facilitators of Affordable Rural Housing

The Central Government announced in 1998, the National Housing and Habitat
Policy which aims at providing 'Housing for All', with an emphasis on extending
benefits to the poor and the deprived. The National Housing and Habitat Policy
1998 clearly recognizes the role of the Government as a ‘facilitator’ and a catalyst
for promoting the development of housing in the country rather than a ‘provider’.
The policy also includes promotion of Public-Private-Partnerships to facilitate the
housing development.

3.1 Government Aid

Government Aid has taken the form of both direct assistance through cash
subsidy scheme such as Indira Awas Yojna (IAY), Pradhan Mantri Gramodaya
Yojana: Gramin Awaas, Samagra Awaas Yojana and various State Run Housing
Schemes as well as indirect support through various government run institutions
such as HUDCO & NHB.

Indira Awas Yojna (IAY) is a cash subsidy scheme for rural Below Poverty Line
(BPL) families for construction of dwelling units on their own using indigenous
design and technology. Allocation for this scheme has been increased to
Rs.10,000 crore in the budget for 2010-2011. The per unit assistance has been
increased to Rs.45,000 in the plain areas and to Rs.48,500 in the hilly areas.
Funding under the Scheme is provided by Centre and the State in the ratio of
75:25. The selection of beneficiaries is done by the respective Gram Sabha from
the BPL list. Under phase I of the rural housing component of Bharat Nirman,
71.76 lakh houses were constructed with an expenditure of Rs.21,720.39 crore.
The Government has now proposed to double this target and to construct 120
lakh houses during the next five-year period starting from the year 2009-10.

Equity Support to HUDCO: To meet the requirement of Economically Weaker

Section (EWS) and Lower Income Group (LIG) groups in rural areas and to
improve the outreach of housing finance in rural areas, it has been decided to
increase the equity support to Housing and Urban Development Corporation
(HUDCO) by the government. The loan outstanding by HUDCO under the rural
housing scheme stood at Rs.5105.53 crore as on Dec.31,2009.

3.2 NHB (National Housing Bank)

In 1988, the National Housing Bank (NHB) was established as a 100% subsidiary
of the Reserve Bank of India, (the central bank of the country), to promote
housing finance through a refinance mechanism to banks, housing finance
companies (HFCs) and other institutions and also to function as the supervisory
and regulatory body for housing finance firms. NHB has been providing financial
support in the form of equity and refinance to cater to the housing credit needs of
all segments of population through primary lending institutions like commercial
banks, housing finance companies (HFCs) and cooperative institutions.

NHB formulated a Rural Housing Fund (RHF) in 2008 for extending refinance for
direct/indirect lending towards rural housing needs of weaker sections of society.
NHB was allocated Rs 2,000 crore under the Rural Housing Fund under the Union
Budget 2010- 11.

NHB has also launched a Rural Housing Finance Scheme on August 16, 1997 to
mark the Golden Jubilee of India’s Independence. Under the Golden Jubilee Rural
Housing Finance Scheme (GJRHFS), NHB seeks to make available housing finance
to individuals in rural areas through the intermediation of banks, HFCs wherein
refinance is provided at concessional rates.

NHB has also launched a programme called Productive Housing in Rural Areas
(PHIRA) under which a composite loan of Rs.70,000 will be extended, of which an
amount to the extent of 30% is for the income generating activity and balance for
construction of housing unit plus work area, including purchase of land.

3.3 Banks
Public sector banks are one of the largest players amongst the organized segment
in the rural housing finance market given their widespread branch network in
these areas. Around 11% of Mortgage lending by Scheduled Commercial Banks is
estimated to be directed towards rural housing. For eg. SBI, a major player in
rural markets with around 67.28% branches in rural and semi-urban areas.

Loans for rural houses

Bank provides housing loans to individuals under the Gram Vikas Yojana, Rajiv
Gandhi Housing Development scheme. The loan limit for purchase of land or
construction of house is Rs 15 lakh, and for repair & renovation, a bank can
provide is Rs 5 lakh. The interest on the loans varies according to the duration of
repayment. The current rates are: 8 per cent for five years; 8.75 per cent for 5-
10 years and 9.25 per cent for 10-20 years.

3.4 HFC’s & Microfinance Institutions

HFCs are not very active in the rural housing segment given the high operational
costs. Few players such as Mahindra Rural Housing Finance Ltd. (MRHFL), Mas
Rural Housing and Mortgage Finance Ltd. have concentrated exclusively on the
rural housing segment. Given MRHFL’s focus on rural and semi-urban space,
lending is typically done at higher yields and lower ticket size. As on March 31,
2009, loans with a ticket size of ‘upto Rs. 5 lakh’ accounted for almost 81% of its
total outstanding portfolio of MRHFL.

Presently Housing Finance by MFIs is as yet in a nascent stage. Few MFIs have
started offering Home loan products on pilot basis. Considering the
transformational role that can be played by Microfinance Institutions (MFI) and
with their well developed credit and recovery mechanisms as well as a ready
client base, they seem a most appropriate channel for ensuring flow of housing
credit to the rural masses. Recently SKS Microfinance entered into a tieup with
HDFC Ltd. to provide rural housing loans on a pilot basis. The pilot project will be
conducted in Andhra Pradesh and the loans of 50,000 to 1,50,000 will be
provided to its existing borrowers with at least three years of credit history.
These loans will be mainly for improving houses with shops to house income-
generating activities like eateries, kirana shops etc.

3.5 Technology Transfer through Rural Building Centres

Rural Building Centres (RBCs) were set up by the Ministry to enable access to
appropriate technologies and capacity building at the grassroots level. The
objectives of establishment of the Rural Building Centres are: (a) Technology
transfer and information dissemination (b) Skill upgradation through training and
(c) Production of cost-effective and environment-friendly materials/ components.
During the first year of the operation of the Scheme in 1999-2000, it was
proposed to set up 2 Building Centres in each of the States. One was to be set up
by a Governmental institution and the other by an NGO. The limit of these
Building Centres per State has been increased to 4 over the period. For setting up
a Building Centre, a one time grant of Rs.15 lakhs is provided by the state
government.Though the scheme has been discontinued from 2004, 85 RBCs
sanctioned in different States are expected to continue to support technology
transfer and produce cost-effective material. Their help is expected to be taken to
get information on cost effective technologies and conducting training for rural
artisans under IAY.

3.6 Non-Governmental Organizations (NGO’s)

NGOs treat rural housing as part of rural development in a comprehensive way.
The primary function of NGOs is to assist the government in identifying the right
beneficiary and to ensure that the beneficiary gets what he/she is entitled to.
NGOs such as SEWA, BASIX, SHARE, PRADAN and MYRADA have also assisted
Government in developing institutions that link formal finance to rural
populations.

3.7 Building Materials Innovations by Research Agencies

Development of low-cost but quality housing material, suitable housing designs

etc. play an important role. Government is stressing on locally available raw
material as these are commonly available and should be the most preferred
material for construction of housing. These include- agroindustrial wastes like fly
ash from thermal power stations, lime sludge, wastes (stone block) from sugar
mills, rice and coconut husk, red mud from aluminium factory, fly ash, banana
leaves, saw mill waste, marble dust, etc. Some important institutions working in
developing suitable building materials and designs are:

Central Building Research Institute (CBRI), Roorkee: The institute has

developed a number of technologies for making housing materials like clay bricks,
machines for making the materials like brick making machine etc. Most of these
technologies are under commercial use, while some are ready for
commercialization.

National Institute of Rural Development (NIRD), Hyderabad: A recent

initiative by the institute is the establishment of a National Rural Building Centre
within the Rural Technology Park. This centre showcases the technologies of
constructing region-specific affordable houses with eco-friendly local materials
rather than conventional concrete and steel.

Advanced Materials and Processes Research Institute (AMPRI), Bhopal:

The institute has developed a number of innovative, cost-effective alternative
building construction materials using industrial wastes like Fly-ash and organic
fibre like Sisal fibre as reinforcement in polymer matrix. The salient features of
the products are:
• High strength and durability
• Cost effective
• Versatile technology for building industry

Building Materials and Technology Promotion Council (BMTPC) Delhi :

BMTPC is being funded to implement projects on popularizing Rural Cost-Effective
Building Materials and Construction Technologies, in various states of India. The
thrust areas of these projects are as under:
• Assisting the process of upgradation, addition of floor area to existing
buildings and new construction using cost-effective 'intermediate'
technologies (e.g. tiled roofs and brick in mud mortar walls).
• Reducing the vulnerability of buildings in risk prone areas, thereby
reducing the loss of buildings from the housing stock by 'dehousing'.
• Assisting the expansion of rural building materials production capacity to
cater to local demand in an economically and environmentally sustainable
basis.
• Enabling access to institutional credit and investment for cost-effective
building materials production, new and upgraded housing construction.

3.8 Innovation in Construction Industry

For undertaking mass housing works, it is necessary to have innovative
technologies which are capable of fast rate construction and are able to deliver
good quality and durable structure in cost effective manner.

Cast-in-Situ Construction Technology

Pre-cast and cast-in-situ are techniques that are used for quick construction.
Pre-cast includes the wall-panel units and slab units directly added to building
structure. The use of aluminium also evolved as one of the technique for quick
construction by use of aluminium and steel (tunnel) formwork. Certain patented
systems based on imported technologies such as “Mascon System” (Canada),
“Mivan System” (Malaysia) have come on the Indian scene in recent years. In
these systems traditional column and beam construction is eliminated and instead
walls and slabs are cast in one operation at site by use of specially designed, easy
to handle (with minimum labor and without use of any equipment) light weight
pre-engineered aluminium forms. Rapid construction of multiple units of a
repetitive type can be achieved with a sort of assembly line production by
deployment of a few semi-skilled labors.

Prefabrication technology

Prefabrication technology works to be cheaper than site built housing to the tune
of 15% to 20%. In US and other countries this technology is considered suitable
for affordable housing programmes. It is also a part of housing programme of
Department of Housing & Urban Development (HUD) of USA. The share of
prefabs in independent houses worldwide -- USA and Australia -- 30%, Japan--
50%, China -- 250% , whereas in India the share is less than 1%. The
advantages of prefab housing -- excellent quality control, material savings, lower
cost, possibility to incorporate required features, faster delivery, lower life cycle
cost, possibility for relocation, can be customized to required codes & standards,
proper alternative for independent houses, and ideal for additional houses on
rooftop. The pre equipped/pre fabricated are available in different types– kit
form, panellized, modular, mobile. Though the technology is in infant stage, it
leads to cost saving of 25-30% over the conventional.

4. BASF Perspective

Addressing the six key challenges embodied in the affordable housing shortages
which all developing coubtries face- the lack of resources, insufficient funds,
shortage of skills, time constraints, work flow control and waste reduction. Herin
lies the opportunity for BASF where it can combine its expertise in various fields
can overcome the barrier between the industry and fundamental human need for
a valued home.

In a building the foundation, walls, doors and windows, floor and roof are the
most important components. These components can be analysed individually
based on the needs. This will improve the speed of construction and reduce the
construction cost.

Foundations

Various type of foundations normally adopted are:

(i) Open foundations.
(ii) Rib foundations.
(iii) Columns and footings.
(iv) RCC raft foundation.
Conventional methods using in-situ techniques are found to be economical and
more practical for low cost housing of slums which generally consists of low rise
structures. In seismic regions, special attention is required to make the
foundations continuous using horizontal reinforcement. Prefabrication is not
recommended for foundations in normal situations.

Floor and Roof

Structural floors/roofs account for substantial cost of a building in normal

situation. Therefore, any savings achieved in floor/ roof considerably reduces the
cost of buildings. Traditional cast-in-situ concrete roof involve the use of
temporary shuttering which adds to the cost of construction and time. Use of
standardised and optimised roofing components where shuttering is avoided
prove to be economical, fast and better in quality. Some of the prefabricated
roofing/flooring components found suitable in many low-cost housing projects
are:
(i) Precast RC planks.
(ii) Precast hollow concrete panels.
(iii) Precast RB panels.
(iv) Precast RB curved panels.
(v) Precast concrete/ferrocement panels.
(vi) Precast RC channel units.

EB division can provide various admixtures and stablizers to reduce the cement
content going into these precast elements.

Lightweight Sandwich Panels

The cellulosic refuse of paper industries are rich in small fibres and can be used to
make value added product, which can be used for acoustics, thermal insulation
and ceiling purposes in buildings. These developed panels have their end
applications in partitioning, panelling, thermal insulation and ceiling with its
unique aesthetics.

Bamboo Mat Corrugated Roofing Sheet

The main raw material for the production of BMCS is bamboo, which is the fastest
growing plant and occurs naturally in the forests and is also suitable for
plantation even over degraded lands. For manufacturing BMCS, bamboo is to be
converted into mats that are hand woven by rural/tribal people, particularly
women. Thus, the product is both environment and people friendly. The sheets
have been found to be resistant to water, fire, decay, termites, insects, etc. They
are light but strong and possess high resilience and offer better thermal comforts.
Alternative : FlexForm High Density Hardboard

FlexForm is a blend of natural fibers and fiberized thermal plastic polymers –

either polypropylene or polyester. The fiber compositions can be custom blended
to meet a variety of needs. The finished product is available in rolls or sheets, in
any length for specific applications. FlexForm can take the replacement of many
materials and applications, as its properties are so flexible and adaptable. The
material is 100% recyclable after use, created with natural fibers. FlexForm
produces no toxic VOC emissions, and can reduce a manufacturer’s total
emissions of volatile chemical while helping improve the environment through
bettering interior air quality, lessening trim waste through the process of
recycling and reducing land fill.

Wall Construction
 Alternative 1: Earth blocks
Material production requires approximately 75% of the energy used in
construction. The brick industry in India produces 22% of the CO2 emissions by
the construction sector and requires about 27% of the energy used in building
material production. Combinations of factors lead to the continuing of
inappropriate, poor environmentally sound materials and building standards. The
production of simple earth blocks only requires around one thousand of the
energy needed to fire bricks, and even in cases where earth is stabilized with
cement it is no more than a sixth per kg of material. EB division can provide soil
stabilizers for this construction.

Alternative 2 : Insulating Concrete Formwork (ICF)

Insulating concrete forms are hollow ‘blocks’ or a ‘panel’ that is made of

expanded polystyrene insulation, or other types of insulating foam, that builders
can use to stack and form walls (Similar to Lego bricks). They can create a cavity
wall, or become a mould for the structural walls of a building when concrete can
then be pumped in to form the structural element of the walls. The structure is
basically a sandwich consisting of a heavy, high-strength material between two
layers of light and highly insulated material to create air tightness, strength, and
insulation, mass and sound attenuation.

Advantages of this system include:

- Minimal air leaks, if any – which provide a consistent comfortable balance and
less heat loss
- Extraordinary energy performance
- Fast and simple construction
- Competitive costs
- High sound absorption for locations prone to high traffic, circulation or is
densely surrounded
- Little waste and the opportunity to utilize local materials
- Time-tested structural integrity
- Resistance to forces of nature and climate change – providing a superior
lifespan and low embodied energy values
- Low maintenance and high durability
- Lower whole life cost and higher resale value
- Flame-retardant EPS will only burn while the flame is directly applied to the
foam, the smoke that results is less toxic than wood smoke from ordinary timber
- During construction, the walls and floors form one continuous surface that keep
insects and vermin out

Alternative 3: Grancrete

Grancrete is a spray applied to Styrofoam walls, of which it adheres to and cures

within 15 minutes. With properties proven to perform better than concrete, such
as it being stronger, fire resistant, able to withstand both tropical and sub-
freezing temperatures and ideal for a range of geographic locations, this is ideal
for the construction of low-cost housing. The Styrofoam remains in place after the
spray is applied, acting as an insulator – although woven fiber mats may be
substituted and reduce the raw materials required. It is important to source
materials and labor that is as indigenous as possible – Grancrete makes use of
the natural resources such as soil and ash found in nearly every village, it is
made of 50 percent sand or sandy soil, 25 percent ash and 25 percent binding
material – the binding material consisting of magnesium oxide and potassium
phosphate, with the latter being a biodegradable element in fertilizer. After two
days of training on how to control and calibrate the machinery, the house may be
fully assembled in another two day period. The cost of an approximately 400
square feet home would cost roughly $4,000 US for labor and materials –
considerably less than the same dwelling constructed with conventional materials.

S Panel System (Steel wire-EPS composite panel)

S Panel system is a composite construction system. It is used for load bearing

walls for low-rise buildings and non-load bearing walls for high-rise buildings, also
for floor board and roofing board; It consists of S Panels - three-dimensional
welded wire mesh and a built-in expanded polystyrene insulation core. The panels
are erected over steel reinforcing bars embedded in a concrete foundation, then
fastened to one another with wire - splice mesh. Concrete is sprayed to both
sides of the panels to the desired thickness. The result is a homogenous structure
with excellent thermal and acoustic properties.
Features
• Fast and simple erection, creating a monolithic structure.
• Cost effective way of creating a quality, plaster finished structure.
• Light weight - only 3.9 kg per m2, 110 kg with cement mortar of 30 mm thick
on both sides, easy to handle and suitable for area with soft foundation.
• High energy efficient system - Efficient thermal barrier, thermal resistance (50
mm in thickness) is 0.825 m2.k/w.
• Excellent Sound Insulation - STC rating up to 52.6 dBA.
• Superior fire resistance - tested to 2 hours fire rating.
• Earthquake resistance - As a monolithic structural element with superior
strength and ductility; it is ideal solution for high seismic areas. Also hurricane
and typhoon proof design, even at the highest wind loads.
• Long life, high durability, low maintenance, strong and modern.
• Healthy and secure - Insect, termite, mildew and fungi resistance.
• Greater design flexibility, easily to be adopted to curved/arched application.
S Panel System is stronger than rock and more versatile than timber.

Door and Window

Coir – CNSL Board

The Coir-CNSL Board is a wood alternative which has low water absorption,
negligible change in dimensions due to water absorption, workable with normal
wood working tools, paintable, pre-laminable, nailable and screwable, passes IS-
3087. The board is eco-friendly and can replace wood or re-constituted wood by
100%.The estimated cost of the board is around 30% cheaper in comparison to
commercially available similar products such as MDF board, plywood, and block
board.

Bagasse-Cement Panels
The developed product and process utilizes sugar cane bagasse and ordinary
Portland cement. The physico-mechanical behaviour of the developed building
pannels passes most of the requirements of general purposes high density board
and is cost effective too.

CONCLUSION

Mass housing targets can be achieved by replacing the conventional methods of

planning and executing building operation based on special and individual needs
and accepting common denominator based on surveys, population needs and
rational use of materials and resources.

No single approach and solution is available which can satisfy the community at
large. However, what is ideal and desirable is to have a system which can provide
choice for people and also appropriate techniques to meet the situation. The
essence lies in the system approach in building methodology and not necessarily
particular construction type or design. Adoption of any alternative technology on
large scale needs a guaranteed market to function and this cannot be established
unless the product is effective and economical. Partial prefabrication is an
approach towards the above operation under controlled conditions. The
methodology for low cost housing has to be of intermediate type . less
sophisticated involving less capital investment.