Micro credit – boost for housing
Loans up to Rs.1 lakh will be given to members of Self Help Groups for building houses under a new scheme formulated by the National Housing Bank in a tie up with Repco Foundation, which was launched by the Finance Minister Chidambaram in Karaikudi, Tamil Nadu, recently which will be extended to Karnataka and Andhra Pradesh in the immediate future.
What has been the main hindrance to the construction of low cost housing in India these days? This is a very important question which remained unanswered for years. Let us, in this background, look at a new scheme implemented by the National Housing Bank in the Finance Minister’s constituency.
Business objectives
Every entrepreneur desires to earn profit from his business. Similarly, all lenders want to maximise their profits. If these fundamental business principles are accepted, one has to lay down norms for starting a business based on these principles. First of all, the scope for a particular business has to be established. Then, the location, the size, demand, and other parameters have to be decided before starting the business. This applies to housing business as well.
Housing development parameters
If housing development business has to be chosen as the activity, the following parameters are to be clear to the promoter:
Target group
Location of the project
Size of individual houses
Cost of the house
Competition
In a country like India, where social inequalities are rampant, pricing of a product like house, is extremely important, as affordability will be the most critical factor in selling a dwelling house
Macro credit for housing.
The salient features of the scheme are:
The finance for this scheme flows from the National Housing Bank (NHB) which is a wholly owned subsidiary of the Reserve Bank Of India
The Repco Bank founded in the year 1969 for rehabilitating the repatriates from Sri Lanka and Myanmar is the implementing agency.
The loans are to be taken by the Self Help Groups (SHGs), and guaranteed by them, who in turn, will provide individual loans to their members.
Loanees should have a piece of land.
The individual loan amount is between Rs.50,000 - to 1 lakh.
No down payment is necessary.
Instalment will start once the house is occupied.
Labour will have to be that of the borrower.
For those who are engaged in any occupation, separate areas for dwelling and work can be put up.
The SHGs should have at least two years standing.
The SHGs have to confine its banking transactions with the Bank solely
Loan amount will be 10 times that of the saving corpus of the SHGs
Processing charges not to exceed Rs 200/-.
Group guarantee will be the collateral.
Interest rate will be 3% to individual borrowers.
Target
A target of 15 lakh houses per year in rural areas is planned for the present. This will be in addition to the I.A.Y target provided in the annual budgets.
Critical factors
Considering the terms and conditions, cost factor and selection of the SHGs/ primary borrowers will be the most critical factors for the success of the programme. In these days of increasing cost of cement and steel, the type of construction need to be with minimum steel and cement. Per haps, bricks made in the borrowers’ own land will be ideal. Madras roofing can also help reducing the cost.
Implementation of the scheme proposed in Karnataka and Andhra Pradesh need to be carefully executed as, SHGs are not very strong there yet. However, it is a novel scheme for the poor and marginalised.
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