Micro credit – boost for housing
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A look at the new scheme implemented by the National Housing Bank in the Union Finance Minister’s constituency by K. SUKUMARAN
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Social justice: Promoting housing for the lower income groups is an objective of the NHB
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. The scheme was launched by the Union Finance Minister P. Chidambaram in Karaikudi, Tamil Nadu, recently and 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.
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 the housing business as well.
Parameters
If the 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 such as a house is extremely important, as affordability will be the most critical factor.
If one goes through budget after budget, both Central and State, the accent is on housing for the poor and low income groups, though tax sops are extended to all types of home buyers.
Indira Awaz Yojana is the flagship programme budgeted everywhere, apart from the schemes for the SCs/ STs and OBCs.
The targets for such schemes increase from year to year. Subsidy is also part of the financial outlay. Interest at differential rate is also specified.
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 SHGs and guaranteed by them, who in turn will provide individual loans to their members.
Loanees should have a piece of land.
Loan amount
The individual loan amount is Rs. 50,000-Rs. 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 their banking transactions to the Repco.
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 three per cent to individual borrowers.
A target of 15 lakh houses per year in rural areas is planned for the present. This will be in addition to the IAY 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 needs to be with minimum steel and cement. Bricks made in the borrowers’ own land will be ideal.
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