Abstract
Access to housing finance is a major challenge for the poor and low income groups because of underdeveloped housing finance market, high transaction cost, lack of collateral, type of housing credit and other factors specific to local area. The paper analyzes nature and pattern of microfinance for housing (MFH) in India and its impact on low segment housing finance. Using primary data collected from microcredit clients from different regions in two southern states in India (Kerala and Karnataka) it discusses two different MFH schemes to understand low segment housing finance and its impact on rural housing activities. Our data support to estimate the approximate size of the low segment housing credit market and the existing gap between demand for and supply of such credit. Findings of the paper offer better understanding about functioning of low segment housing finance markets and potential to improve housing condition of the poor through developing such markets including MFH. Major constraints of MFH program in India are inadequate fund, poor product design, low scale of operation scale and policy related issue. Inter-links between microcredit and MFH is evident from our data. Average demand for housing credit was estimated three times higher than its supply and mostly for new construction of houses rather to repair and renovate existing houses. Though MFH found inadequate to meet the demand for housing credit but it works as kick starts for housing activities and influences household decision making in terms of start of housing activities, fund arrangement and utilization, allocation of resources, asset creation etc. which are crucial for the poor. Housing activities in our study not found progressive as argued by earlier study [1].
Highlights
Safe and affordable housing is one of the basic human needs and the single most important factor creating conditions of decent living, employment, incomes and asset creation, for the poor and low income groups
Shortfall of houses estimated in India is about 27 million units in urban areas and 43 million units in rural areas, out of which more than 90 percent housing shortage is in low income groups [3]
From our analysis it appears that despite of some small quantity and other constraints the impacts of the microfinance for housing (MFH) has been crucial in inducing pro-poor housing activities [11]
Summary
Safe and affordable housing is one of the basic human needs and the single most important factor creating conditions of decent living, employment, incomes and asset creation, for the poor and low income groups. Low segment housing sector continues to be over constrained by access to adequate and affordable credit and conventional housing finance markets fail to cater to the poor. Specific Objectives: a) To analyze the demand of housing credit among low income groups, their priority of low segment housing activities and the existing gap at household level. The second model is a MFI sponsored MFH called Sanghamitra Rural Financial Services (SRFS) in Karnataka Both models follow community and self-help group (SGP) approach to operate but have different in product design, execution, quantum and condition of credit. Collection of primary data includes information about housing conditions, quantum and nature of housing expenditure, current housing plan and activity, demand and sources of housing credit, loan repayment, microcredit group activities and major constraints and suggestion relating to housing finance
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