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Housing Finance

Housing Finance

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03/10/2013

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It is a known fact that year after year more people are added to the
category of homeless as the population is on the increasing trend. The
weaker sections that constitute this group are handicapped in getting
shelter at affordable cost. Housing, as such, in any country depends or the
following factors:

-Demand factor - Growth in population, formation of households,
development of new townships, and increase in income.

-Supply factor - Availability of institutional credit, cost of construction,
availability of land and building materials, and fiscal and legal
provisions affecting building construction.

Though both the type of factors play their role equally, it is to be
understood that everyone wants to have a house constructed either
through own money or borrowed funds. But the growing population
makes it impossible to construct houses and satisfy this need for all the
people in desired proportions.

4

HOUSING FINANCE WITH REFERENCE TO NATIONAL HOUSING BANK

The National Sample Survey 44th Round compiled data on the types of
dwellings in India. Some aspects of these data are presented in Table 1.

Table 1. Types of Dwellings in India

Types

Percentage Distribution
Rural %

Urban %

a.

Independent houses

82.6

52.4

b.

Flats

2.7

17.2

c.

Chawls

3.0

10.8

d.

Others

11.7

90.6

Total

100

100
From the above table it could be seen that the rural areas have more
independent houses compared to urban centers. However, there has been
some tendency to go in for flats also, trend of which is more perceptible in
urban areas. This pattern is due to the fact that while some space is
available for construction of small dwellings in rural areas, it is a critical
constraining factor in urban areas. This necessitates the urban house
aspirants to go in for flats. The NSS further observed that in rural India,
39.4% houses are kutcha houses, 34% semi-pucca and 27% pucca ones
while in urban areas the percentages for the above categories of houses
being 11, 18 and 71 respectively. This also shows that an urbanite is
interested to have a pucca house while a ruralite is prepared to live in a
house in whatsoever may be the type of construction. Again, the socio-
economic conditions of the ruralites do not permit them to go in for a big
permanent dwelling. Yet another observation made by the NSS indicates
that in the past three decades, there has been an increase in the pucca
houses in the rural areas on one hand and the kutcha houses are on a
declining trend in urban centers on the other.

Some trends and progress in housing in India over years as reported

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HOUSING FINANCE WITH REFERENCE TO NATIONAL HOUSING BANK

by the NSS are presents in Table 2:

Year

No of house holds

No of occupied addition
during residential housesDecades - house
holds

R

U

T

R

U

T

R

U

T

1951

53.612.3

65.9

54.1

10.3

64.4

-

-

-

1961

68.915.6

84.5

65.1

13.8

78.9

1
5.03.318.6

1971

79.620.9

100.5

72.7

18.1

90.8

1
0.75.316.0

1981

94.129.3

123.4

88.7

28.0

116.7

1
4.58.422.9

R – Rural, U – Urban, T - Total
The conclusions that emerge from the table are as follows:

#

On an average, about 90% of the total households have occupied
residential houses throughout the past.

#

within this overall pattern the percentage of occupied residential
houses is more in rural areas as compared to urban centers.

#

The number of households added during decades had shown
fluctuations in rural areas but there was a steady increase in urban centers.

The addition to the number of households was more during the

decade of 1971-81.

While indicating the relative growth of housing stock in the inter-
censor period, the NSS report analysed whether the growth in the housing
stock is commensurate with the growth in the population. The Table 3
seeks to provide an answer to the above issue.

Inter – census period

Annual growth of the dwelling per 1000
increase in the population

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HOUSING FINANCE WITH REFERENCE TO NATIONAL HOUSING BANK

Rural

Urban

Total

1951-61

3.4

5.2

3.3

1961-71

1.9

4.5

2.4

1971-81

3.4

7.9

4.0

•The growth of the dwellings per 1000 increase in population was

slow during the period 1961-71. It needs to be noted that during this
period, the total population growth was more than yester years. The
percentage increase in population during this decade was 24.8%
which was, in fact, the highest during the period under reference.

•The rate of addition of dwellings in relation to the population in rural

areas was lower as compared with the urban centers.

•The decade of 1971 -81, witnessed a large increase in the annual

growth of dwellings per - 1000 population and like the earlier
patterns, the increase was more in urban centers. It is interesting to
mention here that during this period, the increase in urban
population was as high as 50% which was almost three times of
18% experienced in rural area

•All these facts lead to the conclusion that the growth rate in housing

did not keep pace with the rate of growth in population in the entire
country. The extent of shortfall was more pronounced in rural areas.

The ultimate result has been the housing shortage in both rural and
urban areas. In 1971, the Banking Commission, headed by Shri. Bhabatosh
Datta submitted its report on the Non-Banking Financial Intermediaries.
This report, besides other aspects of banking systems, dealt at length with
the present and prospective housing finance and the need for a specialised
institution for housing. The Commission made the following
observations:

a.The house construction, as indicated earlier, depends on the demand

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HOUSING FINANCE WITH REFERENCE TO NATIONAL HOUSING BANK

and supply factors with the demand side including the population,
income etc. and the supply side covering institutions, policy etc.

The following are the three indicators for housing shortage:

The first indicator was provided by the proportion of pucca
dwellings to the total housing stock
. According to an estimate, this
proportion in India was only 23% as compared to 96-99% in some of the
Western countries like USA, Canada and Japan. An idea of the over-
crowding in dwellings could be obtained from the fact that about 77% of
the total dwellings are of 1-2 room size, whereas in developed countries
only about 5% of the houses are in this category (Palvia, 1969).

The second indicator for the housing shortage was the
comparison between the number of dwellings and the number of
households
. At the end of 1967, the report indicated that there were an
estimated 6.2 million urban pucca housing units for an estimated 18
million urban households. Thus there was only one pucca house for
every three households in urban areas. In rural areas, for an estimated
81.6 million households, the number of pucca housing units was only 12
million. The estimated rate of living constructions in India was around
two dwellings per 1000 population per annum as against 10 per 1000
population as recommended by the United Nations in developing
countries during the development decade of 1961-71.

The third indicator, according to this report, was the investment
in housing as proportion of the total investment in the public and
private sectors
. The percentage of total investments allocated to the
housing sector had declined from 34% in the First Plan to 12% in Fourth

8

HOUSING FINANCE WITH REFERENCE TO NATIONAL HOUSING BANK

Plan.

The Table 4 giving the housing scenario will further indicate the
housing shortage in the past and the prospective housing shortage by
2001.

Housing shortage in India
Rural

Urban

Total

1
98119912

001198119912

001198119912001

a.No. of house
holds

94.1113.513729.345

69

123.
4

158.
4

206

b
.Households
adjusted for
congestion

94.1113.513730.747.1
7

72.2124.
8

160.
6

209

c.Housing
stock

88.7106.
2

12828

42.664.8116.7148.
8

193

d
.Of which
acceptable

77.892.911223.736.756.7101.

5

129.
6

168

e.Housing gap16.320.625.57

10.415.523.331

41

The above table leads to the following inferences:

•A sizable number of people are without any house and every year more
and more people continue to be added to the category of homeless.

•The housing gap goes on increasing over years. This was indicated

earlier by the fact that the annual growth rate in number of dwellings for
every 1000 increase in population was very less leading to housing
shortage.

9

HOUSING FINANCE WITH REFERENCE TO NATIONAL HOUSING BANK

•The housing gap was prominent in rural areas as compared to urban

centers. This might, be due to the reason that in rural areas still people are
inclined to go in for independent: houses whereas there is a trend towards
flats in urban centers. Besides the needs and likings of the rural people
regarding separate houses, it should also be remembered that the flat
system of houses which needs a multi-storied structure requires a special
infrastructure which is just not available in rural areas at present.

•The houses of acceptable conditions were almost 86% of the housing

stock in both the rural and urban areas.

•Each of the households had on average 5-6 members both in rural as

well as urban areas.

•The report also indicated that more number of persons lives in a room and
lack of privacy connotes the need to augment housing supply.

An analysis was made in various studies on the cause for the
housing shortage in developing countries like India. The conclusion
arrived at by studies has been that developing countries are giving low
priority to housing and this is again due to factors like large capital
resources required, high capital-output ratio and top priority given to
sectors like the agriculture, industries, power, communication etc. as
compared to housing. All these go to show that there is a need to give
priority to housing since it is the basic need for the mankind.

The growing rate of population needs more investment in the
housing sector. The importance of finance as a factor in house construction
may also be examined from the point of view of individual who wants to
own a house. Houses can not usually be built out of the current income of
the individual. It is estimated that in India, 4.9 years' income of an
unskilled labour is require to get 30 sq.m. House. It is also indicated that

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HOUSING FINANCE WITH REFERENCE TO NATIONAL HOUSING BANK

in an economy like ours, about 75% of house-buying involves loan finance
and over 5C% of all new and old houses are encumbered with debt. The
rate of interest charged also plays a role in housing finance. All these go
to indicate the need for housing finance and assistance for a common
Indian. How far our planning has taken care of the housing sector over
years is given in the succeeding paragraphs.

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