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 schemes 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 electricity and sanitation

including

amenities

like

water,

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 Indias 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 510 years and 9.25 per cent for 10-20 years.

3.4

HFCs & 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 MRHFLs 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 incomegenerating 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 (NGOs)

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 more practical for low cost housing of slums which generally consists of low structures. In seismic regions, special attention is required to make foundations continuous using horizontal reinforcement. Prefabrication is recommended for foundations in normal situations.

and rise the not

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 manufacturers 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 subfreezing 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 IS3087. 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.