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Housing rural India


The rural housing stock in India is expected to see a rise of 42-44 million by 2025 according to a report by the National Council of Applied Economic Research. Construction Week highlights the reasons for the growth

Recently, the National Council of Applied Economic Research (NCAER) released a report Rural housing in India: Challenges and Opportunities. Sponsored by Holcim, the focus of the report is identifying the determinants of rural housing in India. The study is based on primary data collected from rural households in different states, as well as on the housing data collected during various decennial censuses and National Sample Survey Organisation (NSSO).

There has been increasing attention and some success in the last few years in building basic rural infrastructure such as drinking water supply, sanitation, roads and electricity. However, despite initiatives, transformation of the rural housing scenario remains a challenge.

An analysis of the housing scene in the rural areas suggests continued poor quality of the rural housing stock in the country, though considerable improvements in quality have been indicated over the period. Also, while there has been continuous growth in the rural housing stock, its pace has been lower than urban housing. The rural areas in India are characterised by small and highly dispersed habitations, apart from a poor village or community level infrastructure. Also, as the principal occupation of most rural households is agriculture (or its related activities), the space requirements of these households, apart from for residential uses, are for livestock and storage of grains and agricultural implements. It is only lately there has been an increase in non-agricultural employment.

Most of the poor households are reported to live in one- or two-room units (85% of the poorest, 20% households) with almost two-thirds of the richest households living in 5+ room dwellings. A dismal finding is the lack of access to basic amenities like drinking water, toilet and bathing facilities, and cooking space. The situation is particularly alarming in respect to toilet and bathing facilities. Access to electricity is somewhat better with over 60% households reporting electricity connections, especially for lighting purposes.

The survey also assessed the status of physical infrastructure and housing environment. Almost 50% of households have closed drainage systems, with hardly any inter-quintile variation. A little over half the households are connected to paved roads, with around 10% without any approach road. Our inquiry on the use of housing premises revealed that about 20% of the households had detached sheds for cattle and another 7% had sheds attached to the house. As to be expected, most households with detached sheds are relatively better-off. Also, a little over 10% of the households reported to have separate sheds either for storage of output and/or for keeping implements.
The survey reveals that most households reported increases in income over the past decade with land-owning households showing about 25% increase.

An analysis for this increase is an improvement in crop yields and better wages. While crop income and wages helped the bottom 60%, the top 40% benefitted from improved business activities and salaries. A positive feature is the widespread optimism among rural households with regard to their incomes over the next 10 years. This optimism is stronger among the richest 40% households.

As for expenditure priority on ownership of various assets, about 80% of households view buying a house important. Infrastructure development is likely to influence householders’ decisions on construction.

In the context of housing, factors such as availability of land, skilled labour and building materials are critical. About 40% have their houses on agricultural land and an equal proportion on non-agricultural land. About 10% of houses are on Panchayat/government land. The houses on Panchayat land belong to the poor. Nearly one-fifth of the households felt that acquiring land is not easy. In case of building materials, most households were satisfied, save for the fact that materials are usually sourced from outside the village. It is the availability of skilled labour that seems to pose a problem.

In rural areas, tenants comprise about 2-3%, and most plan to build houses largely from savings aided by loans from cooperative societies. A small percentage are planning to tap bank finance and government help.
The rising average levels of income in rural India have led to increasing demand for all amenities, including housing. There is a strong impact of household income on housing development in terms of space, durability of construction or amenities. As income increases, demand for housing can be expected to rise. More innovative financial products would be needed to meet their requirements.

An assessment of future scenario

The study shows demand for housing stock for 2008 to 2025 under two alternative scenarios – business as usual (BAU) and higher growth (HG). The projected numbers of houses increase at an average annual rate of 1.48% and 1.56% under the BAU and HG scenarios respectively. The rate of increase in housing demand is related to the assumption of higher rate of income growth as compared to the BAU situation. During the 17-year period of 2008-2025, the rural housing stock is projected to rise by 42-44 million under both scenarios.

The projections draw attention to the need for continued expansion of rural housing. The projections presented here relate to the total housing stock and the distinction between kutcha and durable construction. The changes in terms of space, design, number of rooms and amenities in the house are of importance in improving the quality of housing. These changes may also be continuous in the nature of ‘upgradation of the house’.

Overview of policies and outlook

Economic growth has offered opportunities to individual households, who have been able to benefit from such growth, for improving their housing conditions. However, rural households do not have the same financial capacity as their urban counterparts to undertake improvements. An active housing sector in rural areas could indeed be both a direct catalyst for promoting greater economic activity as it provides considerable employment at the local level and would also help in improving the health and productivity of rural inhabitants.

The government’s policy initiatives have attempted to stimulate rural housing. Given the general handicaps of the rural areas and more specifically the weaknesses of different segments of rural population, the policies have also been evolving.

Given the multiple dimensions of the rural housing challenges, a coordinated strategy needs to be evolved. Recognising the fact that there are strong regional and local dimensions to rural housing requirements, local-level institutional arrangements to encourage rural housing construction are necessary.

The policy initiatives have required both financial commitment and design of delivery systems to make technical and financial assistance available in rural areas. Increasingly, involvement of NGOs and the private sector is becoming important in both providing and delivering this assistance. While the Panchayats are playing a greater role in identifying beneficiaries for subsidies, they should also take up the responsibility for the overall development of rural housing in terms of streamlining land records for housing, enforcing standards of building construction and providing a facilitating environment for housing development so that the finance agencies, construction industry and non-government sector can be more effective in their functions.  

The way forward

The trends suggest that there is considerable demand for improvement in rural housing conditions. The assessment of the future scenario points to the rise in housing stock and more importantly construction of more durable housing stock. However, the quality of a significant proportion of rural housing stock would continue to be poor; demand for upgrading it could be as important or significant as the demand for new housing.

Components that need immediate attention

• Availability of developed land for house construction
• Cost of construction of house
• Availability of appropriate building materials and technology, including of appropriate building design not only for just one house but for the village habitat as a whole
• Availability of skilled labour for construction so that housing construction is of reasonably quality and construction process utilises resources efficiently
• Access to affordable housing finance, not only for construction of new houses but also for continued upgradation of existing housing
• Development of village-level infrastructure that would improve the quality of living in the villages as well as attract new house builders


• The procedures for registering housing property records should be made easy and inexpensive. The Panchayats, as institutions of self-government, should be given greater mandate in streamlining housing property records.
• Construction of group housing complexes in densely populated villages should be encouraged through PPPs
• Level of subsidy should be reviewed periodically; subsidy levels fixed at reasonable levels; housing subsidy schemes should also consider support for housing sites for house construction
• Specially designed rural housing loan products not merely for new construction but also for upgrading and improving existing housing stock
• Fiscal incentives to support rural housing development
• Prefabricated materials may provide economic and scalable options in rural housing
• Efficient technical support should be made available
• Rural local government bodies to assume greater responsibility
• Coordinated approach to rural housing development that brings together building materials industry, housing finance, public policy and civil society organisations.

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June 2020
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