NHB looks to make rural loans convenient

National Housing Bank, the housing finance regulator, plans to tie up with banks and non government organisations for its new rural housing finance project as it believes a joint operation would provide housing loan recipients with opportunities to supplement their income.

"I increasingly feel housing finance should be linked to overall economic activity in rural areas," S Sridhar, chairman and managing director of NHB, said. NHB has started a programme called Productive Housing in Rural Areas (PHRA) to provide a platform to achieve its aims in rural housing finance.

As part of PHRA, NHB has joined hands with an NGO called DHAN Foundation in Tamil Nadu to disburse rural home loans. The regulator plans to add banks and other NGOs to its list of partners in order to strengthen its rural delivery chain, Sridhar said.

NHB's emphasis under PHRA is one of partnership because Sridhar feels rural home loans, when given in conjunction with lending or assistance from other institutions, would have a multiplier effect on the rural economy. NHB's plans include direct lending for rural housing as well as indirect lending through other institutions.

As an example of the multiplier effect on rural economy, Sridhar said even a loan to extend an existing house could result in the additional room being used for income generation. The success of PHRA is linked to the economic empowerment of women in the rural economy because they tend to supplement the family income.

PHRA is not NHB's first attempt to design a project to exclusively boost rural housing finance. In 1997, the institution formulated the Golden Jubilee Rural Housing Finance Scheme which aimed to address the problem of housing shortage. NHB offers refinance to eligible institutions in respect to loans extended by them under the Golden Jubilee scheme.

The multiplier effect of rural home loans aside, NHB's emphasis on rural lending has taken place in the backdrop of a relatively low flow of housing finance into rural areas. In its last report on Trend and Progress of Housing in India, June 2004, NHB had stated that less than 15 per cent of the total housing loan disbursements flows into rural areas.