Figure 1: Low Income Slum Community

Courtesy: Selco Foundation

One of the most consistent aspects of human behavior is the aspiration of living a better life than the one we have today. Often families aspire to buy a new car, own a house and provide their children with better quality education in expensive institutions. These aspirations reflect across various income groups of society, particularly within lower income groups who aspire to grow towards the top of the pyramid. Buying/ constructing a house is a dream that remains one of the most expensive aspirations that most families work towards. However, most low-income families fail to achieve this dream within their lifetimes due to various regulations that render their dreams impossible.

India is home to 1.25 billion people, out of which 22% live below the poverty line earning an average of Rs. 70 per day. This amounts to an annual family income of Rs. 15,000 – Rs. 20,000. For the larger population housing affordability is defined as 40% of the annual income, which is about Rs. 6000 p.a in the case of low-income families. However, the housing market in India does not cater to the affordability of this income group, thus leading to a huge gap between demand and supply. With the 2017 Annual Budget providing housing with an infrastructure status, large developers have set their eyes on the supply of smaller houses in the market keeping in mind the demand for them. However, the definition of affordability starts from the price range of Rs. 12 lakhs – Rs. 15 lakhs which still excludes the population that falls under the bracket of lowest income groups. Thus, buying a home in an urban area remains a far-fetched dream for most low-income families in the current housing market scenario.

The biggest supplier of homes for low-income groups remain the housing boards, slum redevelopment boards and private players who have been awarded work under public-private partnerships with the state government. Construction projects are implemented through one of the components under the Prime Ministers Awas Yojana (PMAY) which replaced the Rajiv Awas Yojana (RAY) as the national level housing policy for urban areas in 2015.

Slum rehabilitation center
Credits: Karnataka Slum Development Board Website

The alternate way for a low-income family to obtain a house is to construct it themselves. This is one of the most economical options for beneficiaries who have been allotted land by the government through the process of slum recognition. Once a slum is legally recognized beneficiaries are leased plots of lands for long periods of time. However, ownership remains with the government in the scheme of long term land use city level planning. The beneficiary led construction component encourages families falling under the categories of LIG and EWS to construct their own homes on land allotted under the scheme through the provision of cheap housing finance. One of the ways to achieve this is through the credit linked subsidy component of PMAY under which beneficiaries are eligible for an interest subsidy of 6.5% on a housing loan of 6 lakhs. (Recently the Prime Minister has announced a further subsidy of 4.5% on a loan of 9 lakhs and 3% subsidy on a loan of 12 lakhs too).

There are two main reasons because of which beneficiaries are still unable to access this finance component of the national housing scheme. Firstly, the lack of ownership creates a sense of vulnerability within the minds of beneficiaries because of which many people are hesitant to take up the burden of large loans. This could be related to the lack of financial awareness and hand holding that is required to be done by local authorities through whom the scheme is implemented. Secondly, land plots allotted to beneficiaries are typically around 150 – 200 sq.ft in area. Legally plots below the size of 300 sq.ft are not recognized as habitable spaces for the construction of individual residences. Hence it becomes difficult to obtain permissions for legal construction. Both the aforementioned reasons create a hostile environment for bank financing for housing construction, as the lack of ownership and small plot sizes create a property that cannot be mortgaged against a loan.

The lack of formal sources of finance or the vulnerability of evictions does not stop beneficiaries from constructing their own houses. However, the quality of construction is highly compromised in homes that are built under such constrained conditions. The beneficiaries are equipped with excellence neither in planning nor in designing thus leading to a decrease in the quality of the built product both in terms of the materials and technology used. Due to a lack of construction regulations, houses tends to lack basic lighting and ventilation qualities. This is due to the restriction of the small plot sizes that do not allow cross ventilation to happen as most houses are covered on three sides by other houses. Also, house owners do not plan for more floors at the time of the construction of the foundation and load-bearing component thus incremental construction in the future becomes extremely risky as the structure has not been constructed keeping in mind the excess load. The quality of materials purchased is also compromised on as house owners do not want to invest large sums of money in procuring quality materials to construct a house on land that is not owned by them in the conventional sense. In most cases unhealthy materials such as asbestos roofing sheets are used to reduce costs, as house owners are unaware of the long-term implications such materials may have on their health hence the quality of the living conditions traverses the same path to that of its predecessor “the slums”.

For the financial component, house owners tend to look for alternate sources of finance, which are informal money lenders in most cases. In some other cases, they tend to take loans from friends or families. However, in all such cases of financing interest rates tend to be very high. The lack of proper planning usually leads to improper allocation of resources thus cash falls short during the process of construction. The family then has to take further loans on high-interest rates that are beyond their financial capacity to complete the ongoing work. This drives them into a never-ending cycle of poverty.

Figure 3: Ecosystem for affordable housing.

Firstly, there needs to be a set process through which implementation authorities are able to create awareness and educate beneficiaries on the meaning of “leased land” and the vulnerabilities associated with it if any. (My personal opinion would be that land which is a finite resource should never have been privatized in the first place in India). Secondly, banks need to be directed by the government to create loan products appropriate for the set of people targeted under the self-construction component of the PMAY. The credit linked subsidy component needs to be implemented more rigorously through financial institutes; which can be done through the setting of annual goals under the priority sector lending wing of such institutes.

Thirdly, there is a need to improve the financial literacy of the end user in terms of expenditure involved in the process of construction. In many cases, people use up the entire sum of money to achieve their aspirations which may be a luxury cost for one component of the structure. For example, families may indulge in building a floor finished with Italian marble rather than complete the basic structural framework. The concept of incremental housing which has been highly propagated by the Chilean architect Alejandro Aravena (winner of Pritzker Award, 2016) is extremely relevant in such situations. Aravena understood the need to provide for the basic structural and service requirements of the home, leaving the interiors, furnishing and other components to the beneficiaries to complete as and when financially viable. There are two reasons that this process turned out to be a successful one – firstly, beneficiaries were allowed to customize their homes according to their tastes, and secondly, the process did not throw a financial burden on them at any point. Similarly, beneficiaries of the PMAY may be educated by implementation authorities on the importance of completion of the structural framework with the available funds and then slowly customizing the structure to their requirements.

Figure 4: Quinta Monroy by Alejandro Aravena – Before and After


Fourthly and most importantly, houses constructed on plot sizes smaller than 300 sq.ft needs to be recognized as habitable homes. This is because it is the only size that can be afforded by a significant section of the Indian population that is going to continue building unsafe and unplanned homes in the absence of regulatory construction frameworks. Guidelines and regulations for this sector could be added to the National Building Code (NBC, 2005) thus formalizing the existence of small houses in urban (and rural) areas. This would provide prospective homeowners in the low-income group bracket with crucial information regarding the construction of better quality homes. This would be both in terms of ventilation and lighting techniques and also in terms of material selection for the purpose of construction of healthy homes.

Finally, the government needs to allocate resources towards the monitoring and evaluation of the implementation of the housing policy to identify further gaps and create processes that would feed into strengthening the same. The housing crisis in the country is only growing worse by the day and it is the time we understand the needs and aspirations of end users and customize our policies accordingly. Policies must see through not just the problems they intend to solve but also the repercussions it is projected to have.

By Meghna Mohandas

About the author: Meghna was the recipient of the second runner-up award at the Berkeley essay writing competition, 2015. This provided her with an opportunity to attend a certification course in Urban Planning at Aalto University, Finland. Her undergraduate thesis at School of Planning and Architecture, Bhopal, “Redevelopment of BDD Chawls, Mumbai”, was presented and published at the World Town Planning Day 2015. Currently working at SELCO Foundation, she is developing ecosystems for the holistic approach of housing in various low-income communities.


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