Page 59 - HUDCO-SHELTER-April22

Relative/Friends
Money lender
Bank 17% 28% 40%
Micro Fin Institution 6%
Other 4%
Cooperative Bank 3% CASE STUDIES
Employer 2%
NBFC 1%
Figure 9: Rates of Interest of formal and informal loans and the beneficiary, and the
verification of the vacant site
is done. Odisha also revised
Informal Loans Formal Loans the programme structure
80 and facilitated the release of
70 the first instalment of state
60
50 share immediately after the
40 excavation, initiated with the
30 beneficiary contribution. On
20
10 the other hand, TN releases
0 the first instalments only after
0% 20% 40% 60% 80% 100%
completing the foundation
with the beneficiary’s

equated monthly instalments Cost escalations generally share. While, on the one
over the loan term. Relatives/ demand urgent funds. hand, facilitated large-scale
friends – with whom trust- Informal loans usually fulfill grounding of houses in Kerala
based lending/repeat lending such urgent demand for funds and Odisha (85 percent of
is easier – emerged as the as they enable easy and timely sanctioned) in TN, it resulted
major source of informal access to finances compared in 24 percent of sanctioned as
borrowings among the BLC to formal sources. On the non-started houses.
beneficiaries (Figure 8). other hand, accessing formal Unavailability of basic civic
Moreover, while the majority institutional credits involves infrastructure access in
in Kerala reported zero significant documentation, newly constructed houses
interest rates when borrowing making it time-consuming.
from relatives/friends, in The PMAY-Urban programme
Odisha, charging interest on Additionally, the guideline directs the ULBs
such loans remained high unavailability of public to ensure that individual
(Figure 9). subsidy upfront resulted houses under BLC have
in many approved but adequate provision for basic
The urban poor, often uninitiated houses, owing not civic infrastructure such as
employed in the informal only to the unavailability of water, sanitation, sewerage,
sector, do not possess funds but also to the limited road, electricity, etc. Further,
documented income proofs faith in receiving the public all houses built or expanded
and therefore remain unable subsidy after the demolition under the Mission shall have
to borrow from formal of the existing house. This a toilet facility. Accordingly,
financial institutions, which has emerged as one of the the programme guideline
perceive the urban poor critical impediments in BLC defines an EWS house as
as a high-risk, unbankable house construction. States ‘an all-weather single unit
segment. Interestingly, the like Kerala have gone around or a unit in a multi-storeyed
poorer BLC beneficiaries this provision by releasing superstructure having carpet
reported a higher dependence the state share of the subsidy area of up to 30 sq. m. with
on informal borrowing than immediately after signing the adequate basic civic services
their better-off counterparts. agreement between the ULB and infrastructure services

April 2022 Volume 23 No. 1 - SHELTER 57