Helping the urban poor

Greater Kashmir

Rajiv Rinn Yojna is suitable scheme for flood affected economically weaker section

Appropriate relief and rehabilitation packages in J&K for flood affected people demand serious focus, as a significant section of the urban poor here has been rendered shelterless.

We have a huge segment of urban poor, constituting economically weaker sections and low income group categories of population, who live with many deprivations. Today, our urban poor face multiple challenges and these challenges have grown manifold when flood has rendered them either houseless or with inappropriate shelter. Prior to floods also, problems like lack of housing facility or inadequate and insecure housing have always remained a companion of our urban poor. This has made this segment vulnerable to so many risks.

Generally speaking, housing need of this segment has always escaped attention of banks and financial institutions. Even as government of India attempted to address this problem by launching an innovative scheme of Interest Subsidy for Housing the Urban Poor (ISHUP) in 2008 under `affordable housing for all’ flagship programme, the programme proved a failure. In September 2013, the scheme was closed, but re-introduced in a modified form as Rajiv Rinn Yojna.

Under Rajiv Rinn Yojna (RRY) loans are given to economically weaker sections and low income groups in urban locations for purchase or construction, and even for repairs and renovation of houses.

Those urban poor who do not own a house in his/her name or in the name of his/her spouse or any dependent child can also take benefit of the scheme. Such beneficiaries who own land in any urban area but do not have any pucca house in their name or in the name of their spouse or any dependent child are also covered under the Scheme. Notably, it carries a provision for toilet wherever new construction of house is contemplated.

The scheme envisages provision of interest subsidy to the borrower. Any economically weak person having an average annual income up to Rs. 1,00,000/- or anyone belonging to low income group having an average annual income between Rs.1,00,001/- up to Rs.2,00,000/- can take route of this scheme to obtain housing loan. The quantum of loan ranges from Rs. 5 to 8 lakhs, with interest subsidy granted for loans up to Rs. 5 lakhs. Additional loans, if needed would be at unsubsidized rates.

Loan repayment period is of long duration ranging from 15 to 20 years. As far as security is concerned, the mortgage of the dwelling unit is accepted as primary security. However there would be no collateral security/ third party guarantee for loans up to and inclusive of Rs.5 lakh. These loans are also covered under credit guarantee fund scheme.

But it’s unfortunate that the scheme, despite under its new nomenclature and improved features, has failed to deliver. Firstly, urban poor have not been apprised about the scheme. Secondly, the scale of finance is not matching the current needs.

Besides, we have seen that most house financing initiatives carried out by governments and banks often end up benefiting the high/middle income segment. Administrative procedures, terms and conditions set up by the government and banking institutions exclude the poor due to their low affordability levels. As the poor cannot meet the set stringent conditions; there is need to relax norms of availing the housing loan so that the scheme becomes viable, compatible and affordable for the urban poor.

We have to understand that any attempt to improve housing quality goes concurrently with improvement of income level and with economic development. The extensive implementation of this scheme will not only benefit the poor, but will also provide an impetus to the economy by its tremendous multiplier effect—in terms of providing boost to other industries and generating employment. In fact, it would go a long way in mitigating the housing shortage for poorer strata of our society in urban areas.

Meanwhile, the banks operating in J&K have been showing very conservative approach to propagate the scheme, despite huge potential to market the scheme. The banks were given a target of Rs.87.55 Crore for 2010 beneficiaries for the current financial year ending March 2015. By the end of half year ended September 2014, the banks have disbursed just Rs. 97 lakhs to 51 beneficiaries. This is achievement of just 1% of financial targets and 3% of physical targets.

The kind of catastrophic situation which compounded the housing problems of our urban poor makes a sense for the banking fraternity here to show proactive approach in extending the benefits of Rajiv Rinn Yojna to them. There is need to launch joint awareness programmes about the scheme by banks and the government. It would be a major shot in the arm of relief and rehabilitation of poor.

(The views are of the author & not the institution he works for)