With the novel objective of making Tamil Nadu the first ‘hut free State’ in the country by 2016, the state government launched a rural housing scheme called “Kalaignar Veedu Vazhangum Thittam” (KVVT) for rural areas with the objective of replacing all thatched houses in villages with robust all-weather houses over a 6-year period. The KVVT scheme comprises a grant of Rs. 75000 per house, which includes both cash and material components. Both cash and material grants are made in 4 tranches.
Only one problem!
Each tranche is disbursed upon the completion of a ‘stage’ of construction (such as upon the completion of the basement, or walls, etc), and clients have found it difficult to raise the finance required for the completion of each stage upfront.
To plug this gap, IFMR Rural Finance has devised a Housing Finance loan product that is currently being piloted in Alakkudi and Karambayam villages of Thanjavur district. This product serves as both a bridge and additional financing option for people eligible under the KVVT scheme.
The loan amount is in the range of Rs. 12000 to Rs. 25000, with monthly repayments and having a tenor of 3 years. One of the salient features of the product is that the customer can pre-pay or pre-close their loan when they get their tranche from the government for the portion constructed.
Mr. Shanmugavelu Mottaiyapillai of Alakudi, the first housing finance loan customer of Pudhuaaru KGFS who had availed a loan of Rs. 25000.
Amongst the basic pre-requisites for the loan are: 1) The customer should be eligible for the KVVT grant 2) The customer should have a clear title deed/patta for the property.
To our surprise, however, the need for a clear title deed wasn’t as simple as we thought.
Three weeks into the pilot we found that a majority of the residents of the two villages didn’t have proper title deeds/patta for their property, thus making it difficult for them to avail the loan. Taking this into consideration we had to make changes to our product eligibility requirements to suit some of the different scenarios as below:
• Land title in the name of client and few other people (siblings generally)
• Client’s land title in the name of deceased parent
• Client’s land title in spouse’s name but spouse is not available (out of country, state)
In special cases, where the government allots property to individuals, but passes on a certificate of ownership but not the title deed, we encourage such cases to avail a customised JLG Housing Finance loan than the regular one. This product has monthly repayments and a tenor of 18 months.
So far, out of 55 individuals in Karambayam and 26 individuals in Alakkudi who are eligible under the KVVT scheme norms, 9 in total have availed of our product. Working in close coordination with the local gram panchayat, the team intends to expand the pilot to other villages and adopt the learnings to refine the product. Watch this space for more updates on the progress.