Socio-Economic Determinants of Incremental Housing: An Account of a Few Cases in the Peripheries of Ahmedabad, India.

Socio-Economic Determinants of Incremental Housing: An Account of a Few Cases in the Peripheries of Ahmedabad, India.

March 27, 2021

- By Rohit Lahoti

Guest Writer

Rohit Lahoti is an urban development practitioner working on issues of housing and urban planning in India. He holds a postgraduate degree in Urban Development Planning from University College London.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Indian Housing Federation (IHF).

Introduction 

Incremental owner-driven construction is a prominent channel for investing in the supply for housing that is affordable to low-income households at the bottom of the pyramid. As an estimate based on current trends, over half the required supply for low-income housing in India is likely to emerge from incremental owner-driven construction, considering that most housing in rural India is also owner-driven. Within this mode of construction, there is no standard rule or a guidebook that determines methods and principles of incremental construction. The steady efforts of the owner and owner’s family along with a range of socio-economic dynamics determine the process and the output of construction. Incremental housing enables a gradual process whereby the house is built, improved, or extended by owners as and when access to finance, time and materials is available.      

This article reflects and delves deeper into the aspects of incremental housing and the governing socio-economic factors. The article is based on field experiences with some low-income households in the periphery of Ahmedabad city, within the Ahmedabad District; mainly in:   

1. The villages of Soyla and Modasar in Sanand Tehsil, and 

2. The villages of Viramgam and Bhojva in Viramgam Tehsil.        

Case Studies of Incremental Construction     

The following three case studies showcase how different households navigate the various stages of incremental self-built housing.

a.   Soyla Village, Sanand Tehsil

Figure 1: A house in Soyla Village

Photo Courtesy: Author

Family members		Two adults and three minor (The family comprises parents and three children)
Occupation		Father works at a mill in Ahmedabad and earns approximately Rs 10,000 per month.  Mother does odd jobs at the nearby farms on a daily basis and gets paid around Rs 250 per day. She also manages the local anganwadi (rural childcare centre).
Journey of incremental housing		Both of them decided to get the house (Figure 1) constructed a year ago. They built this house incrementally as their financial capacity gradually improved.  Presently the last patch of the house, which comprises a room on the first floor, remains to be constructed. They have paid a lumpsum amount to the contractor, who gets his own labourers and gets the work done within a promised period of time.
Challenges in building incremental-ly		The limitations in possessing appropriate property-related documents, prevent the couple from securing a bank loan. The property tax receipts, and electricity bills do not suffice as adequate documentation to get a formal credit sanctioned. Thus, they have borrowed the money from local moneylenders and their relatives, to meet the financial requirements for construction work.
Cost of Construction		Following is an overall account of the costs incurred on basic materials: Rs 360 per cement bag. They needed 600 bags,       Rs 7,000 for a dumper of sand, mainly used for building the house except the roof,  Rs 16,500 for a dumper of good quality sand, mainly used for the roof to prevent water leakage. This was procured from Limdi, a town which is 100 kms away from the village, and  Rs 5 per brick.  Overall, they have spent Rs 3 lakhs on the labour and Rs 7 lakhs on the materials.

b.   Soyla Village, Sanand Tehsil

Figure 2: A house in Solya, Sanand

Photo Courtesy: Author

Figure 3: A storage room in the same house 

Photo Courtesy: Author

Family members		Six adults and two minor.  (This family comprises two brothers, their wives, children, and grand-parents.)
Occupation		One of the brothers works as a contractor.  The other brother works at his own farm.
Residential Status		Their house is considerably bigger than other houses in the vicinity. Their house is partially complete (Figure 2) and comprises common area, kitchen, toilets and five rooms.  Two of these rooms are for two brothers and their respective families while the other rooms are primarily for the storage of the farm produce.
Journey of incremental housing		One of the rooms in the house was filled with good quality sand (as shown in Figure 3). They plan to use it in future.  To finance the construction of the house, they had secured a loan of Rs 4 lakhs against the car which is owned by one of the brothers. Rest of the money was arranged through their savings. Once they pay off the loan EMIs, they plan to build the last part of the house.
Challenges in building incrementally		This area falls under the municipality limits and they have the earlier Gram Panchayat notified document. However, the overall 7/12 document (an extract that gives details of a plot, from the land records register maintained by the revenue department) of this site still has its demarcation as ‘agricultural’.  One of the brothers conveyed that getting a ‘non-agricultural’ permission is not possible and considering this complication, the property value for their land is very low. As per the local standards, the value is Rs 50,000 for a plot size of more than 600 sq ft.  Moreover, the banks do not approve loans since the collateral is of high risk considering the low value of land which is not attractive enough for the lender. In fact, despite spending considerable amounts in building the house, selling their property informally can fetch them only around 3-4 lakhs.
Cost of Construction		The materials for the construction of this house were bought from nearby locations as per the standard rates (mentioned in Case 1.a.).

2.   Modasar Village, Sanand Tehsil

Figure 4: A house in Modasar village

Photo Courtesy: Author

 Figure 5: Interiors clad with tiles

Photo Courtesy: Author

Family members		Five adults and two minor  (This house in Modasar comprises two brothers, their respective families, and their grand-mother.)
Occupation		The main livelihood of the two brothers is milking their cattle and selling the raw milk.
Residential Status		They earlier lived in a kutcha house which had a recurrent problem of water leakage. Later, they decided to get a pucca house constructed.  They got the materials from nearby areas. One of the interesting aspects of this house was that the interior walls were clad with tiles from the Morbi area of Gujarat (shown in Figure 5). The tiles seemed to be of a robust quality and sourcing it directly proved to be  economical. The primary reason for using tiles is that they are easy-to-clean, and they prevent water leakage and recurring painting expenses.
Journey of incremental housing		The brothers outsourced the main construction work to a local contractor by paying him a fixed wholesale amount (locally known as uchak). Within this amount, the contractor shall manage the labour work and ensure timely completion.
Challenges in building incrementally		Presently they have halted the construction and will complete the last patch once their financial capacity improves.

3.a.    Viramgam Village, Viramgam Tehsil

Figure 6: A house in Viramgam village 

Photo Courtesy: Author

Family members		Two adults and two minor (This family comprises parents and their two daughters.)
Occupation		The woman does home-based work of different kinds.  The husband is a rickshaw driver.
Residential Status		This house (Figure 6) was built under the Beneficiary-Led Construction/Enhancement (BLC) component of the Pradhan Mantri Awas Yojana - Urban (PMAY-U) scheme where the beneficiary household was approved of the subsidy of Rs 3.5 lakhs.  They are presently waiting for the disbursement of the last instalment of Rs 1.5 lakhs.
Journey of incremental housing		They secured a loan of Rs 1 lakh from Bandhan Bank and Rs 50,000 from the Saath Cooperative.  Formal property documents were not required to service these loans; basic identification through Aadhaar card and passbook sufficed. When asked how they procured such a loan despite not possessing a salaried income, the woman shared how they first took a loan of a smaller amount and ensured its timely repayment without default.  The lender could then trust them enough to sanction them a bigger amount. The beneficiary family outsourced the construction work to a local contractor who also procured the materials while the last patch of the house remains to be completed.
Cost of Construction		The total construction cost is approximately Rs 8 lakhs, inclusive of material and labour cost. Apart from the PMAY-U subsidy, they required additional financial support to meet the construction cost.

3.b.    Viramgam Village, Viramgam Tehsil

Figure 7: A house in Viramagama village

Photo Courtesy: Author

Family members		Two adults This house (Figure 7) belongs to a divorced Muslim woman who has been living here with her mother.
Occupation		She earlier worked at a private hospital.
Residential Status		The house is currently constructed up to the lintel level. It is a PMAY-U BLC house.
Journey of incremental housing		Being a PMAY-U beneficiary, she is guaranteed a subsidy of Rs 3.5 lakhs and is waiting for her second disbursement.  She bought the building materials from the supplier on credit.
Challenges in building incrementally		When asked to the local supervisor (who works under the contractor), he conveyed that a house of this size (1 BHK with toilet) can be fully constructed for Rs 4-4.5 lakhs along with the material.  She shared her frustration of not being able to procure a housing loan. Except the local NGO cooperative, none of the banks or housing finance companies were willing to lend her because she was a single woman without a regular job.  She further shared that she used to work in a private hospital and was confident of repaying the loan amount if approved, until the Covid-19 pandemic posed several inconveniences.

4.a.    Bhojva Village, Viramgam Tehsil

Figure 8: A house in Bhojva village

Photo Courtesy: Author

Family members		This house (Figure 8) comprises a small family
Residential Status		The house is G+1 with terrace.  The owner said that the contractor was his brother-in-law and they decided to invest and get the house constructed at one go.
Cost of Construction		The owner invested around Rs 13 lakhs in the house. The material cost was around Rs 3 lakhs for which he took a loan and had to pay an interest of around Rs 40,000. The rest was labour cost, and the furniture investment was approximately Rs 2 lakhs.

4.b.    Bhojva Village, Viramgam Tehsil

Figure 9: A house in Bhojva village

Photo Courtesy: Author

Residential Status		The family living in this house (Figure 9) is covered under the BLC component of PMAY-U.
Journey of incremental housing		They have an assured subsidy of Rs 3.5 lakhs and are awaiting the last disbursement for the last  6 months.
Challenges in building incrementally		They faced challenges in utilising the subsidy and dealing with a corrupt contractor. The family shared that the contractor, along with a local politician, demanded money from the PMAY-U subsidy to restart the work.
Cost of Construction		They also took a loan of Rs 50,000 each from the Saath Cooperative and Bandhan Bank. Due to a long wait for the release of the last disbursement of the PMAY-U subsidy, the family had to buy the material from their loan, on which they ended up paying a lot of interest.

Inferences from the Case Studies     

Some of the learnings from the above cases include the following. 

1. Incrementality offers flexibility and prioritisation

Families choose to build their houses incrementally because that gives them flexibility, both need-based and financial. They prefer to prioritise their immediate requirements, and also foresee the future to invest strategically. For instance, in some of the cases, people chose to hold-up the last part of the house construction for varied reasons and planned to complete it sometime in future.  

2. Responsibility entrusted to contractor 

Households can choose to go by the route of appointing a contractor for their house construction or can take the non-contractor route. In the cases above, it was interesting to see how families chose to appoint a contractor by paying a lumpsum amount, as agreed upon, and ensuring that the work is completed within a promised time. 

3. Borrowing through informal channels

The innovative ways of procuring finances for getting the house constructed were evident in multiple cases. Often when the banks do not approve loan applications, households try to avail subsidies through schemes like PMAY-U, borrow from NGO-based cooperatives, or approach local moneylenders and relatives.

4. Housing closer to the workplace

Sanand is an industrial area which creates immense work opportunities for households living there and in the nearby villages. This is one of the main reasons why many of them do not travel to Ahmedabad for work since they have their livelihood closer to their homes. However, people who choose to travel to Ahmedabad are mainly the ones who have better educational qualifications and seek better work opportunities in IT or call centres in the city. It is also a matter of pride for some of them to say that they work in Ahmedabad, even if they might not have high-income levels.

5. Socio-economic status determines housing

The caste dynamics are very strong in rural Gujarat. Depending on what rungs of caste hierarchy people belong to, it can determine the construction quality and the typology of their house. At the same time, the kind of livelihoods the households are engaged in and how they would eventually upskill their children is also heavily determined by caste politics. 

6. Limited focus on the rate of interest on loans

One of the common and evident traits across different families was that they were hesitant to discuss the rate of interest levied on their loans. They preferred to avoid counting the extra cost they were incurring but rather get the payment cycle started without overthinking. 

Conclusion

Incremental housing among the economically weaker section (EWS) households has significant potential in mitigating housing poverty by providing flexibility to construct and enhance the houses, when the resource capacity improves. It is an essential part of the housing market and enables one to create affordable and adequate housing in innovative ways. Beyond contextual practices deployed by a household, the interventions of material supply, use of specific materials, technology, social support, financial accessibility, and management also influence the methods of developing incrementality in housing.