CHENNAI: With the lending rates falling, it’s not just the urban home buyers who are benefiting. Micro finance institutions (MFIs) are now rolling out home loan products to the poor in rural India. And they are finding takers too. For their part, MFIs are lending to those having a good repayment track record.
Most people in villages own plots and they construct the house on a low-cost model with indigenous materials, says Tara Thiagarajan, chairman of Madura Micro Finance. This low-cost construction model is what is prompting MFIs to dole out home loans.
SKS Microfinance is planning to launch a home loan product next fiscal. It would start as a pilot in rural Andhra Pradesh. “We are still finalising the interest rates,” says Suresh Gurumani, CEO and managing director of SKS Microfinance.
The rural home loan products are structured pretty much the same way as in the cities. The difference being the average loan amount. For MFIs, it ranges between Rs 50,000 and Rs 2 lakh with repayments being in equated monthly instalments (EMIs). Some like Madura Micro Finance also provide a payment holiday of four months for construction.
The real action on the rural home front is loans for home improvements and extension – converting the thatched roof into a tiled one, adding bathrooms or other additional rooms.
SKS and Grama Vidiyal, which is also planning to launch a home loan product soon, are concentrating on the home improvement and addition space.