India is a nation hard to ignore, both in the context of Asia, or even the rest of the globe, because of the significant strides it has taken towards development. It is also true that India lives in its villages.

Rural India might not be as under-developed as it was even a decade back, but the cause of affordable housing in villages continues to remain a tough task. This owes to commercial banks, which provide housing loans to urban India, did not have similar offerings for village residents, mostly due to their cautious approach towards risk.

In such a scenario, MFIs like VFS have a major role to play in coming forward to provide loans for low-cost and affordable housing. While various schemes offered by the central and the state governments provide succour to a large number of village residents, the widespread network of MFIs are well-fitted to service the rural housing sector. With the National Sample Survey organisation estimating that around 64 percent of rural houses are semi-pucca (semi-finished) or kutcha (primitive), MFIs can come forward to provide such housing loans, which typically vary between Rs 1.5 lakh to Rs 2 lakh.

Microfinance housing loans will also provide a boost to the government’s impetus on better hygiene and sanitation, since while building pucca houses, village residents will focus on building toilets inside the house. MFI housing loans may also be provided in a modular manner, instead of one single loan as offered to urban customers, making the EMIs smaller and shortening the payment period, so that such loans easier to access and the burden of repayment is lessened at the same time.

MFIs providing such small housing loans open up a situation that is win-win because such loans will provide millions of rural Indians an opportunity to have a pucca house and, in the process, help MFIs work around a market, which the NSSO estimates is worth around Rs 6,400 crore. Since MFIs typically serve customers who are not salaried and come from a smaller income bracket, in other words, those not served by commercial banks, microfinance housing loans could help the government change the way people look at housing loans. Interestingly, unlike urban customers, since borrowers in villagers are psychologically averse towards long-term loans, MFI housing loans will change the rural landscape.