Home / Politics / Policy /  Rural India trades up on its housing

New Delhi: Rural India traded up on housing needs in the first decade of the new millennium, reveals new data released by the government.

A report on household capital expenditure based on the 70th round of the National Sample Survey reveals a sharp increase in the percentage of households incurring fixed capital expenditure, particularly in rural areas, in the 10 years ended 2012-13.

Fixed capital expenditure includes all expenditure on land development work, on fixed assets used in farm and non-farm business and on residential plots and buildings.

However, it excludes any expenditure incurred on purchase of land.

The decade ending 2012-13 was the period rural incomes, buoyed by peaking international commodity prices and global growth, were on the increase. Most of this period overlaps with the 10-year rule of the Congress-led United Progressive Alliance, which provided an additional boost through its marquee rural employment guarantee scheme.

Economists said the increase in rural incomes was channelled into improving living standards, especially the need for a pucca house.

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“Rural incomes have increased drastically in the 10-year period both for the rich and the poor. Both the low- and high-income categories have invested heavily on the construction of buildings and conversion of their kutcha houses to pucca houses. Availability of land is not a problem in the rural areas and hence expenditure incurred on purchase of land has not seen any increase," said Himanshu, an assistant professor at the Jawaharlal Nehru University and a Mint columnist.

The NSS data showed that the share of expenditure in residential plots and construction (including purchase) in average expenditure incurred by both urban and rural households was more than 50%.

To be sure, the percentage of households that incurred expenditure on normal repairs and maintenance in 2012-13 remained high both in rural and urban areas. The number of rural households incurring expenses towards normal repairs and maintenance was almost double those incurring fixed capital expenditure.

Repairs and maintenance include expenditure of a recurring nature on fixed assets necessary to keep them in good working order. The replacement of parts of fixed assets is also included.

However, adding a word of caution, Himanshu pointed out that 2002-03 was a drought year and the increase is reported in nominal terms.

Significantly, the trading-up trend held up across all income classes. All income classes in rural areas incurred more expenditure on fixed capital assets compared to that on the purchase of land. In the case of the rural areas, fixed capital expenditure increased steadily as one moved up the income class but such a definite trend was not seen in urban areas.

In rural areas, around 16% of households in the lowest income class (the bottom 10%) and 47% of households in the highest income class (the top 10%) reported fixed capital expenditure.

In urban areas, however, only 2.1% of the lowest income class reported capital expenditure, while it was 21.4% for the highest income class.

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