Seeks to enhance access to sustainable housing finance for low income households, to enable them to purchase, build or upgrade their dwellings. To reach the low-income households for whom the project is intended, primary lending agencies (PLIs) will need to reach households with informal incomes and/ or informal tenure. These households are significantly underserved categories of potential borrowers. This study identified types of informal settlements and examined their legal characteristics of land tenure and planning status. The objective of the legal analysis was to deepen broad-brush characterization of these settlements as illegal or no-go areas for PLIs. The study seeks also to support assessment of what types of the type of lending may be appropriate in these settlements. Broadly, the study looked at three types of settlements: unauthorized colonies, urbanized villages and slums.

These terms have been elaborated in section three of the report, followed by the classification of informal settlements into a lending typology. Sections five, six and seven provide the background study of state laws and frameworks which forms the basis for the typology. As legal frameworks applicable to land and planning are largely state-specific, and in some cases city specific, three case study states (Andhra Pradesh, Madhya Pradesh and Orissa) were selected for study. In these states, for interviews with local officials and in order to understand local administrative practice relating to informal settlements, the cities of Vishakapatnam, Gwalior and Cuttack were selected for study. There were sharp differences between states in the nature of tenure in slums. Slum households that have tenure regularization (allotment of patta) in Andhra Pradesh and Orissa have clear private property rights, while Madhya Pradesh slum households that have been granted patta have only temporary rights which can be modified by administrative decision.

In Madhya Pradesh and Andhra Pradesh, slum households with no tenure or temporary rights might perceive a higher level of security than is borne out by their legal status. This sense of security is backed by administrative practices in relation to the settlement that provide official recognition and services infrastructure to the settlement. Households with temporary or insufficient tenure may be listed in property tax registers, have house connections for water supply and electricity, and may even (in Andhra Pradesh) be given state housing finance or housing subsidies. In most cases however, this sense of security did not really mean there was any certainty that temporary tenures would be regularized in situ, except in some cases in Andhra Pradesh where households with provisional pattas obtain mortgageable “possession certificates” by which they climb a significant step in the tenure ladder.