The RBI's move that prompted banks to lower lending rates is not only beneficial for the borrowers residing in the urban places but also for the people living in rural India. The micro finance institutions (MFIs) have come forward to help the poor by introducing home loan products.

The MFIs are launching home loans because majority of the people in the villages own plots in which they construct a low-cost model house with indigenous materials. It is the low cost model that is inducing MFIs to start home loans, says Chairman of Madura Micro Finance, Tara Thiagarajan.

The home loans designed for rural India are almost same as the home loan products for the urban individuals. The only difference is the average loan amount. MFIs are disbursing home loans in the range of Rs 50,000 and Rs 2 lakh. The repayment for the loan is allowed through the equated monthly instalments (EMIs). In fact some MFIs like Madura Micro Finance are also providing a payment holiday of four months for the construction purpose.

The main purpose of extending rural home loans is to enable credit for home improvements and extension like converting the thatched roof into a tiled one, adding washrooms and rooms for better living.

However these MFIs are going be cautious in their lending and will only extend to the individuals with a good credit history.

Meanwhile there are more MFIs such as SKS Microfinance Grama Vidiyal that are going to launch their home loan products in the upcoming fiscal. "We are still finalizing the interest rates," says Suresh Gurumani, CEO and Managing Director of SKS Microfinance.

The key area of focus for these MFIs would be loan disbursement for improvement of the home and creating additional space.