The demand for basic needs has outpaced supply in many cities of the world. This fact is observed in the urban housing sector. High economic growth along with urbanisation has created a huge demand for housing, and according to recent estimates, there is a massive shortage of dwelling units in many urban areas of the world.
The demand for basic needs has outpaced supply in many cities of the world. This fact is observed in the urban housing sector. High economic growth along with urbanisation has created a huge demand for housing, and according to recent estimates, there is a massive shortage of dwelling units in many urban areas of the world.
A high proportion of persons belonging to the economically weaker sections (EWS) and lower income groups (LIG) are adversely affected by the housing shortage, as well as infrastructure deficiencies prevailing in the housing sector. Due to high land values and rental rates, and costly housing, such persons are left with no option but to reside in self-arranged shelter in the form of slums and poorly built unsafe structures situated in unauthorised and unsafe areas.
In India, there are five cities (with population of more than one million) where the proportion of slum households is more than 40 %, and there is no security of tenure or guaranteed access to basic needs such as drinking water, sanitation, drainage, electricity, roads, education, health care, and public transport! Similarly, in China, despite explosion of new housing over the past decade, an estimated one-third of China’s 225 million urban households live without kitchens and plumbing.
The poor quality of life and living conditions in cities is, thus, a reflection of challenges before the government in responding to the basic needs of city inhabitants.
In view of the multifaceted deficiencies in the urban housing sector, the Observer Research Foundation (ORF) and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) jointly organised the Third Urban Workshop on ’Affordable and Liveable Housing for the Migrants and Urban Poor’ on 25 July 2013 at the Observer Research Foundation.
The third workshop is part of a series being organised by ORF and GIZ in 2013 on important urban development topics. The initiative’s objective is to facilitate interaction among key national and international stakeholders in urban development, and produce new knowledge for addressing the challenges of urbanisation in India and other emerging economies.
The objective of the third workshop was to: (a) deliberate on urban housing issues and constraints to improving urban citizen’s/migrant’s access to affordable and liveable housing; (b) evaluate the performance of existing housing policies and programmes; and (c) describe best practices in housing.
In this workshop, Dr. P.S.N. Rao, Professor of Housing at the School of Planning and Architecture, New Delhi, delivered the keynote address, which was followed by three presentations. Distinguished speakers included Dr. P. Jayapal, Executive Director at Housing and Urban Development Corporation (HUDCO) Limited; Mr. Swarnpal Singh Bais, Business Head at Aadhar Housing Finance Pvt. Ltd., Mumbai; and Dr. Lan Wang, Associate Professor at College of Architecture and Urban Planning, Tongji University, Shanghai. Thereafter, the floor was opened for discussion on presentations and the workshop theme. Towards the end, concluding remarks were given by Ms. Regina Dube, Head, GIZ Sustainable Urban Habitat Programme.
Dr. P.S.N. Rao described numerous issues and concerns relating to affordable housing. Some of the points emerging from his keynote address are summarised below:
• The market is catering to the people who can afford to pay. Market supply, therefore, toes the line of affordability, and in this situation the low income groups (LIG) have few or no housing options, and they squat on whatever land is available.
• Today most of the public housing authorities are moving towards PPP, encouraging real estate developers. They are ultimately providing high income housing.
• In many cases, the government is coming forward to give land to developers so that they can develop huge townships, unfortunately with very little or meagre reservation for the LIG. State policy is itself encouraging more of high priced housing rather than low income housing.
• Funds are drying up and the government is thinking how do we bring in more funds, how do we tap the insurance market, how do we tap the pension funds, etc. so that fund flow in the system increases and that in turn brings about some amount of reduction in the interest rates.
• Virtually, housing has been given almost free in various parts of the country but people have not actually moved in. The houses are lying unoccupied because they are located far away and there is no public transportation to bring people daily to their place of work.
• After acquiring land for public purpose, the land is actually being auctioned to the private real estate developers whose interests lie in making profit. The price of house increases by three or four times. Therefore, you have 100s of acres of high-end housing and there is nothing provided for the LIG.
• Pooling and readjustment has been a tried and tested method that again gets embroiled in a large number of legal complications. But the experience from Gujarat and Chhattisgarh has shown that you can bring in more land from the farmers into the urban development system. Also, give them back developed land so that they feel that they are not uprooted from their places of living, and they get a fair deal in this process.
• There are examples of innovations. In Visakhapatnam, the Development Authority acquired land from farmers and gave them developed plots through land pooling. In Rajasthan, stamp duties were reduced on registration of low income housing to as low as 100 per cent. In Pune, farmers came together and they themselves pooled their land and operated as a developer to implement the entire project.
• There are some basic imperatives that are required. The basic land laws are required to be in place. There are serious issues related to land records, titling and guarantee system. The offices of the registrars of land needs modernisation, computerisation. India has also not modernised its land valuation regime.
Dr. P. Jayapal spoke on ’HUDCO’s Contribution to Affordable Housing’. The following points were covered by him in his presentation:
• So far, HUDCO has sanctioned 16,537 projects, 26 billion USD of loans, and loan releases are about 15 billion USD. The sanction and release ratio has been fairly good. About 15.47 million dwelling units (9.22 million rural and 6.25 million urban) have been supported. In about 1800 towns, many projects have been supported by HUDCO. Of the total 15.47 million houses supported by HUDCO, almost 95 % has gone for EWS and LIG.
• In HUDCO’s entire operations, money is given based on affordability and repayment capacity, and all funds for the weaker sections are given at a substantially lower interest rate of 8 per cent.
• It is not just lending that HUDCO does. As a techno-financing institution, HUDCO goes one step beyond. In most cases when HUDCO helps EWS in designing a complex, it sees housing as an income generating opportunity, not simply a shelter.
• In their lending operations, HUDCO does not charge any application fee from EWS and LIG. Similarly no front-end-fee is charged. HUDCO gives up to 90 % of the cost of the unit as loan to the poor.
• HUDCO focuses on technology that provides for use of cost effective building materials.
The second presentation on ’Home Loans for the Low Income Segment’ was given by Mr. Swarnpal Singh Bais. He described the work being done by Aadhar Housing Finance Pvt. Ltd. for the LIG in various parts of India. The topics covered by him are briefly described below:
• Aadhar has chosen the backward States of India, namely UP, MP, Bihar, Jharkhand, Chhattisgarh, Orissa and West Bengal. The presence is through 24 branches covering more than 100 locations. Aadhar operates in around 89 districts in 7 states.
• Aadhar focuses only on funding for low and middle income segment. It does not fund people who want loans of more than 12,00,000 and people who are earning more than Rs. 30,000 per month. The income of Aadhar customers ranges between USD 90 and 450 per month, which is about Rs. 5,000 per month and up to Rs. 30,000 per month.
• Aadhar’s customers’ earnings are from salary or small business - shopkeepers, tailors, matron in hospital, contractual staff in bank, tool room technician in private company, medical representative in Pharma Company, peon in government school, etc. They are low income self earning or salaried individuals to whom loans are given for self construction of a house on a piece of land that they already own; or for incremental housing for reconstruction since the family needs become larger with time.
• Customers working in informal sector usually have no banking habits, insurance coverage, family savings or history of loan. These are challenges for a finance company in terms of how to assess their income or paying capacity, whether they have an intention to pay, do they have the capability to build up the particular house, do they have savings to build a house. Due to these reasons, many housing finance companies do not support such customers.
• But in the case of Aadhar, the loan officers/credit assessment officers personally meet potential customers to examine their loan repayment capability, and then guide them in house construction, guide them to local architects who help in the making of drawings at subsidised rates. Aadhar also does a full legal check of property so that no demolition takes place after the unit is built. This approach distinguishes Aadhar from a normal housing company.
• Aadhar follows an inclusive approach. It builds immense financial, savings and repayment awareness among its customers. As a result, in the last two and a half years, Aadhar has been able to build a strong customer base of 5,300 families or 25,000 individuals; 80 % of Aadhar’s customers earn below USD 550 per month; 26 % customers are self employed; 40 % customers pay their instalments electronically.
The final workshop presentation on ’Social Housing Development for Urban Poor in Shanghai’ was given by Dr. Lan Wang. Her impressions are summarised below:
• Half of China’s population is now living in urban areas. Thus, accommodating migrants and urban poor in cities has become a big challenge for the government.
• A number of institutional adjustments related to social housing development were made since 1979, when the country underwent economic reforms and followed an open door policy. Specifically In 1987, a nationally-owned land use reform was carried out when the first land use right transfer contract was signed in Shenzhen. After 1994, it was declared that the working unit will not provide houses to workers, and gradually housing markets were established for housing provision.
• From 1978 to 1985, when China had market economy initiation, 100 % of land for development was designated by government to working units. This meant that the government would provide land to working units for free. After 1986, China started market-oriented development as per which 95 % of land for development was designated by government, and 5 % land was rented to developers. Land renting peaked around the year 1993. Between 1991 and 1994, 20 % of land for development was provided by government and 80 % by the developer. During 1995-2000, China slowed down land renting. After 2000, land renting was expanded from central city to sub-urban areas of Shanghai, and more social housing was provided by the government.
• From 1987 to 1998 the local government in Shanghai started massive housing construction for urban poor. It also started housing accumulation funding to support workers who tried to purchase a house. From 1999 to 2002, low rent housing and designated market housing were provided. Since 2003, there has been provision of affordable housing and large scale community of social housing.
• A case study of four communities in Gucun Community of Social Housing on five aspects, namely commercial, culture, education, health and transport facilities has brought to light a number of problems, such as: location of large-scale communities of social housing has been in urban peripheries; facilities in plan have not been implemented on time; serve areas of existing facilities have not covered the entire community; community commercial centers are not accessible enough for urban poor due to transportation issues; lack of facilities for senior citizens; there is large scale concentration of urban poor; no consideration of floating workers.
The workshop ended with concluding remarks by Ms. Regina Dube, who emphasised that the numerous barriers in the urban housing sector need to be urgently addressed and that too in a comprehensive manner. She raised concern over the present state of urban governance, and called for better city planning and greater transparency.
(This report is prepared by Dr. Rumi Aijaz, Senior Fellow, Observer Research Foundation, Delhi)
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