Tata Housing - Who'll finance 'affordable' housing in India?

Tata Housing - Who'll finance 'affordable' housing in India?

Brotin Banerjee is happy. He has been able to sell a fourth of the 1,500 apartments of his affordable housing project in Boisar, about 100 km from Mumbai, to people who he describes as belonging to the “informal sector”. These are buyers, the managing director of Tata Housing explains, who don’t have a bank account and, therefore, wouldn’t qualify for a bank loan. But thanks to Micro Housing Finance Corporation (MHFC), a microfinance company, they can now hope to own a house.

Tata Housing’s efforts at helping less privileged sections of society are commendable, but after a point it won’t be able to do much for the simple reason that there aren’t going to be enough lenders to give loans to these prospective home buyers. So, the shortage of homes in the “economically weaker segments and low-income groups” — estimated by Ernst and Young at some 26 million by 2012 — could be even bigger. Banks are doing their bit but they are becoming finicky about the paperwork and will only stretch themselves till they are done with the mandatory lending to the priority sector. Beyond that, they will be reluctant to take on the risks and headaches of such small-ticket loans. In any case, they won’t bail out those who can’t come up with the necessary papers.
Microfinance institutions are trying to see whether there’s an opportunity here, but MHFC Director Madhusudhan Menon says it’s not going to be easy to get hold of long-term money. Whatever his organisation has agreed to give so far has come from its equity capital, which is why it is able to lend at between 12 and 14 per cent. But once it runs out of capital, it will need to borrow to stay in business. That’s where the problem arises, because there is hardly any 15- or 20-year money available. Moreover, cost is also an issue; currently, it costs a borrower 10 per cent to borrow from National Housing Bank (NHB), over which he needs a spread of 4 per cent to cover operational costs, credit and interest rate risks. But if NHB raises interest rates, the higher cost would have to be passed on by the microfinance companies to homebuyers. The economically weaker sections need to be given loans at interest rates that they can afford, otherwise the demand for low-cost housing will soon vanish. Typically, for a lift attendant or a driver, the equated monthly instalments (EMIs) can’t be more than the rental that the family is currently paying.
So, while NHB does provide a refinance facility, the problem lies in that interest rates are not fixed but reviewed periodically. Indeed, that’s one reason why no one is touching too much of the NHB money. Former Citibanker Jerry Rao, who’s working on some affordable housing projects himself, says the lack of “affordable” long-term money is a big hurdle and that right now what most microfinance companies have with them is only three- or four-year money which comes at a cost of 15-17 per cent. So there’s no way they can lend for mortgages. Even if they are willing, the rate will be some 18-19 per cent, which, while it may be way cheaper than what a moneylender would ask for, doesn’t really help the cause.
Clearly, the solution lies in the development of a long-term debt market. Also, like it is done overseas, pension funds that typically have resources which they can invest for long periods, should be allowed to lend for mortgages. Or there could be mortgage guarantee funds in which investors pool together their resources to lend to mortgage companies. Money apart, the government also needs to step in on other matters, like in China. As Ernst and Young points out, under the “Jingji Shiyong Fang” policy, 20 million housing units were sold in five years.
How was that possible? Well, the government helped out with a one-time equity grant, so as to help people access a mortgage. It also chipped in with some state-owned land at no cost and threw in some tax concessions. And to encourage private developers, it made sure the approvals came in fast. That apart, it also incentivised utilities in the vicinity. If the risks are boxed in, banks too may be willing to step up lending to the economically weaker segments. For their part, developers could make sure they complete projects on time and help with the collection efforts. Again, one can’t build a lending proposition on the basis of future inflation in asset prices, that has to necessarily be built on the basis of cash flows. However, even a small rise in prices would increase the comfort level of lenders.

Affordable housing for the masses - India

Affordable housing for the masses

Director
Red Fort Capital
The new age real estate developer has envisioned a dream — a dream of housing every family in the country. ‘Affordable housing’ is a term that posses the potential to transform this dream, also harboured by millions of households, into reality. Affordable housing includes value housing, which is the need of every middle class family, as well as low income housing, where the most significant need of India lies.
Over a billion people around the world live in appalling conditions. In India alone, about 100 million people live in slums and slum-like conditions without adequate basic facilities. These numbers are expected to touch 200 million by 2020. If the current trend continues, the number of urban dwellers will reach almost 5 billion by 2030. In India, the urban population is expected to reach 576 million in 2030 from the current 328 million. With this rapid urbanisation, one of the biggest challenges will be providing affordable housing to city dwellers, especially the poor.
Aggregating land in the outskirts of congested cities with a view to building mass scale housing for the poor is the need of the hour if India’s cities need to clean their environment and ensure sustainable and inclusive growth. To ensure that we are able to house the economically weak and disadvantaged, we must be able to provide housing at a cost of around five times the per capita income.
With the number of families earning more than Rs 2 lakh annually, set to double to around 20 million in the next two years, demand for small and simple apartments is set to mushroom. Prices will need to become more realistic if developers have to succeed in finding enough buyers. Much of the affordable housing projects will necessarily be built in suburban areas, given the prohibitive cost of land in cities. Land cost needs to be comparatively lower for an affordable housing project. There is also a need to develop innovative ways to reduce construction costs without compromising on the quality of housing.There is also an urgent need to look at the use of newer, energy efficient, environment friendly materials and innovative construction technologies that minimise skilled inputs and deliver faster results at affordable price. These approaches mitigate increasing raw material cost and mainly utilise unskilled labour, drastically reducing dependence on skilled manpower, which is currently in short supply.
Paving the way for such trimming in construction cost is the use of ‘prefabricated materials’, or ‘systems technology’. The use of these practices can bring down construction time by as much as 50%, reduce costs by 10% — 15% and also avoid employment of a large and skilled work force. At the same time, these practices help in delivering a quality end product. Another aspect that should not be neglected is good transportation. Most projects for affordable housing are likely be on the outskirts of cities, so the importance of providing a sound and efficient transportation system cannot be undermined.
There is also a need for the regulatory authorities to review their settlement policy by concentrating on developing main infrastructure, laying down policy, and setting up a regulatory mechanism. Encourage adoption of appropriate technologies and suitable building materials to enable construction of safe, durable, comfortable and sustainable dwellings.
The government should consider tax sops, including cuts in duties and levies for the real estate sector, in a bid to promote affordable housing in the country. Apart from the taxation on land, taxes are also levied on construction and building materials such as steel, cement and plywood. The state also levies octroi, electricity duty and stamp duties on transfer of property. The government should help in bringing down the component of taxes and levies to make housing more affordable.

Keywords - Affordable housing for the masses - India, construction technologies, Red Fort Capital, low cost housing, building materials, environment friendly materials, a dream of housing every family, poor, building mass scale housing for the poor, moladi

Billions for low-cost housing - Thailand

Billions earmarked for low-cost housing - Bangkok Thailand

A Bt3-million fund has been pledged to fund housing projects for low-income earners in a two-year project that runs until next year, Social Development and Human Security Minister Issara Somchai said yesterday.

A request for a Bt1-billion should be tabled and approved at the Cabinet meeting today, said Prime Minister Abhisit Vejjajiva. He was delivering an opening statement at a Bangkok seminar yesterday at the United Nations headquarters. He said Thailand would be part of the UN project aimed at providing low-cost homes for 100 million slum dwellers worldwide by the year 2020.Somchai said another Bt2 billion would be mobilised from the Thai Khemkhaeng fund. The entire Bt3-billion budget will be used to give out as soft loans to people living in 1,000 slums both inside and outside Bangkok. The government has provided such loans to 86,000 families, out of a total of 200,000. Somboon Sing-ging, an advocate for low-cost housing projects, submitted a seven-point proposal to the government, including amendments to forestry and land laws that were against basic constitutional rights, and the setting up of a national fund to give soft loans relating to land purchases.

Keywords: - Bangkok, Thailand, low cost housing, Social Development, government, Somboon Sing-ging, national fund, families, slums

Shoddy houses for the poor

Sexwale takes aim at housing corruption

HUMAN Settlements Minister Tokyo Sexwale is “sharpening his pencil” to root out corrupt contractors and officials who build shoddy houses for the poor.
A National Housing Audit headed by the Special Investigations Unit had been instituted to find the culprits who had caused “chronic” and “massive” problems in housing, he told journalists in Pretoria.
“The audit deals with issues where the law had been broken.”
Sexwale said recent visits to all provinces, where he heard the concerns of those on the receiving end of low cost housing, and of those on waiting lists, had highlighted the need for an audit.
In the Northern and Eastern Cape alone 3000 houses would have to be destroyed as a result of “shoddy” and corrupt workmanship.
“In response to the situation we face, we have decided we need to take a rigorous look at housing delivery, from top to bottom.
“We need to focus on issues we know are specific impediments: fraud, delays, corruption, absentee contractors, ghost houses, shoddy workmanship again and corruption around waiting lists.”
Sexwale said those found guilty would face civil or criminal action.
For those found within the government ranks, suspension with pay was not an option, he said.

Minister Tokyo Sexwale - You have the support of the moladi TEAM!!!

Kenyans need more and quality low cost housing

01 November 2009


Kenyans need more and quality low cost housing

Kenya faces a serious shortage of quality houses for an increasing population that is expected to hit 62 million by 2030. According to the latest Kenya Economic Report, over 60 per cent of this population will be living in urban areas.“Current estimates indicate that the country needs to build up to 150,000 housing units annually... However, only 23 per cent of this demand is being met.”The shortfall, the report adds, is more acute among low-income households whose present demand is about 48 per cent of all new housing required.New houses“Currently, more than 80 per cent of new houses are for high and upper middle-income earners. “However, because more than 60 per cent of the Kenyan population is younger than 25 years, it is clear that the demand for adequate housing will rise steadily as those aged 20 and below reach adulthood and start family life,” the report says.It identifies increasing the volume of funding towards construction of low and middle-income housing as one of the major challenges facing the housing sector. It also advocates reducing the cost of construction, increasing the speed of rolling out housing projects and reviewing the regulations to allow for new and innovative technologies for faster and cheaper housing construction as policy challenges.The priority“In order to ensure that the construction industry delivers physical infrastructure and quality housing in a timely and cost-effective manner, the priority in the sector is to develop and implement a comprehensive construction industry development policy,” Kippra says.The report recommends contracting foreign construction companies, in the short term, but also points out the need for them to collaborate with local contractors to help them build their capacity to undertake large projects in the future.

Kenyans need more and quality low cost housing

Kenyans need more and quality low cost housing


Kenya faces a serious shortage of quality houses for an increasing population that is expected to hit 62 million by 2030. According to the latest Kenya Economic Report, over 60 per cent of this population will be living in urban areas.
“Current estimates indicate that the country needs to build up to 150,000 housing units annually... However, only 23 per cent of this demand is being met.”
The shortfall, the report adds, is more acute among low-income households whose present demand is about 48 per cent of all new housing required.
New houses
“Currently, more than 80 per cent of new houses are for high and upper middle-income earners. “However, because more than 60 per cent of the Kenyan population is younger than 25 years, it is clear that the demand for adequate housing will rise steadily as those aged 20 and below reach adulthood and start family life,” the report says.
It identifies increasing the volume of funding towards construction of low and middle-income housing as one of the major challenges facing the housing sector. It also advocates reducing the cost of construction, increasing the speed of rolling out housing projects and reviewing the regulations to allow for new and innovative technologies for faster and cheaper housing construction as policy challenges.
The priority
“In order to ensure that the construction industry delivers physical infrastructure and quality housing in a timely and cost-effective manner, the priority in the sector is to develop and implement a comprehensive construction industry development policy,” Kippra says.
The report recommends contracting foreign construction companies, in the short term, but also points out the need for them to collaborate with local contractors to help them build their capacity to undertake large projects in the future.

Housing the Urban Poor

Africa : Focus on Housing the Urban Poor

FACT : 62% of sub-Saharan Africa's Urban Population live in Slums.Millions of people move to Africa's cities every year, swelling the numbers of urban poor. "We cannot chase people away from slums," says Kelvin Mmangisa, chief executive of the Lilongwe City Assembly. "But we can improve the conditions there to make their lives better." Mmangisa made this call for investment in affordable housing for the poor in an interview with IPS on Jun. 10 in Nairobi, where he was among 200 delegates at a conference addressing challenges of urbanisation and poverty reduction for slum dwellers in developing nations. The conference was organised jointly by the Africa, Caribbean and Pacific Group of Countries (ACP), European Commission and UN-HABITAT - the United nations human settlement agency. His remark resonated with a key highlight of the Jun. 8-10 meeting - financing the upgrading of informal settlements in order to provide necessary basic services. There are a billion people living in poverty in slums and squatter settlements worldwide; with predictions that about two billion more will be living there by 2025, the question of upgrading housing for the urban poor is an urgent one. "If adequate financial resources are not allocated to the development of better shelter and requisite services, this additional population will be trapped in urban poverty, poor health and sanitation, further compounding the enormous slum challenge prevalent today," said Anna Tibaijuka, U.N. Under-Secretary General and executive director of UN-HABITAT. Sixty-two percent of the population living in sub-Saharan Africa's cities live in slums where basic services are poor or non-existent. Access to safe drinking water is a challenge, and the situation as regards sanitation even more severe. Finding resources to build houses and water and sanitation infrastructure for these billions is a massive challenge. One approach being adopted by several governments involves resources belonging to slum dwellers themselves. One such project is the Moratuwa Slum Upgrading Project in Sri Lanka, a joint initiative by UN-HABITAT and the Sri Lankan government, which seeks to construct new housing units for slum dwellers in the capital Colombo. About 60 percent of the city's 2.3 million population lives in slums, according to UN-HABITAT. The project operates a fund supported by the Women Development Bank Federation, a nationwide network of over 1,000 savings and credit groups operating across Sri Lanka. The government and UN-HABITAT also contribute to the fund, which acts as a guarantor to enable groups of slum dwellers to access credit from financial institutions with which to pay for new homes. A similar initiative in Malawi came into focus for its success in not only in providing the poor, particularly women, with decent housing but also engaging them in other income-generating and poverty reduction activities. The programme, by the Centre for Community Organisation and Development has used community-managed savings and credit schemes to provide loans to women for decent housing. The income-generating projects have helped them in repayment of the loans. "With government and donor support, many poor people have been able to build better houses with facilities like water, toilets and generally good sanitation through the initiative. These houses are in the periphery of the city - Lilongwe - and they do not look like slums. They are well-organised and are now planned settlements," Mmangisa said. The success of the initiative is said to be largely because of its promotion of participation of poor people in seeking to address housing problems. Sustainability of housing projects for the poor has emerged as a key concern, with some blaming governments for failing to prioritise urbanisation. "So many times we have seen in the national and regional development strategy plans that the issue of urbanisation does not feature. We have to do advocacy - to ensure that urbanisation is at the centre of these plans because only through that process, then funding will be allocated for urbanisation issues," Andrew Bradley, assistant Secretary General of the ACP group told the meeting. Burundi is a case in point. With the government allocating only four percent of its budget to housing, it's little wonder Sebastian Ntirampeba, advisor to the urban planning department within the ministry of water, wnvironment and urbanisation is outraged. "This amount is negligible. How can we prevent slums if we do not invest in housing," he said in an interview with IPS. "[The] majority of the population are poor". Jose Maria Veiga, Cape Verde's minister for environment, rural development and maritime resources argues that a critical step is to prevent people from migrating to urban centres in the first place. "This can be done by decentralising services to rural areas to guarantee that people access services where they are, as well as creating infrastructure in rural areas. These could be electricity, roads, markets, telecommunication among others," said Veiga. Still, equalising access to job opportunities and services between urban and rural areas would slow the explosive growth of urban Africa. A 2008 UN report focusing on population distribution and urbanisation concedes that the growth of the urban population is fuelled by rural-urban migration, but found that with the exceptions of Indonesia and China, natural increase - births to urban residents - accounted for two-thirds of urban growth.

70,000 new Kuwaiti homes planned by 2015 - Construction & Industry - ArabianBusiness.com

70,000 new Kuwaiti homes planned by 2015 - Construction & Industry - ArabianBusiness.com

Kuwait is planning to build 70,000 new homes by 2015 to meet the country’s growing housing needs, a senior politician has said.Sheikh Ahmad Fahad Al-Sabah, Kuwait’s Minister of State for Development and Housing, said the housing scheme would help push the country’s real estate sector towards recovery after the effects of the global financial crisis.The new homes will be powered by a suburban cooling system to help conserve energy resources and overcome power shortages, the news agency Kuna reported.

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