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CONTENTS
PART 1/ NEEDS 4
PART 2/ SOLUTIONS 15
PART 3/ CONCLUSIONS 57
« The researchers expect rate of urbanisation to also increase in the coming years. With
over 575 million people, India will have 41 percent of its population living in cities and
towns by 2030 from the present level of 286 million. As the urban population in the
country is growing, so is urban poverty”
UNDP experts
Emerging definition
Affordable housing - also called low-income housing - is an emerging segment in the housing sector in India.
It is used to describe provision of adequate housing, affordable to people within the “low income” bracket
(who don’t have access to current housing services). The industry considers that a house is affordable if it
costs less than 40 times the monthly income of the buyer. However as there is no clear definition of “low
income bracket”, there is no defined price range for affordable housing.
From our research and consultation, we can say that currently, players involved in low-income housing in
India are mainly targeting the lower-middle class: people earning Rs. 7 000 ($150) to Rs. 20 000 ($430) per
month, which means 30% to 60% of Indian population. As a result, price range of affordable housing units
currently under construction is between Rs.300,000 ($6,400) and Rs.1,000,000 ($21,340).
Organization we consulted clearly confirm the demand is very high in Lower Income groups (LIG) as well
as in middle class. As a result, a key issue for NGOs working in new housing projects is to ensure housing
units are not all booked by middle class customers and that LIG have the opportunity to apply.
However, it is only a small share of the actual affordable housing demand because it excludes rural
population and lower income groups (earning less than Rs 7,000 per month) where no profitable business
models without government intervention have been identified so far.
“All the housing available in India is only serving 6% of the population. So 94% of the population has no
access to housing services (…) The market of affordable housing in India is almost unlimited, the volumes
are huge and there is a considerable amount of profit to make”
Source: Monitor
Objectives
We spent a week in Kolkata slums in early May 2010 to do a quick market study with 3 objectives:
1/ To better understand who are slum dwellers and how do they live
2/ To identify what are housing needs and demand of slum dwellers
3/ To identify typical architecture and materials used for housing in slums
Panel
The following study has been done based on 16 interviews of slum dwellers from different Kolkata slums :
Natunbazar, Tollygunge, Howrah, Bahar. As you will see, people we have met often earn less than 2$ per
day and are not really the core target of current affordable housing initiatives. However we felt it was
interesting to get more knowledge about this «still untapped » market in India.
We also decided to interview 3 cement dealers and 2 masons to better understand how they work with poor
households.
Mindset
The aim was more to get a quick insight on housing in slums than to do a detailed survey that would
obviously have required more time and more interviews.
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Escale Responsable - Affordable housing in India : needs and emerging solutions
1/ RESPONDENT PROFILES
Level of education:
> 69% of them have received a basic
education (primary school) and 31% have no
education.
Home density:
> 4.6 people live under the same roof
Revenues:
> 50% of the people interviewed earn between
$54-118 per month
> An average of 1.8 people contribute to the
family income
2/ HOUSING CHARACTERISTICS
Environment
> All the people interviewed live in urban or
semi-urban areas
Sanitation
> 94% use latrine outside their house
Construction materials
> 44% have bamboo walls and 19% have
walls made of concrete blocks
> 94% have a tile roof and 81% have a
concrete floor
Origins
> 81% of the households got the house from
inheritance
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Escale Responsable - Affordable housing in India : needs and emerging solutions
Financing: Micro-credit -
> All the people that made house Grants/gifts 20%
improvements used their savings in addition to
loans from friends or relatives or grants. Others -
Barrier:
> As 69% are renting, they fear the landlord
will not let them doing improvements.
> Her older son and herself manage to earn a total monthly income
of $55
> She saves $4 every month that make an overall $106 total
savings that she could potentially used to improve her house
> Over the past few years, she had to spend $106 to repair the roof
damaged by the monsoon. The money came from her own savings
and a loan from relatives
> As many other slum dwellers, she dreams that one day she will be
able to have her own house
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Escale Responsable - Affordable housing in India : needs and emerging solutions
Timescale:
> Because they are unable to save enough
money or because they have other priorities
(e.g. health care of a relative), only 8% plan to
invest in their housing in the coming year.
5/ CONSTRUCTION PLANS
> With a total family income of $110, they can’t save any
money as they have to spend all their savings in the
husband health care and medications.
> She would like to repair the house, especially the roof but
she has no savings to do so for the moment.
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Escale Responsable - Affordable housing in India : needs and emerging solutions
Debts
> 56% do not hold any loans with banks, MFIs or
relatives
Assets:
> 44% have no assets to use as a collateral
> 6% of them have a property in rural area
Mindset
> 25% declare that they are worried of taking a
loan because they doubt of their repayment
capacity.
Financing modalities
> The 3 preferred means through which they plan
to finance their housing needs are their own
savings, loans from relatives or friends and loans
from Microfinance Institutions.
NGOs, social entrepreneurs, developers, banks as well as government bodies are developing solutions to
housing the poor in India. Hereafter is a short description of their involvement in affordable housing in India
and their strategies.
A recent engagement
Prior to the economic downturn in 2008, very few developers had entered the affordable housing segment.
Indeed, the Indian residential real estate market was experiencing an unprecedented boom. Between 2000
and 2005, Indian residential real estate prices had nearly doubled and the residential prices continued to
rise at an average increase of 16% year-on-year. With such rising prices, real estate was seen as an asset
for investment and the industry was focusing on the high end of the economic pyramid (upper class and
upper middle class).
With the global economic crisis of 2008-09, household income fell and so did the demand for houses. The
impact was more pronounced in the segment of houses priced over Rs. 6,000,000 ($128,040) (Monitor,
2009). Developers were forced to look at lower income segments from middle-income to the bottom of the
pyramid, who are less dependent on “market sentiment” and where a huge demand was still unmet. In
addition to the tremendous business opportunity, government incentives to build low-cost housing has been
an important driver to encourage developers going down the income ladder.
Key differences between affordable housing and traditional housing for developers
! Priority is to find cheap land, often at the outskirt of cities. In affordable housing projects, land is
treated as a cost not as an asset.
! Expect lower margin but more volume (which means executing more projects in a fixed timeframe).
Affordable housing projects have to be built faster than traditional projects (less than 2 years instead of 3-4
years for traditional projects)
! Build smaller housing units (between 200 and 700 sq/feet)
! Find cheap building materials
! Work in partnership:
>> Partner with NGOs who have the knowledge of - and links with - the poor (for the design phase and
demand aggregation)
>> Partner with housing finance organizations (MFIs, banks) to ensure customers have access to
require finance. Developers like Tata Housing, Shree Vaishnavi Constructions and Matheran Realty have
tied up with MFIs like Micro Finance Housing Corp (MFHC) which disburse loans of about Rs. 5 lakhs.
! Look for « cross-subsidies » for the project (by building simultaneously high income commercial or
residential development in the neighbourhood).
! Keep overheads low (e.g : no advertising)
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Escale Responsable - Affordable housing in India : needs and emerging solutions
ASAG, SPARC, Habitat For Humanity India, and SAATH have been among the main pioneering NGOs to
focus on housing poverty in India and pilot innovative solutions. ASAG, created by the architect Kirtee Shah
in 1968 looked at housing poverty both in rural and urban areas and developed successful housing projects
that influenced government housing policies. Similarly, SPARC and SAATH have developed solutions that
have been adapted and scaled up through local or national government programmes. SAATH Integrated
Slum Development project has been the basis for the Slum Networking Programme implemented by
Ahmedabad Municipal Corporation. SPARC Slum relocation model has become the standard in Mumbai and
is now replicated in other cities.
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Escale Responsable - Affordable housing in India : needs and emerging solutions
While the middle-class and upper class segments of population are well䇲served by the financial
community, with various mortgage finance options available to them, there is little or no availability of
finance to a huge section within the low income category and the informal sector as a whole. A recent
survey from Ashoka among 45 housing finance institutions in India reveals that only 7 of them provide
loans to customers from the informal sector : GRUH Finance, Mas Financial Services, Dewan, HUDCO,
Mahindra Housing finance, Repco and MHFC (which is the only one to lend without requesting a garantor).
Commercial banks involved in affordable housing finance don’t reach the informal sector
Very few commercial banks have entered the low-income housing market. HDFC, one of the largest
housing loan providers in India, has been one of the pioneers in that field in 1988 with the creation of
GRUH Finance Ltd, a subsidiary dedicated to servicing low income population. Other banks have also
proposed objectives to serve middle and lower income clients such as Dewan Housing Corporation Ltd or
Repco. Big banks like SBI, ICICI, MRHFL (Mahindra Rural Housing Finance) have regulated requirement,
to invest a portion of their capital for low income population, but they have not been very active in that field
so far.
The population of poor people, can be divided into 2 categories: the poor people that are formally
employed, and who have formal documentation in terms of payslips or bank account and the informal
category such as street workers, vegetable venders, which have no formal documentation on their income
or the assets that they own. As demonstrated by Ashoka survey mentioned earlier, very few housing
finance companies are targeting this latter category of customers. Even in the case of GRUH Finance Ltd,
they require clients to be formally employed or business owners with audited financial statements and
exclude informal workers. Consequently, « only about 10% of their consumer housing portfolio is directed
towards the lower middle and low income groups » (source IFMR, Chennai 2007).
MHFC, first housing finance company dedicated to low-income and informal sector in India
MHFC (Micro Housing Finance Corporation), is a housing finance start-up created in 2008 and dedicated
to providing home loans to low䇲income individuals (earning less than Rs.20 000 ($430) per month)
belonging to the informal sector. For M. Merchant of Monitor, « The entry of MHFC marks a breakthrough
in the housing market as it addresses the pressing need for funding informal sector customers in affordable
housing ». Following the exemple of MHFC, we have heard that at least 5 companies are willing to enter
this market and are in the process of getting regulatory clearance from NHB.
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Escale Responsable - Affordable housing in India : needs and emerging solutions
Our interviews and research did not show any strong involvement of cement companies in affordable
housing. E.g.: we did not came across with any new product dedicated to that market segment. However,
some cement companies such as ACC, HOMEX or Gujarat Ambuja Cement are starting to look at ways to
get actively involved in the low-income housing segment.
ACC is doing a pilot project in Bihar with Habitat For Humanity India (see Ashreya project in Habitat for
Humanity India business case). Officially branded as a corporate social responsibility initiative, ACC’s
objective behind that project is to better know the low income market and feed its strategy to reach it.
During our consultation, we have also heard of Homex - a Cemex subsidiary - willingness to enter
affordable housing market in India. Cemex would like to leverage its experience on affordable housing in
Mexico (cf. Patrimonio Hoy project) and replicate its model in India. However as discussed with M.
Merchant from Monitor Group, “To succeed in India with its model, Homex will need a much stronger
housing microfinance sector.”
Gujarat Ambuja Cement Ltd is the cement company with the most advanced and ambitious affordable
housing project we came across. Its project, called Bengal Ambuja Housing Project is a joint venture
between Gujarat Ambuja Cements Ltd and the West Bengal Housing Board. « The West Bengal
government initiated the move to rope in private-sector companies into mass housing more than a decade
ago and so far Bengal Ambuja has completed three housing projects in the low, middle and high income
segments. All the JV companies are provided land at a subsidised rate. This initiative has helped people
from lower and middle-income groups to own a home at prices ranging between Rs. 2.5 lakh ($5,340) and
Rs. 6 lakh ($12,800). »
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Escale Responsable - Affordable housing in India : needs and emerging solutions
Government bodies
Concerning housing and infrastructures, the National Government, States Governments and Cities have all
their own areas of decision and influence. For example, urban development is a State Government matter
while land issues are Cities responsibility. As a result., according to Sheela Patel from SPARC, « The
national government of India cannot make a housing policy for the whole country » due to a lack of
coordination between government bodies. Many government initiatives have proved to be inefficient or
unenforced for that reason.
However, as housing - together with education - has become India’s government new mantra in recent
years, things are evolving quickly. « Until 10 years ago, housing issues were taken in charge by the State
Government. Now pressure is on cities to deal with housing poverty and infrastructures with subsidies
coming from National and States Governments » says Mrs Patel.
The other major initiatives, called Rajiv Awas Yoina has been designed to complete JNNURM and make a
slum-free India within 5 years. It includes some measures to tackle land issues (availability of land and
property title issues). Indeed, issues over land property are one of the main barrier (especially in urban
areas) which prevent affordable housing solutions to scale. Rajiv Awas Yoina provides for example a land
title certification of 10 years for all slum dwellers. However this initiative launched by the National
government has not really been enforced at city level so far.
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Part 2/ Solutions
Escale Responsable has identified 4 housing models in its study of low-income housing solutions in
India:
- Slum rehabilitation: incremental housing in existing slums
- Slum redevelopment: relocation of slum dwellers in new housing units
- New housing: building of housing units affordable to low income households
- Renting model (emerging): building of housing units where a minimum of 40% will be reserved for low
income households.
All these models, excepted the Renting model, require development of affordable housing finance to be
successful. Consequently Escale Responsable has considered it was critical to identify solutions in this
field too.
1 SLUM REHABILITATION
AFFORDABLE
2 SLUM REDEVELOPMENT HOUSING
FINANCE
3 NEW HOUSING
H
4 RENTING MODEL
Figure 2/ Models and areas in which organizations we have consulted are involved.
MHT
SEWA Bank
GRUH
MHFC
ASHOKA
FOLIAGE
DBS
HABITAT FOR
HUMANITY INDIA
MONITOR
SPARC
22
1/ Slum rehabilitation
UN-Habitat has developed five indicators for slum upgradation: security of tenure, access to water and
proper sanitation, enough space for everyone to live and houses made of durable material
Case study
>> SAATH Integrated Slum Development
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Escale Responsable - Affordable housing in India : needs and emerging solutions
EXECUTIVE SUMMARY
Integrated Slum Development (ISD) programme was conceptualized by SAATH (and M. Himanshu Parikh
from Ahmedabad Municipal Corporation) in 1989 to transform the slums and improve the quality of life of its
inhabitants by providing both social services (education, health, community development) and basic
infrastructures. It takes a participatory approach, with the community involved both in contributing towards the
cost of the programme and also being closely involved in its implementation.
First tested out in a slum named Sanjaynagar Mukhi ni Chali, ISD has then been completed with the Slum
Networking Programme (SNP) implemented by Ahmedabad Municipal Corporation. SNP Infrastructure
package contains household connections for water supply and drainage, individual toilets, and slum level
storm water drainage, paving of internal roads and street lighting.
Home upgradation or extension investments are a consequence of ISD programmes which create an
enabling environment (secure tenure, infrastructure, access to finance…).
! A multi-stakeholders partnership: ISD is based on a public-private partnership involving NGOs, the
municipality and the private sector. Indeed the nature of investments (eg. water connection, road
pavement…) falls under the municipality’s responsibility; the amount of money to be raised requires diverse
sources of fundings, and the diverse fields of actions (health, education, construction, economic
development…) makes it necessary to involve specialized organizations.
! A market-based approach: Slum dwellers have to pay for the package of infrastructures that are
provided at household level.
« SAATH was the first NGO in the 90’s, to say that poor
people were able and willing to pay for basic
infrastructures and services »
Rajendra Joshi, SAATH founder and managing trustee
ISD APPROACH
Step1/ Understanding priority needs and mobilizing the slum community: SAATH usually
builds up a group of local youth to carry out surveys regarding basic physical infrastructures,
housing, health and education needs. It then empowers the slum residents through the creation of
1 community based associations aiming to get organized in order to improve the quality of life in the
slum.
FINANCING
> Subsidy-based: infrastructures investments are mainly funded by the municipality (usually 2/3 of the
cost). The municipality get funding from aid agencies for SNP implementation.
> Cost-sharing sharing model: All infrastructures and services are provided at household level; slum
dwellers pay for 1/3 of the cost of the infrastructure package. Payment collection is done by SAATH and
microfinance institution like SEWA provide loans to slum resident when needed. In the first ISD projects, the
infrastructures package cost was Rs 6,000 ($130) per house, out of which Rs 2,000 ($45) had to be paid by
beneficiaries.
Ahmedabad Municipal Corporation Slum dwellers SAATH and Mahilan Housing Trust
Over $20 million ! 98,5% $301,600 ! 1,48% $9,206 ! 0,05%
Source: AMC
SOCIAL IMPACT
Main social benefits
> Improved quality of life: almost all households have regular water supply, drainage connections and a
toilet.
> Secure tenure: people are reassured they won’t be evicted from their homes and start feeling secure.
> Surplus income due to:
- Reduced expenditures on health thanks to a healthier living environment
- Women have more time for productive activities.
> Access to financial services: Slum residents can open a bank account by using their 10 years non-eviction
certificate delivered by the municipality
> Job opportunities through vocational training
Facts:
In Ahmedabad:
> SNP has been undertaken in 41 slum communities covering 8703 households benefiting 43,515 people
(source AMC).
> SNP has enabled access to water, electricity and road infrastructure to over 6,000 households on a fee-
paying basis (source AMC).
> Saath’s Vocational training programmes have placed 25,000 youths and housewives into formal sector
employment (source SAATH) 26
Escale Responsable - Affordable housing in India : needs and emerging solutions
IMPACT ON HOUSING
SAATH did a detailed impact survey in the slum of Pravinagar – Guptanagar to see the changes after ISD.
The study demonstrate that the project has allowed housing upgradation (increasing the number of rooms,
or making a concrete roof and brick walls, or making lasting flooring).
After Pravinagar – Guptanagar ISD, almost 40% have made changes in their houses and about 33% were
planning some changes in the coming one-year. Average amount actually spent per household for house
upgradation during and after slum networking project has been Rs. 50,250 ($1,070)
Slum redevelopment is often done in two phases: slum dwellers move in transit homes while their
permanent home is being built or arranged.
Authorities are always involved in redevelopment projects, and diverse public funds have been created to
finance slum redevelopment or resettlements .
Case study
>> SPARC Nirman
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Escale Responsable - Affordable housing in India : needs and emerging solutions
- Mahila Milan (MM): Created in 1986 by 500 pavement dwellers women in Mumbai,
MM is a decentralised network of poor women's collectives that manage credit and
savings activities in their communities. MM has strong links with the NSDF, and the
two networks work together to enable poor people to share experiences through
exchanges, train each other in financial management, construction techniques and
other relevant skills, and develop the confidence and opportunities to take on
leadership roles within poor communities. Today MM counts over 300,000 members.
EXECUTIVE SUMMARY
SPARC Samudaya Nirman Sahayak, means SPARC's assistance to community-led construction. Called
Nirman for short, it is a non-profit construction company set up in 1998 by SPARC to support the Alliance in
undertaking housing and infrastructure construction. Nirman is involved in technical aspects and financial
support, with the aim of developing new strategies for the poor to access affordable housing and
infrastructure.
CONTEXT
In 1998, after more than a decade of operations, the NSDF and MM networks had considerably grown.
Having demonstrated that its community-led strategy to seek a wide range of in-situ and relocation
solutions for those facing evictions was actually successful and has the potential to work at scale, the
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Escale Responsable - Affordable housing in India : needs and emerging solutions
STRATEGY
> Leveraging synergies with NSDF and MM: The NSDF along with SPARC negotiates for land. Nirman
focuses on handling the financial and technical assistance that the communities need, while the federation
provides them the grassroots and leadership support. For community finance, microcredit or housing loans
distribution, Nirman usually operates through Mahia Milan network.
> Working in partnership: In order to bring the required financial and technical support to enable slum
dwellers driving their own development, Nirman has to build up multi-stakeholder partnerships. These
partnerships usually involve financial institutions, state and municipal agencies, and development
organisations.
> Leveraging slum dwellers’ wasted-spending on housing: as they don’t have any other options, the
poor develop their own housing in very resourceful ways. Without security of tenure, most informal
settlements start with building their houses with recycled materials and while this is affordable, it requires
more routine maintenance (e.g.: each year they have to repair their houses affected by the monsoon) and
end up spending consequent amounts of money in construction materials. Nirman’s objective is to build on
this informal process, so that the poor’s capacity and housing spending are used in a more constructive and
durable way. Once security is assumed, the strategy is to invest in incremental formal upgrading so money
used in repair produces the house which requires no yearly repair
Community mobilization: The federation (NSDF) assists communities to gather information and
explore potential relocation lands. Community-led surveys are done both as an organization
strategy (to bring people together) and as a useful basis for negotiations with local authorities.
1 Groups of 50 households are created and leaders are chosen to facilitate coordination. Mahila
Milan initiates women savings and credits groups to anticipate futures issues (and costs).
Move to transit camps: When the time comes to move, depending on whether the relocation
housing stock’s availability, households shift in groups to transit homes where they will stay during
2 the construction phase of their permanent homes. They had previously selected the date for the
move and planned how they would organize the move. The slum area can then be demolished
and redeveloped
Creation of housing cooperatives: in transit camps, future neighbours are regrouped into
housing cooperative societies which deal with subjects like cleanliness, sanitation, relationships
3 with the municipality… Residents are expected to contribute to maintenance costs and have to
pay a monthly maintenance charge (including electricity and water bills).
Community-led housing design and construction: In the event that the housing is to be
constructed by the communities themselves, Nirman involves the housing cooperative societies in
4 the design and the construction of their new housing units and related infrastructures.
Move to permanent homes : when their permanent housing units are done, housing cooperative
groups leave their transit homes to move in their new homes. The alliance assists them in their
new lives supporting them to develop management capacities to pay their collectives taxes,
5 manage their water pumps and maintenances and collect dues from members and the alliance
continues to provide social services, savings schemes, community representation through the
NSDF… 30
Escale Responsable - Affordable housing in India : needs and emerging solutions
*CLIFF
The Community-Led Infrastructure Finance Facility (CLIFF) is a financial mechanism that provides slums
community-based organizations direct access to the venture capital they need to develop creative and
sustainable solutions to housing and infrastructures issues. The objective is to give them the opportunity to
demonstrate to the city that their solutions work and can be scaled up, and to financing institutions that
their initiatives are financially viable.
CLIFF is funded by UK Department for International Development (over $9,8 million) and the Swedish
International Development Cooperation Agency ($4,3 million). Nirman is the implementing partner of CLIFF
in India. It has provided substantial capital for Nirman’s projects. These funds contribute the bridge
financing needed to start projects before sor other funding comes in.
FINANCING
Nirman operates as SPARC financial and technical sister organization and uses diverse sources of financing
for its projects:
> Contracts : as a construction company, Nirman undertakes infrastructures, resettlement programs and
housing projects. Its main clients are federal states, cities and local authorities. Nirman largest contracts
include the Bombay Municipal Corporation‘s (BMC) Rs.440 million ($9.4 million), Mumbai Slum Sanitation
Project and the MMRDA's Mumbai Urban Transportation Project which aims to resettle and rehabilitate over
10,000 households along the railway tracks.
> Subsidies : central or local government gives Nirman subsidies to work with the poor communities to
construct houses and provide infrastructures .
> Grants are given by donors to cover Sparc and Nirman’s general expenses and core administration costs
and to finance revolving funds. Indeed, due to usual delays for loans (contracts and subsidies) pre-
financing is required to start on a project while waiting for the entire amount to come. A revolving fund is then
created by Nirman, where donors (Homeless International, Selavip, Cordaid, Miserior…) lend out money to
projects and receive interests upon repayment.
> Community contributions: savings that poor communities can use to pay for their housing and
infrastructure needs. They are used to subsidize a project, stand in as collateral for a loan, prove
commitment to maintaining community assets and to repay loans. 31
Escale Responsable - Affordable housing in India : needs and emerging solutions
SOCIAL IMPACT
Nirman has been involved in many projects since its creation in 1998. Hereafter are some examples of
housing projects it has carried out :
> Rajiv Indira – this is the first housing project in SRA which has been designed and managed by residents
cooperative, where slum dwellers redeveloped houses where they lived in situ. ! Over 219 families have
been accommodated in 5 new buildings and the remaining tenements sold on the open market.
> Sunnuduguddu, Bangalore – the Rajiv-Indira Housing scheme in Mumbai inspired a similar project in
Dharavi in a very difficult central part where again communities designed and managed the project.
> Sunnuduguddu, Bangalore –when slum dwellers were facing eviction, the MM in Bangalore agreed to help
residents build houses if the city acquired the land from a private developer. 160 houses have been
constructed in a slum called Sunnuduguddu.
> The Mumbai Urban Transport Project (MUTP) : relocation of 20,000 families who lived on land next to the
railway tracks. Since February 2000, the Alliance has resettled more than 11,000 families. Out of these
families, more than 6,000 were resettled in transit accommodations and the rest in permanent housing
(mostly in small apartments in eight-storey buildings). Nirman was commissioned to build 2,500 of the 6,000
transit tenement buildings. This strategy set a precedent and MMRDA then constructed the rest of the transit
houses commercially.
> Oshiwara, Mumbai – through a partnership with a private land owner, Nirman construction of 5 seven-
storied apartment buildings for over 700 households in an area called Goregoan, in the north west of
Mumbai, bringing in non-state land into the domain of housing stock for the relocated households.
> Mumbai Urban Infrastructure Project: financed by the state government. This project focuses on roads and
highways, and has required the resettlement of some 30,000 families, mostly pavement dwellers. The
Alliance has been invited to manage the resettlement of most of these families and Nirman is currently
engaged in constructing some 3,000 housing units.
New housing model consists of building new housing units at affordable price for the poor. New housing
projects dedicated to the poor usually involve citizen sector organizations (CSO). According to Ashoka
India, there are 4 engagement models between CSO and the private sector :
- CSO as marketing agent of the project: the developer manages all the phases of the housing project
and partner with a CSO to market its housing units to the poor and to organize adapted housing finance
(loan collection). In return CSO get agent fees from developer.
Example: Vintron with CHL (Community Housing Limited) project in Ahmedabad
- CSO on the management board of the project: the developer takes in charge all the financial aspects
(land acquisition, infrastructures) as well as the construction process. However a CSO representative is
invited to the management board of the project to bring its knowledge of the poor and and can influence
some decisions (e.g. Housing design)
Example: Umang Lambha project (DBS/SAATH)
- Joint venture between the developer and the CSO: equity of the project is shared between the
developer and the CSO.
Example: Swapna Shrihti project (joint venture between Awaas Sewa and Vintron)
- The developer as a contractor for the CSO: sometimes CSOs own lands, have access to potential
clients for housing projects but don’t have the expertise to manage a construction project. The developers
are then only involved in the construction phase as a « contractor ». This model is still being explored by
Ashoka.
Case studies
>> MHT, Awaas Sewa Private Ltd
>> DBS Affordable Home Strategy Ltd
>> Foliage Real Estate Developers Ltd
>> Habitat for Humanity India, Habitat Model
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Escale Responsable - Affordable housing in India : needs and emerging solutions
EXECUTIVE SUMMARY
MHT has launched Awaas Sewa Private Ltd, a for-profit real estate company aiming at building a undertaking
affordable housing projects designed with the poor and dedicated to them. With this new vehicule, MHT
« wants to go from a mobilizer and contractor for the poor to a developer for the poor ». Awaas Sewa is a
collaborative organization, which leverages synergies with its sister organizations (MHT and Sewa Bank).
CONTEXT
> After 20 years of activity, Sewa Bank acknowledges that many of its clients have reached a level of incomes
that allow them to buy or build cheap houses and leave the slums. Moreover, the JNNURM* law has
engendered a higher eviction risk for slum dwellers, many of whom are indicating they are ready to move for
a more secure home, even if it is outside of the city.
> The demand for housing is so high in India that poor people (and Sewa members) don’t have access to
affordable housing because all housing projects are pre-booked by middle-class families or speculators. This
is true even for housing projects targeting specifically the BoP population.
> MHT is already involved in all aspects of housing for the poor (slum rehabilitation, house upgrading,
infrastructures construction...) excepted real estate development --> Awaas Sewa Private Ltd has been
created to cover this aspect and build up a completely market-based approach to affordable housing.
*JNNURM: Jawaharial Nehru National Urban Renewal mission: Governement initiative aiming at improving urban infrastructure and services 34
Escale Responsable - Affordable housing in India : needs and emerging solutions
STRATEGY
> Dedicated to low income families: Awaas Sewa projects are sold in priority to Sewa Banks members
(clients). To avoid speculation, sales are not open, and no marketing is done.
> Customized housing finance: Awaas Sewa has persuaded Sewa Bank to create a new “Mortgage
Housing Loan”. Credit assessment of potential clients is made by Sewa Bank and a brainstorming is
ongoing regarding housing loan accessibility (collateral required, repayment modalities…).
> Participative process for housing units design and key decision making: Awaas Sewa (through
MHT) mobilizes the community of new clients to facilitate the design process: by giving a cost to every
optional element of the housing unit, Awaas enable the community to really adapt the design to their needs.
Ex: for Swapna Srishti project, Awaas Sewa recently asked the community if they want a loft which would
cost Rs.5,000 ($110). They also asked them to choose between common or separated toilet-bathroom.
> High quality standards at lower costs: for Awaas Sewa, “Low cost housing doesn’t mean low quality”.
To reduce costs as much as possible, Awaas Sewa uses several means:
- Choice of cheap land
- Tax exemption by organizing its projects under a Housing Cooperative status
- Lower profit margin (20%) compared to other developers (around 50%)
- Smaller super built up area (20%) compared to similar projects (35% to 50%)
- No charge of maintenance deposit: usually developers charge Rs.20,000 ($430) to Rs.50,000 ($1,070)
deposit for maintenance. The interest of the overall amount collected is then used to pays maintenance
services. Awaas Sewa decided to let the future owners community decides.
> Collaboration with an experienced partner: As it has no experience in real estate development activities
(eg. finding a land, getting clearance from government, building completely new housing …) Awaas Sewa
has created a joint venture with and experienced developer (Vintron Infrastructures) for its first project. “We
are in a capacity building phase and the collaboration with Vintron will help us gaining expertise in the fields.
After 2 or 3 projects, we will be able to be an independent developer”.
Definitions:
> Carpet area is the net area of the premises
> Built-up area means carpet area plus the area occupied by walls of the premises
> Super Built-up means the area of the premises plus the areas used for all common amenities (lift, stairs,
passages, basement parking, etc.). It is divided among all users.
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Escale Responsable - Affordable housing in India : needs and emerging solutions
MAIN STAKEHOLDERS
REAL ESTATE DEVELOPER ( Vintron Ltd)
SHAREHOLDERS (MHT, Affordable
- Joint venture partner
Housing Institute…)
- Co-manages construction process
- Invest in Awaas Sewa
- Brings know-how and experience to Awaas Sewa
- Participate in key decisions
SEWA BANK
CLIENTS (low income households/ slum - Brings customers
dwellers members of Sewa Bank) AWAAS - Credit assessment of potential customers
- Participate in housing units design - Provides housing loans for clients
SEWA
- Take a housing loan from Sewa Bank
MHT
- Mobilizes and organizes community of buyers
CONTRACTORS
- Organizes consultation for key decisions (unit
- Do the construction works design, cost issues…)
LOCAL AUTHORITIES
- Give project approval
- Can be a future client ( e.g. for slum
redevelopment projects)
FINANCING
For profit real estate company
Awaas Sewa Private Ltd is a for-profit company with an initial capital of Rs.400,000 ($8500). As any real
estate developer, Awaas Sewa works project by project and generates profit from the sales of housing units
it has designed and built. The main difference with traditional developers is the social goal of Awaas Sewa
which focuses on low income clients and expects a profit margin of 20% by projects instead of 50% in the
industry.
Swapna Shrishti requires an investment of Rs.100 million ($2,1 million). Rs.40 million ($854,000) are
provided by Vintron Ltd, around Rs.40 million ($854 000) are provided by customers loans, and a minimum
of Rs.20 million ($427,000) have to be invested by Awaas Sewa by the 30th June 2010.
Other specificities:
> Participative design to ensure housing units are adapted to the
needs (e.g.: alcove, loft, storage space….)
> No marketing, clients are found among Sewa members
> Smaller super build-up area than for traditional projects
> Relatively low deposit margin for booking: 15% of the housing unit
cost (instead of 20% traditionally)
> No maintenance deposit charge
> Green building: Awaa Sewa considers implementing green
alternatives if cost-free (energy efficient electricity lines design,
water recycling…)
EXECUTIVE SUMMARY
Foliage developers have been involved in the construction and development for almost 20 years mainly in
the state of Gujarat. Their expertise includes conceptual planning, project scheduling, co-ordination of
architectural and engineering services, zoning regulation review and approval, management and total
project costing, pre-construction services, conceptual estimating, value engineering, construction
administration and cost estimating.
Historically, the company was more involved in construction of high end houses and commercial buildings in
the city of Ahmedabad for middle class and upper middle class people. However, in 2009, feeling a good
business opportunity with a huge demand and therefore huge growth potential, they have decided to enter a
new market: the affordable housing market.
Today, Foliage is managing 4 different projects in Gujarat including its first affordable housing project called
Navjivan project located in the suburbs of Ahmedabad. It employs around 35 people (260 including
contracted staff)..
STRATEGY
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Escale Responsable - Affordable housing in India : needs and emerging solutions
CONTRACTORS
- Do the construction works
FINANCING
Foliage works as any other developer companies: they initiate and manage construction projects and
generate margins out of it. They typically invest between $600,000 to $1 million per project with additional
capital provided by its partners and lenders. Their strategy is to have more projects than other developers
and to build houses more quickly so they increase their profitability (see strategy above). Their targeted
return is minimum 20% per annum.
NAVJIVAN PROJECT
Targeted population: lower class or more specifically the “top of the bottom of the pyramid” i.e. people with
a family income between Rs.7000 ($150) and Rs.15,000 ($320).
Description:
420 housing units spread in 1 five-storied building with and 8 six-storied buildings on a 27,000 sq feet land
(2,510m2).
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Escale Responsable - Affordable housing in India : needs and emerging solutions
3 types of flats with a surface area from 220 sq feet (20m2) to 750 sq feet (70m2) will be developed:
> 1 room kitchen including toilets and shower
> 1 bedroom kitchen including 1 living room, 1 kitchen, 1 bedroom, toilets and shower
> 2 bedrooms kitchen including 1 living room, 1 kitchen, 2 bedroom, toilets and shower
The 1st and 2nd floors of 2 buildings located along the street being reserved for commercial use (shops for
the neighbourhood and small businesses).
Other specificities:
> The MFIs play a key role in this project as they will help communicating to the targeted customers and
secure the repayment. Foliage is currently approaching some MFIs in order to create special partnerships.
> The price of the land is < Rs. 300/ sq feet or an equivalent of $6,5/sq feet or $70.5/m2.
> The project includes incorporation of green design concepts in all stages of development and electricity,
sewage and drainage installations.
EXECUTIVE SUMMARY
DBS Affordable Housing is a developer based in Ahmedabad, dedicated on creating community housing for
Indian’s population who have no access to the formal real estate market.
DBS mission is « to establish an efficient, viable and transparent system for the Large-scale Mass-
production of Houses that are Affordable and Financed through Savings and Credit Systems that are
Accessible to the Bottom half of the Socio-Economic Pyramid”
STRATEGY
DBS strategy is based on 3 elements:
> Design and production of community housing: build house type from one-room to three rooms units
with work spaces, crèches, community resources centres
> Housing Finance : through partnerships with Micro Housing Finance Corporation and other MFIs, DBS
aims at developing customized finance solutions to its clients, including mediated person-to person loans
and flexible repayment schedules
> Community Development : Through partnerships with NGOs like SAATH, DBS wants to create livelihood
opportunities, enhance skills and education…
MAIN STAKEHOLDERS
Targeted population: very low revenue and lower middle class. Majority of
DBS customers have no regular/formal revenues, no access to housing loan.
60-70% of housing units are reserved for customers coming through SAATH
(NGO). The open category is only 30 to 40%.
Description:
1,404 housing units on a 5,8 acres land.
3 types of flats :
> 1 room kitchen, the smallest 315sq/feets (30m2)
> 2 rooms kitchen,
> 3 rooms kitchen
The 1 room kitchen flats are in four storied buildings, while the other two
categories have five floors above parking.
Other specificities:
> Marketing strategy: radio spots, banners and SAATH which communicates
through its networks in slums. DBS pays fees to access SAATH reservoir of
customers.
> Consultation of NGOs and targeted population for design of the housing units
> Partnership with SAATH and Micro Housing Finance Corporation. SAATH will
ensure poor people can book housing units and will manage community
organization. MHFC will ensure credit assessment and loan for poor customers.
> No innovation in term of construction material and process
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Escale Responsable - Affordable housing in India : needs and emerging solutions
Habitat for Humanity India began operations at Khammam, Andhra Pradesh in India
in 1983 and has since become one of Habitat’s largest country programs impacting
the lives of around 165,000 people with over 33,000 houses. The organization works
through Regional centers called Habitat Resource Centers, based in Bangalore,
Chennai, Delhi and Mumbai. Their programs operate mainly in the rural area which
represents almost 80% of their activity.
Today Habitat for Humanity India employs 73 permanent people and relies on a
community of almost 2,450 volunteers.
To support its activity, Habitat for Humanity India have created an umbrella program
called IndiaBUILDS which is a strategic initiative to provide better housing for 50,000
low-income Indian families so 250,000 people by 2012. The program has 4 main
objectives to achieve:
> Create shelter: build houses for 50,000 families and 250,000 people
> Create inspiration: mobilize one million volunteers
> Create capital: raise funds from government, businesses, individuals and other
donors and raise community resources, build partnership with businesses and
leverage government schemes. Create a community housing revolving fund.
> Create capacity: Develop a network of individuals, corporations, civic groups,
NGOs and governments committed to finding shelter solutions.
HABITAT MODEL
EXECUTIVE SUMMARY
Habitat for Humanity India has designed a model called Habitat Model, specifically developed for India’s
housings needs in rural areas and implemented in all IndiaBUILDS projects. In partnership with local
grassroots organization (NGO or MFI) working with people living in inadequate housing, HFH brings housing
finance and technical support through its network of architects and volunteers. To get a new house,
beneficiaries have to be land owners and to contribute both financially and in kind to the construction
process.
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Escale Responsable - Affordable housing in India : needs and emerging solutions
> Providing technical skills: Habitat has a network of architects and technical engineers involved from
design stage to delivery of the house.
> Involving beneficiaries both financially and physically: beneficiaries have to bring a minimum of 1/3 of
the house cost (in cash or in kind – e.g. wood, tiles…) and have to provide a minimum of 200 hours of
« sweat equity » (participation in the construction process)
> Providing free housing finance : Habitat for Humanity India provides beneficiaries with housing loans
(up to 40% of the house cost) with 0% interest. The repayment starts only once the house is completed and
is done on a monthly basis - on average between Rs. 500 ($10) and Rs.800 ($17). Housing loans
distribution and collection is outsourced to local NGOs and microfinance institutions.
MAIN STAKEHOLDERS
45
Escale Responsable - Affordable housing in India : needs and emerging solutions
Mortgage payments collected through Habitat housing loans contribute to a Fund for Humanity, which in turn
provides the money to build more houses.
IndiaBuilds overall budget is Rs. 2 billion provided by different donors (corporations, foundations, Habitat
International, individuals…). Administration costs are kept under 14% of the overall budget of Habitat India.
SOCIAL IMPACT
> Since its creation in 1983, Habitat for Humanity India has built over 33,000 homes including more than
11,000 houses under its tsunami-response program launched in 2005.
> Between July 2008 and June 2009, the NGO has built, rehabilitated or repaired 5,126 houses across
India.
> The ambition of Habitat for Humanity India is to serve 24,000 families by the end of 2012.
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Escale Responsable - Affordable housing in India : needs and emerging solutions
EXECUTIVE SUMMARY
In partnership with a local NGO, the cement company, ACC and Hindustan Unilever Limited (HUL), HFH
India launched in November 2009 its first integrated project called Project Ashreya. In addition to building 72
houses in the village of Jorgama, HFH India, will develop revenue generating activities and run capacity
building actions.
CONTEXT
In August 2008, the State of Bihar experienced one of the worst flooding in the history of the state that
displaced more than three million people. HFH India joined hands with the state government’s shelter sector
coordination committee, to take an active role in planning and coordinating housing needs of the affected
families.
STRATEGY
Ashreya project aims to build up on the success of Habitat Model, by adding new initiatives that make it a
comprehensive solution to housing poverty in rural area. As a result 2 main new elements have been added
to traditional habitat housing projects:
> Empowering the community: In collaboration with a local NGO, HFH formed groups from the community
and is implementing trainings and capacity building activities to help the community to access existing
government schemes and negotiate with competent government department to develop livelihood projects.
Ashreya is a pilot project; if successful, the model will be replicated in other areas with similar needs.
Affordable housing finance is not a housing model as such, however it is a key component for each model
we have studied (excepted rental model).
Affordable housing finance, means housing finance products accessible and adapted to low income
population. It can be done by microfinance institutions or traditional finance institutions like banks.
Mainstreaming affordable housing finance is a necessary condition for affordable housing market to take
off in india
Case studies
>> Micro Housing Finance Corporation
>> GRUH Finance
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Escale Responsable - Affordable housing in India : needs and emerging solutions
EXECUTIVE SUMMARY
Micro Housing Finance Corporation Limited (MHFC) is India’s first housing finance company dedicated to
providing home loans to low䇲income individuals belonging to the informal sector and who traditionally have
had no access to finance from established banks and financial institutions. Created in 2008 by 3 former
investment bankers, MHFC has received the necessary regulatory clearance from the National Housing
Bank (“NHB”) and has started its lending operations in May 2009 (the first client has been repaying for 13
months).
According to Monitor « the entry of MHFC marks a breakthrough in the housing market as it addresses the
pressing need for funding informal sector customers in affordable housing. This will allow development of
the low䇲income housing market which could result in housing for 10–15 Million households in the next 5–8
years and potentially represents a $75 Billion market that is commercially viable. »
STRATEGY
> Focus on urban areas: in urban areas density is high, infrastructures are good quality and most of the
population, even in the informal sector, has a bank account (or can easily get assisted to open a bank
account). As a result, marketing and loan collection are easier with urban customers than with their country-
side counterpart.
> Target the informal sector: India’s informal sector is a huge untapped business opportunity for housing
finance. It is estimated that in India, 90 percent of all employment is in the informal sector. Typical customers
targeted by MHFC are self-employed, earn between Rs.10,000 ($215) and Rs.20,000 ($430) per month but
don’t have access to loans from established banks because they don’t have adequate documents or formal
salary slips. MHFC is creating a credit assessment model adapted to the informal sector customers by
building databases by profession and by location. E.g.: statistics on auto rickshaw drivers revenues in
Mumbai, or vegetable vendors in Ahmedabad.
> Project led: MHFC ties up with builders that have a similar focus on affordable housing (defined by MHFC
as flats which have a final price of Rs.500,000 to Rs.600,000; $10,670 to $12,800) and lend money to their
potential low-income buyers. However, MHFC does not get involved randomly in affordable housing
projects. It has established a project screening model, which not only check the legal and technical
parameters, but also look at social parameters such as location, transports links, infrastructures (schools,
markets, hospital…).
> No branches, no mass marketing : as it is project led, MHFC marketing strategy is tailored to each
project and usually done in synergy with developers commercial strategy and/or local NGOs. To reach its
customers, MHFC has one employee staying in each project/ builder’s location and welcoming customers.
Currently, there are 25 projects in progress. 50
Escale Responsable - Affordable housing in India : needs and emerging solutions
FINANCING
MHFC has raised a capital base of Rs.330 million ($7 million) of which Rs.250 million ($5,3 million) came
through venture capitalist funding as equity in its first round of external funding from the India Financial
Inclusion fund and the Dell Foundation.
In its first financial year, MHFC incurred a loss of Rs.917,000 ($19,600). However M. Menon, MHFC
Chairman, estimates that the company should be at break-even by the end of 2010, if it reaches the
provision of 1,500 loans as planned. Objectives are to provide 50,000 loans worth Rs.20 billion ($426,8
million) in the next 5 years.
SOCIAL IMPACT
MHFC focus on people that don’t have access to housing finance in existing banks and financial institutions
in India. In May 2010, the company had 200 clients and was getting involved in 25 affordable housing
projects all over India. The objective of MHFC is to lend 50,000 loans within the next 5 years and as a result
to improve living conditions of over 300,000 persons.
MHFC PRODUCT
Targeted population: Urban low-income population belonging to the informal sector and in the
process of buying a new house/flat. Family income between Rs.10 00
($215) to Rs.20,000 ($430) per month.
Loan Amount: Maximum Rs.500,000 ($10,670). The loan size is usually 3 to 5 years
annual income.
Interest Rate: Between 12% and 14%. However, actual rate of interest on a loan depends
on individual circumstances, especially on the amount of borrower
contribution and the loan tenor requested. Further, it should be noted that
the loan rate is floating and is revised from time to time, in line with market
conditions. 51
Escale Responsable - Affordable housing in India : needs and emerging solutions
Other Conditions: MHFC expects the borrower/s to have a bank account, also to take out life /
permanent disability / property insurance (MHFC will help facilitate the bank
account and the insurance).
EXECUTIVE SUMMARY
GRUH has been created in 1988 as a subsidiary of HDFC, one of the main private banks in India. GRUH’s
objectives were primarily to provide long term finance to individuals for Construction/ Purchase /Extension/
Repair/Renovation/Shop loans of their homes but the company is now also engaged in loans to
professionals for office premises. The targeted population is mainly low income housholds earning less than
Rs 10,000 per month ($215) living in rural and semi urban areas. With a network of over 80 retail offices,
spread in western India across Gujarat, Maharastra, Rajasthan, Madhya Pradesh, Karnatala, Chattisgarh
and Tamil Nadu, GRUH gathers a customer base of more than 90,000 customers and employs almost 350
people.
STRATEGY
GRUH has identified 4 different segments of clients and therefore has developed 4 different products based
on an individual risk assessment method called Credit Rating Model. This model consists of 21 parameters
(age, income, stability of income, savings, assets and liabilities, etc.) to enable appraising potential
customer's financial and repayment capacity. The interest rate of the loans depends on customers credit
rating score.
MAIN STAKEHOLDERS
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Escale Responsable - Affordable housing in India : needs and emerging solutions
Source: http://www.gruh.com
SOCIAL IMPACT
GRUH targets the people who are not covered by other housing finance companies. They have regular
income with no formal income slips and work in the informal economy.
64% of GRUH customers have a family income of less than Rs. 10,000 ($215) per month and 60% of the
loans disbursed so far are of amounts less than Rs. 300,000 ($6,402).
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Escale Responsable - Affordable housing in India : needs and emerging solutions
55
Escale Responsable - Affordable housing in India : needs and emerging solutions
Although affordable housing models have different approaches to solve the housing needs, we can
nonetheless highlight at least 3 similarities between them:
> Multi-stakeholders approaches: affordable housing projects are complex projects involving more
stakeholders than traditional housing projects. Communities, NGOs, housing finance institutions, and
local authorities are among the main stakeholders of any affordable housing project. They usually rely on
partnerships between for profit and non profit organizations and are difficult to coordinate. One of the
main challenge for the project leader is to make these two « worlds » speak the same language and work
together efficiently.
> NGOs involvement: in every affordable housing project aiming to have a genuine social impact, NGOs
and social entrepreneurs are involved to a certain extent. Their input can be variable - from project leader
or simple « marketing agent » - but their role is often critical to the success of the project :
- They bring the knowledge of the poor
- They facilitate relationships between the poor and others stakeholders and can market the project in the
community
- They ensure the project is in line with the needs of the poor and facilitate their participation in the
process
- They ensure the follow-up of the project
> Availability of affordable housing finance options: as shown in the previous pages of this report,
housing finance is essential to any affordable housing project. The 3 models highlighted include
affordable housing finance options and involve specialized organizations. NGO’s again, play usually a
critical role to aggregate the demand, organize saving groups, do credit assessment of potential
customers and collects loans.
We propose hereafter a short analysis of the different models according to 4 key criteria: social impact,
economic viability, scalability and potential synergies with private sector organizations. The objective is to
highlight strengths and weaknesses of each model.
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Escale Responsable - Affordable housing in India : needs and emerging solutions
+ Target the poorest segment of the population (including - Often subsidy-based model
pavement dwellers)
- High risk of negative social impact unless communities are
involved in the whole process
SCALABILITY SYNERGIES WITH PRIVATE SECTOR
+ Slum dwellers relocation is a major trend in India since the + Business opportunities for private sector are mainly found
government has fixed a 0 slum objective. in the construction phase of new housing units
- Dependant on political will
= Projects in progress are impacting mainly the top of the + For profit business model (but no return on experience so
“bottom of the pyramid” as housing units are often booked by far to validate its profitability)
middle class customers instead of BoP customers - Doubts regarding repayment capacity of poor customers
- Many uncertainties regarding integration of former slum
dwellers in new housing regarding their integration in their
new social environment, impact on their incomes and
economic activities (new transport costs, business
opportunity destruction…)
- Some projects are realized without the communities
consultation ! risk of inadequate housing
- Risk of the speculation
+ Mass market and strong demand : need of 21 million new + Led by private sector organizations
housing units in India) + Several required partnerships with other private
+ Affordable housing projects are mushrooming in every companies : Housing finance organizations, contractors,
cities of India material providers etc.
+ Loans benefiting to low income families coming from the + Profitable and self sufficient model
informal economy + Huge market opportunities
- The social impacts remain low as it is an emerging industry - High risk of this business (repayment risk, no real
that benefits to a small number of people collaterals (business creation) like for MFIs)
- Still no housing finance solutions for the very poor (BoP) - Need to gather more customer to increase the profitability
+ Mass market and important need for housing + Housing finance is a key and mandatory partner in all the
- Dependent on legal aspects (clear land tenure) or affordable housing projects that are currently being
affordable housing projects experimented
- No real return on experience as the model is being
experimenting in few cities
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Escale Responsable - Affordable housing in India : needs and emerging solutions
1/ Are current affordable housing initiatives potentially able to solve the problem of housing
poverty in India?
Even if they scale up, current affordable housing initiatives will only bring solutions to a small portion of
Indian's population in need of adequate housing. As mentioned earlier in this study, India is still very rural
with 70% of the population living in the countryside and count 101 million people earning less than Rs
7,000 ($150) a month. Housing needs of these two segments of population – the rural poor and the very
poor – are massive – only 19% of rural population live in strong houses and India counts more than 200
million homeless people – but unmet by market-based initiatives (excepted Habitat for Humanity).
To solve housing poverty in India, affordable housing initiatives will have to tackle the very poor and the
rural population. As the sector is still very young, we are confident that players will seek more and more to
reach these two segments of population. However it can happen only if the Indian government creates an
enabling environment (facilitate access to ownership, create incentives for private sector to get involved in
housing solutions for the poor).
2/ What are the main barriers to the development of affordable housing solutions?
The 3 main barriers for affordable housing market growth are the following:
> Access to land property : Establishing homeownership in India is difficult due to a lack of clear land titles,
in particular in urban areas where there is few transparency on property transactions and widespread
disputes and litigations. The government has been struggling to solve land title issues for the last 20 years
without any clear result so far. Land title uncertainties and the associated fear of eviction are a major
barrier to housing investments in slums.
> Availability of housing finance: The growing supply of housing for the poor is constrained by the fact that
they still don’t have access to housing finance. As explained earlier in this study a recent survey from
Ashoka India among 45 housing finance institutions reveals that only 7 of them provide loans to customers
from the informal sector : GRUH Finance, Mas Financial Services, Dewan, HUDCO, Mahindra Housing
finance, Repco and MHFC (which is the only one to lend without requesting a guarantor). Among the Non
Banking Finance Companies, only a handful microfinance institutions (MFI) explicitly offer housing finance
loans and there is no large scale housing microfinance programme in India.
> Lack of incentives to build houses for the poor: The Indian Government has been unable so far to provide
efficient incentives to build low cost houses excepted in Mumbai which has developed an efficient Slum
Rehabilitation Policy which incites developers to build affordable housing.
« Five years ago, no one builder was speaking “The companies are used to serve the top and
about affordable housing. Today everybody middle of the pyramid. As they don’t know the
speaks about it » low income population, they think there is no
market!”
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Escale Responsable - Affordable housing in India : needs and emerging solutions
> Learn before looking for profit: serving the poor has to be a long term commitment and companies should
not expect making profit in the short term. As they usually have little knowledge regarding the poor’s
preferences, needs, ability to pay…they need to learn in the first place. Staff immersion can be a possibility.
Another one is to test out solutions on small scale projects like ACC does currently with Habitat For
Humanity.
> Be participative: a key success factor is to make people participate in the whole process. As Sheela Patel
put it « community engagement is key, because people have to feel the project is an improvement
compared with what they do by themselves ». All projects of our case studies (excepted Foliage) includes a
community involvement component. E.g.: Awaas Sewa Private Ltd is consulting potential customers to
ensure the design of its housing units fulfils their needs. Sparc slum redevelopment projects are co-
managed by the slum community.
> Think out of the box : be flexible and open to new ideas. Housing units dedicated to the poor are very
different from housing units traditionally sold to middle and upper class customers. As explained by Sparc,
« Its ok for rich people to live in 60 floor buildings, but not for poor people. You have to build ‘walk-up
houses’, you have to build communities, you have to build neighbourhoods… ». Building or upgrading
housing units is not enough to serve the poor efficiently. As shown by our business cases, affordable
housing projects have to be comprehensive and bring community services as well as housing finance
options.
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