- Rationale
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The housing shortage in India remains critical, especially for low-income households, despite the recent liberalization of the financial sector and associated policy and regulatory reforms to promote increased participation in housing finance and development. It is estimated that India's housing shortage is as high as 40 million units, suggesting that more than 200 million people are living in chronically poor housing conditions or on the streets. Even if the overarching goal of the Ninth Five-Year Plan is "shelter for all", it has not been achieved by the year 2000 and will not be achieved by the end of the Ninth Plan period in 2002. Since over 90 percent of the housing need is from low-income families, these families are the ones who are most directly impacted by unacceptable living standards and a poor quality of life in all of India's urban centers. Lack of basic services such as water supply, drainage, sanitation and electricity also negatively impact the productivity and incomes of poor households, especially those who work in their homes.
Since the major source of housing finance for low-income households is their own meager savings and family assets, the principal constraint to the ability of low-income families to improve their housing and living conditions is the absence of affordable credit for housing. Although various CFIs and NGOs have assisted low-income families to mobilize their savings and have extended loans for housing construction and improvement, these efforts are extremely small when compared to the total housing finance demand of low-income households. Project resources will therefore be focused on assisting poor families with one or more income earners to gain access to housing finance from formal and informal housing finance institutions, especially CFIs and NGOs. With this, the Project will promote market-based lending, as these families would otherwise have to pay higher than market interest rates to money lenders in order to access small housing loans. For the poorest families, the Project will support subprojects such as slum networking and home workplace schemes to improve their housing, income earning potential, and access to basic infrastructure and community services.
- Objectives and Scope
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The objectives of the Project are to: (i) increase access of low-income households to market-based housing finance by increasing and broadening the finance channels of both informal and formal housing finance institutions (HFIs); (ii) reduce poverty by improving infrastructure and services in slum areas, and financing innovative low-income housing subprojects; and (iii) expand the lending operations of housing finance companies (HFCs) to include a greater proportion of loans to low-income households. The overall thrust of the Project is to promote market-based lending without subsidies, and the target beneficiary group is low-income households.
The Project consists of three parts: Part A: lending to low-income households through intermediaries such as CFIs, NGOs, public and private enterprises, and state and local bodies; Part B: reducing poverty through slum networking and home-workplace subprojects; and Part C: increasing lending to low-income households through formal HFIs.
- Policy Dialogue
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Under the first Housing Finance Project, the policy dialogue focused on: (i) removing major legal and regulatory impediments to developing a sustainable housing sector; (ii) promoting greater cost recovery and community participation for slum improvement and low-income housing subprojects; (iii) strengthening financial management capacities of state level housing institutions; (iv) supporting market-based lending to low-income households; and (v) expanding the national housing finance system. The existing situation and agreed upon policy reform measures to be linked to the Project are contained in the Policy and Institutional Action Plan which incorporates reforms that focus on establishing a conducive environment for housing investment, setting up appropriate and sustainable mechanisms for housing finance, and strengthening institutional capacities of formal and informal sector HFIs. Some reforms require support from institutions other than the Borrowers. For such cases, the Government as Guarantor of the loan will be responsible for supporting the reforms.
- Environment Category:
B
- Environment Impact and Mitigation
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The environmental implications of the subprojects were reviewed and their likely impacts found to be easily mitigated. Initial environmental examinations will be undertaken for subprojects.
- Social Aspects and Remedies
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The Project is expected to reduce poverty by providing direct support for low-income and slum upgrading subprojects to address the housing needs of the lowest income groups, particularly the economically weaker section.
- Benefits and Beneficiaries
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The major benefit of the Project will be the catalytic impact on improving the access of low-income households to housing finance, and the accompanying policy reform agenda that will promote sustainable mechanisms for the delivery of housing finance at market rates, strengthen the institutional capacity of HFIs in both the formal and informal sectors, and facilitate housing investments.
- Public Consultation
- Arranged by Borrower, Bank and TA Consultants
- Date for Consultation : During implementation of TA 3288-IND and during fact-finding mission
- Groups Consulted : CFIs, NGOs and low-income households
- Beneficiary Participation in Formulation
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There will be community participation in project planning, implementation and O&M and private sector participation in the design, development, and financing of improvements to ensure sustainable subprojects.
- Beneficiary Participation in Implementation
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There will be community participation in project planning, implementation and O&M and private sector participation in the design, development, and financing of improvements to ensure sustainable subprojects.
- Consulting Services
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No requirement for consulting services.
- Procurement
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Procurement of Bank-financed facilities under the Project will be in accordance with the Bank's Guidelines for Procurement. For procurement of goods and services to be financed by the subloans out of the loan proceeds, the Borrowers will satisfy the Bank that the procurement procedures they apply are appropriate in the circumstances.
- Contacts
- Bank
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Tetsu Ito
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Senior Economist (Financial Sector)
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INRM
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Tel. No.:
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(632) 632-5514
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E-mail:
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tito@adb.org
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- Executing Agency
- Housing and Urban Development Corporation Limited
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Contact Person
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Mr. V. Swarup, Chief, Communities Development
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Tel. No.
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(9111) 4367734
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Fax. No.
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(9111) 4365053
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E-mail
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habitat@mantraonline.com
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Contact Person
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Tel. No.
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Fax. No.
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E-mail
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- Remarks
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