Bhutan: Green and Resilient Affordable Housing Sector Project

Sovereign Project | 54355-001

The project is aligned with the following impact: livability, safety, and sustainability of human settlements ensured. The project will have the following outcome: access to green and resilient affordable housing for low-income households improved.

Project Details

  • Project Officer
    Kohlhase, Jude Ernest
    South Asia Department
    Request for information
  • Country
    Bhutan
  • Sector
    • Water and other urban infrastructure and services
Project Name Green and Resilient Affordable Housing Sector Project
Project Number 54355-001
Country Bhutan
Project Status Proposed
Project Type / Modality of Assistance Grant
Loan
Technical Assistance
Source of Funding / Amount
Grant: Green and Resilient Affordable Housing Sector Project
Asian Development Fund US$ 6.00 million
Loan: Green and Resilient Affordable Housing Sector Project
Concessional ordinary capital resources lending US$ 24.00 million
TA: Supporting the Green and Resilient Affordable Housing Sector Project
Technical Assistance Special Fund US$ 1.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Sector / Subsector

Water and other urban infrastructure and services / Urban housing

Gender Equity and Mainstreaming Effective gender mainstreaming
Description

The project is aligned with the following impact: livability, safety, and sustainability of human settlements ensured. The project will have the following outcome: access to green and resilient affordable housing for low-income households improved.

Output 1: Climate- and disaster-resilient, energy-efficient, and affordable housing units and public facilities for low-income households constructed. Output 1 will support the National Housing Development Corporation Limited (NHDCL) in building about 1,000 rental units, three integrated community service centers, and two recycled waste stations connected to services, in support of the Sustainable Development Goal 1. The government selected high-priority investments as subprojects. The increase in the supply of affordable rental housing is expected to immediately relieve the housing shortage and benefit lower-income civil servants (about 10%) and non-civil servants (about 90%), including marginalized municipal waste workers. The building designs incorporate gender-inclusive features; enhanced safety against earthquake and fire hazards; and resource efficiency, making greater use of locally available materials. The building structures will employ reinforced-concrete frames and innovative pre-engineered structures. The project design has identified and incorporated climate and disaster resilience features, considering multiple hazards. The project will support green building certification through the International Finance Corporation's Excellence in Design for Greater Efficiencies (EDGE). The housing designs reflect local cultural heritage values and traditional architecture. Additional subprojects will be selected during project implementation in line with the National Housing Policy, 2020 (NHP) using the eligibility criteria set out in the project administration manual.

Output 2: Institutional capacities, policy, and regulatory framework of the housing sector strengthened. This output will (i) strengthen the NHDCL's housing design, construction, and management capacity; (ii) review the building code and regulations; (iii) develop climate- and disaster-resilient building designs and related solutions to improve safety, resource efficiency, and gender and disability inclusiveness; (iv) conduct awareness training and a capacity building program for key project stakeholders on climate- and disaster-resilient design and the building code; (v) enhance the NHDCL's business model, strengthening its operation and maintenance capacity, and developing partnerships with the private sector; (vi) strengthen the housing management information system of the Ministry of Works and Human Settlement by expanding it to include tenancy data; (vii) develop a gender and socially inclusive national homeownership strategy, including a rent-to-own mechanism; and (viii) provide project implementation support, including supervision, and set up a safeguard unit in the NHDCL.

Project Rationale and Linkage to Country/Regional Strategy

Country macroeconomic context. Bhutan is steadily urbanizing. The share of the urban population increased from 30% in 2005 to 42% in 2021, driven by an average annual growth rate of 1.9% over that period. The urbanization rate is projected to reach 56.8% by 2047. Urban population growth is fuelled by rural migration, mostly to the four largest urban centers of Gelephu, Phuentsholing, Samdrup Jongkhar, and Thimphu, which account for 59.0% of the total urban population. While 58.0% of the Bhutanese population still lives in rural areas and engages in small-scale and subsistence agriculture, the constant flow of rural migration to urban centers is exerting mounting pressure on urban services. Bhutan has a chance to be proactive and focus on housing development. Economic growth in the capital city, Thimphu, has been fuelled by expansion in construction, services, and manufacturing. Bhutan has a current overall unemployment rate of 2.4%, which is low relative to neighboring South Asia countries. The Government of Bhutan's Twelfth Five Year Plan, 2018-2023 calls for developing the economy by fostering growth in the private sector, which will create jobs and contribute to sustainable poverty reduction and the country's transition to green and resilient development.

Housing demand. Affordable housing development in Bhutan has not kept pace with population growth, particularly in urban areas where the demographic increase puts pressure on the limited usable land and pushes house prices up, making it increasingly unaffordable. The estimated shortfall of housing nationwide is 21,156. The affordable housing shortage is particularly acute for low-income households, which spend on average more than 40% of their income on housing greater than the recommended 30%. Nearly 64% of urban households rent, and only 19% of households own their homes. Housing options are becoming increasingly unaffordable for low-income households and vulnerable groups, including women, leaving them in (i) overcrowded conditions in shared accommodation, and (ii) residing in informal settlements.

Sector challenges-planning constraints, limited housing supply, and lack of access to finance. Unclear and onerous land use planning and zoning constrain the timely conversion of agricultural land for housing in Bhutan. The supply of appropriately zoned land for residential development limits the potential for affordable housing development. The private sector faces challenges in increasing housing stock because of high development costs and the difficulty of acquiring land located near services and employment centers. Key commercial housing finance constraints that limit housing development include high land prices and maximum lending terms capped at 20 years. Despite these limitations, mortgage lending for housing has increased significantly from 17% of total loans in 2018 to 27% in 2020. This reflects continuing high demand for housing credit, and is perceived as a medium-term risk by domestic banks because of their high exposure in a vulnerable housing sector and the possibility of leading to a real estate bubble. For home loans, microfinance is nascent in Bhutan and no microfinance institutions offer housing finance to households. Low-income earners are unable to access housing credit without verifiable income statements linked to formal employment. While making housing finance more accessible to households is necessary to address demand-side challenges, the government needs to intervene to increase housing supply.

Climate and disaster vulnerability. Bhutan is highly vulnerable to climate change and natural hazards. Flooding is considered the most significant climate-related hazard affecting the built environment. The country is also exposed to other hazards such as earthquakes, glacial lake outburst floods, forest fires, and landslides. The intensity of heavy rainfall events is projected to increase. Making housing and infrastructure more resilient to the impacts of climate and disaster events is essential to protect the urban population, especially the vulnerable communities.

Government policy. Bhutan's Twelfth Five Year Plan, 2018-2023 prioritizes the government's strategic thrust for economic stability, economic diversification, poverty reduction, and affordable housing provision. The government approved the National Housing Policy (NHP) in 2020. The objectives of the NHP are (i) providing safe, affordable, and adequate rental housing for all; (ii) promoting home ownership; (iii) encouraging partnership among private and government entities to provide affordable housing; (iv) establishing a robust governance system; and (v) promoting green and energy-efficient housing. The government's Low Emission Development Strategy, 2017 reinforces the government's commitment to developing green and resilient affordable housing.

The Ministry of Works and Human Settlements represents the government in human settlement matters and is responsible for the NHP. The NHDCL, a state-owned enterprise, is focused on providing and maintaining public housing. The NHDCL units are leased at below market rates, and more than half of them are leased to lower-income households. Of its 2,496 units, civil servants account for 84% of tenancies, while non-civil servants account for 15%. Only 1% of NHDCL units are owner-occupied. A preliminary assessment of the NHDCL indicates that it operated successfully from 2015 to 2019, averaging annual growth of 9.9% in rental revenue, 15.9% in profit after tax, and 8.5% in its asset base. The NHDCL plans to construct 2,500 housing units in a phased manner, of which 1,000 are proposed to be built under this project.

ADB intervention in the sector. The ADB has adopted a holistic, long-term approach to the "housing crunch" in Bhutan. Initial upstream analyses paved the way for a policy-based loan (PBL) to develop financial markets using a programmatic approach. Subprogram 1 of the PBL, approved in 2019 for the Financial Market Development Program, focused on reforms to enhance the efficiency, stability, and inclusiveness of the finance sector and supported updating the NHP. In October 2020, ADB approved subprogram 2 of the PBL to support the development of a long-term strategy for public housing, including recommendations for fiscal measures and actions to improve women's access to finance. Subprogram 3 of the PBL, approved in October 2021, will support a housing survey across urban areas and the implementation of financing schemes. Complemented by reforms tied to the PBL, this project will support government efforts to improve sector performance. The government has indicated its intention to approach ADB for additional financing to expand affordable housing based on satisfactory performance and lessons from the project implementation. ADB will coordinate with development partners-the World Bank and the Japan International Cooperation Agency-that are providing assistance for urban development, and climate change and disaster risk reduction.

The following lessons are incorporated in the project design: (i) technical assistance support is needed to achieve sector reforms; (ii) strengthening of the implementing agency's capacity will ensure financial sustainability, adequate operation and maintenance, and improved asset management; and (iii) a viable business model will be developed.

Sector lending modality. The project meets sector lending requirements as (i) the government has an NHP and implementation program, which provide a framework for sector investments; (ii) the NHDCL has the capacity to implement the sector development plans; and (iii) the existing policies are appropriate, and assistance provided under the project will support their implementation. The government has identified affordable rental housing subprojects, which are at different stages of readiness, so the sector approach adds flexibility and is suitable. Additional subprojects will be guided by detailed eligibility criteria agreed with the government for the project.

Impact Livability, safety, and sustainability of human settlements ensured
Outcome Access to green and resilient affordable housing for low-income households improved
Outputs

Climate- and disaster-resilient, energy-efficient, and affordable housing units and public facilities for low-income households constructed

Institutional capacities, policy, and regulatory framework of the housing sector strengthened

Geographical Location Nganglam, Phuentsholing, Samdrup Jongkhar, Thimphu, Trashi Yangste
Safeguard Categories
Environment B
Involuntary Resettlement B
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services All consultant recruitment will adhere to the ADB Procurement Policy (2017, as amended from time to time) and Procurement Regulations for ADB Borrowers (2017, as amended from time to time).
Procurement All procurement of goods and works will adhere to the ADB Procurement Policy (2017, as amended from time to time) and Procurement Regulations for ADB Borrowers (2017, as amended from time to time).
Responsible ADB Officer Kohlhase, Jude Ernest
Responsible ADB Department South Asia Department
Responsible ADB Division Urban Development and Water Division, SARD
Executing Agencies
Ministry of Finance
Royal Government of Bhutan
Thimphu, Bhutan
Attention: Director
Timetable
Concept Clearance 08 Dec 2020
Fact Finding 29 Jun 2021 to 09 Jul 2021
MRM 23 Sep 2021
Approval -
Last Review Mission -
Last PDS Update 22 Sep 2021

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

The Access to Information Policy (AIP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.

The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.

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Title Document Type Document Date
Affordable Housing Development Project: Initial Poverty and Social Analysis Initial Poverty and Social Analysis Aug 2020

Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

Title Document Type Document Date
Green and Resilient Affordable Housing Sector Project: Updated Land Acquisition and Involuntary Resettlement Due Diligence Report Safeguards Due Diligence Reports Nov 2021
Green and Resilient Affordable Housing Sector Project: Phuentsholing Updated Resettlement Plan Resettlement Plans Nov 2021
Green and Resilient Affordable Housing Sector Project: Thimpu Resettlement Plan Resettlement Plans Nov 2021
Green and Resilient Affordable Housing Sector Project: Updated Resettlement Framework Resettlement Frameworks Nov 2021
Green and Resilient Affordable Housing Sector Project: Amochhu, Phuentsholing Updated Initial Environmental Examination Initial Environmental Examination Nov 2021
Green and Resilient Affordable Housing Sector Project: Trashiyangtse Updated Initial Environmental Examination Initial Environmental Examination Nov 2021
Green and Resilient Affordable Housing Sector Project: Updated Environmental Assessment and Review Framework Environmental Assessment and Review Framework Nov 2021
Green and Resilient Affordable Housing Sector Project: Thimphu Updated Initial Environmental Examination Initial Environmental Examination Nov 2021
Green and Resilient Affordable Housing Sector Project: Drungpa Residence Site, Phuentsholing Updated Initial Environmental Examination Initial Environmental Examination Nov 2021
Green and Resilient Affordable Housing Sector Project: Rinchending, Phuentsholing Updated Initial Environmental Examination Initial Environmental Examination Nov 2021
Green and Resilient Affordable Housing Sector Project: Thimphu Initial Environmental Examination Initial Environmental Examination Sep 2021
Green and Resilient Affordable Housing Sector Project: Land Acquisition and Involuntary Resettlement Due Diligence Report Safeguards Due Diligence Reports Sep 2021
Green and Resilient Affordable Housing Sector Project: Trashiyangtse Initial Environmental Examination Initial Environmental Examination Sep 2021
Green and Resilient Affordable Housing Sector Project: Environmental Assessment and Review Framework Environmental Assessment and Review Framework Sep 2021
Green and Resilient Affordable Housing Sector Project: Amochhu, Phuentsholing Initial Environmental Examination Initial Environmental Examination Sep 2021
Green and Resilient Affordable Housing Sector Project: Phuentsholing Resettlement Plan Resettlement Plans Sep 2021
Green and Resilient Affordable Housing Sector Project: Rinchending, Phuentsholing Initial Environmental Examination Initial Environmental Examination Sep 2021
Green and Resilient Affordable Housing Sector Project: Resettlement Framework Resettlement Frameworks Sep 2021
Green and Resilient Affordable Housing Sector Project: Drungpa Residence Site, Phuentsholing Initial Environmental Examination Initial Environmental Examination Sep 2021
Green and Resilient Affordable Housing Sector Project: Thimphu Resettlement Plan Resettlement Plans Sep 2021

Evaluation Documents See also: Independent Evaluation

None currently available.


Related Publications

None currently available.


The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.

Tenders

Tender Title Type Status Posting Date Deadline
Project Implementation Assistance Consultants Firm - Consulting Closed 04 Sep 2021 03 Oct 2021

Contracts Awarded

No contracts awarded for this project were found


Procurement Plan

None currently available.