Incentives for private sector participation in affordable housing
The World Bank has signed agreements for two US$250 million to help low-income groups Tamil Nadu get access to affordable housing and strengthen the state’s housing sector policies, institutions, and regulations.
The US$200 million is for First Tamil Nadu Housing Sector Strengthening Programme and US$50 million Tamil Nadu Housing and Habitat Development Project.
The US$200 million First Tamil Nadu Housing Sector Strengthening Programme supports the government’s ongoing efforts to increase the availability of affordable housing by gradually shifting the role of the state from being the main provider to an enabler. It will also aim to unlock regulatory barriers and incentivise private sector participation in affordable housing for low-income families.
Nearly half of Tamil Nadu’s urban population is expected to increase to 63% by 2030 from the present estimate of 50%. An estimated 6 million people are currently living in slums, representing 16.6% of the state’s urban population.
The loan agreements were signed by Sameer Kumar Khare, Additional Secretary, Department of Economic Affairs and Junaid Kamal Ahmad, Country Director (India) of the World Bank on 30 June 2020.
The project agreements were signed by Hitesh Kumar S. Makwana, Principal Resident Commissioner, on behalf of the Government of Tamil Nadu and Junaid Kamal Ahmad on behalf of the World Bank.
Commenting on loans, Ahmad said that the ongoing COVID-19 pandemic has put urban households at an unprecedented risk of increased poverty, loss of human capital, assets and livelihoods.
The impact will be most acute among the poor, particularly those living in overcrowded slums with limited access to basic services. The projects will support the state’s vision of providing safe affordable housing with improved living conditions for the poor and vulnerable.
Concurrently, the Board also approved a $50 million Tamil Nadu Housing and Habitat Development Project to support innovations in housing finance and strengthen housing sector institutions in the state. It will finance the newly created Tamil Nadu Shelter Fund (TNSF) – an innovation in housing finance in India – by providing an equity contribution of $35 million.
This initial support to TNSF will enable cross-subsidisation opportunities where higher returns from commercial and high-income developments will compensate for lower returns from affordable housing.
This will make affordable housing commercially viable for potential investors. The project will also strengthen the capacity of key housing institutions including the Tamil Nadu Slum Clearance Board, the state’s main provider of affordable housing; Chennai Metropolitan Development Authority, the land use planning authority for the Chennai Metropolitan Area; and Tamil Nadu Infrastructure Fund Management Corporation Limited, the asset management company of TNSF.
Yoonhee Kim, Senior Urban Economist, World Bank and Task Team Leader for the Housing Sector Strengthening Programme said that the global experience shows that the public sector alone cannot address growing housing demand, especially as countries undergo rapid urbanization. The public sector can play an important role in providing regulatory and market incentives to make affordable housing more attractive to the private sector.
Abhijit Sankar Ray, Senior Urban Specialist, World Bank and Task Team Leader for the Tamil Nadu Housing and Habitat Development Project, added both projects will complement each other and strengthen key institutions to transform the housing sector in Tamil Nadu.
The loans of US$200 million and US$50 million from the International Bank for Reconstruction and Development (IBRD) have a maturity of 20 years including a grace period of 3.5 years. fiinews.com
