1 Housing and Housing Finance Challenges and Opportunities A new horizon for DFIs A review of some Asia-Pacific Countries Housing and Housing Finance Challenges and Opportunities A new horizon for DFIs A review of some Asia-Pacific Countries Presented at ADFAIP Annual Conference Vancouver, May 10-12, 2010 By: Zaigham Mahmood Rizvi Secretary General South- Asia & Pacific Housing Forum

2 Issues we know: An essential part of political sloganizm An essential part of political sloganizm “Housing for all”, “Slums Free Cities”, “Maang Raha hai har Insaan-Roti, Kapra, aur Makan”, and so on…… “Housing for all”, “Slums Free Cities”, “Maang Raha hai har Insaan-Roti, Kapra, aur Makan”, and so on…… In some countries delivery is SOME, and in most it is NONE In some countries delivery is SOME, and in most it is NONE Backlog is increasing to unmanageable levels Backlog is increasing to unmanageable levels It is a common issue of the region, needing sharing of experience and knowledge It is a common issue of the region, needing sharing of experience and knowledge Each country in the region has its own geo-socio- economic parameters, from Afghanistan to Indonesia, all facing a common issue of “shelter less poor”, so regional successful models would need indigenization Each country in the region has its own geo-socio- economic parameters, from Afghanistan to Indonesia, all facing a common issue of “shelter less poor”, so regional successful models would need indigenization

3 Population Trends Total Population (mn) 2007 Population Growth % Urban Population (mn) 2007 Urban Population % of Total Urbanization Growth % GDP Growth Rate % India1, Pakistan Sri Lanka Thailand Mongolia Indonesia Bangladesh Source: World Development Indicators 2009

4 The importance of SA Region The SA Region represents one out of four persons and one out of two poor on the planet The SA Region represents one out of four persons and one out of two poor on the planet It is among the lowest in terms of Mortgage Finance (Average Mortgage Debt to GDP Ratio 3.3) It is among the lowest in terms of Mortgage Finance (Average Mortgage Debt to GDP Ratio 3.3) Region is faced with massive housing shortage, Indian Urban Housing shortage 25 million plus Region is faced with massive housing shortage, Indian Urban Housing shortage 25 million plus Nearly the entire urban shortage is in Economically Weaker and Poor sections Nearly the entire urban shortage is in Economically Weaker and Poor sections Persons per Room Density in India/Pakistan is 3.5. EU is 1.1, USA is 0.5 Persons per Room Density in India/Pakistan is 3.5. EU is 1.1, USA is 0.5

5 Where the urban Poor Live Hiding behind higher persons/room density, and living in slums Hiding behind higher persons/room density, and living in slums In some cases homeless poor live on footpaths, and even in abandoned sewerage pipes, In some cases homeless poor live on footpaths, and even in abandoned sewerage pipes, A slum household is defined as a group of individuals living under the same roof lacking one or more of the following conditions: A slum household is defined as a group of individuals living under the same roof lacking one or more of the following conditions: “access to improved water; access to improved sanitation facilities; sufficient living area (not more than three people sharing the same room); structural quality and durability of dwellings; and security of tenure” “access to improved water; access to improved sanitation facilities; sufficient living area (not more than three people sharing the same room); structural quality and durability of dwellings; and security of tenure” Slums, Shanty Towns, Jhopar Patti, Jhuggi, Basti, Katchi Abadi, Squatter Settlements, legal/illegal habitat, and you name it Slums, Shanty Towns, Jhopar Patti, Jhuggi, Basti, Katchi Abadi, Squatter Settlements, legal/illegal habitat, and you name it Nearly 50% of major metropolitans in the regions are slums Nearly 50% of major metropolitans in the regions are slums Two prong approach would be needed: slums improvement programs and rehabilitation programs Two prong approach would be needed: slums improvement programs and rehabilitation programs

6 Slums Prevalence Afghanistan: 80 percent of the Kabul population (2.44 million) live in slums, damaged or destroyed housing Afghanistan: 80 percent of the Kabul population (2.44 million) live in slums, damaged or destroyed housing Bangladesh: 2,100 slums; more than 2 million people in Dhaka live either in slums or are without any proper shelter Bangladesh: 2,100 slums; more than 2 million people in Dhaka live either in slums or are without any proper shelter India: 52,000 slums holding 8 million urban households, representing about 14 percent of the total urban population. India: 52,000 slums holding 8 million urban households, representing about 14 percent of the total urban population. Pakistan: Karachi alone has between slums, sheltering about 7.6 million (or 1 million households) out of the total city population of 15.1 million people Pakistan: Karachi alone has between slums, sheltering about 7.6 million (or 1 million households) out of the total city population of 15.1 million people Sri Lanka: A considerable share of the population of Sri Lanka lives in plantations, slums and shanties. Sri Lanka: A considerable share of the population of Sri Lanka lives in plantations, slums and shanties. Mongolia: 51% of the population is residing in temporary ger dwellings Mongolia: 51% of the population is residing in temporary ger dwellings Indonesia: 17.2 million families live in approximately 10,000 slum areas Indonesia: 17.2 million families live in approximately 10,000 slum areas

7 Role of Formal Housing Finance Role of Formal Housing Finance Housing Debt to GDP (percent) Source: Financing Homes 2008

8 Importance of Housing Contributes to overall economic growth, social uplift and employment. Contributes to overall economic growth, social uplift and employment. Deepens, broadens and stabilizes the financial sector. Deepens, broadens and stabilizes the financial sector. Accounts for 75-90% of household wealth in emerging market countries. Accounts for 75-90% of household wealth in emerging market countries. In South Asia, industries are directly linked with housing construction. In South Asia, industries are directly linked with housing construction. Construction and related sectors constitute 9% percent of the labor force worldwide. Construction and related sectors constitute 9% percent of the labor force worldwide. Housing investment accounts for 15-35% of aggregate investment. Housing investment accounts for 15-35% of aggregate investment. Housing makes 15-40% of monthly household expenditure worldwide. Housing makes 15-40% of monthly household expenditure worldwide. Mortgage debt constitutes about 30% of GDP worldwide, and only 3.42% in South Asia. Mortgage debt constitutes about 30% of GDP worldwide, and only 3.42% in South Asia. Increases national savings and investment, and contributes towards poverty reduction. Increases national savings and investment, and contributes towards poverty reduction.

9 Growth potential of Housing Finance The world population is expected to reach billion by Within the next two decades, 60% of the world’s people will reside in urban areas. The world population is expected to reach billion by Within the next two decades, 60% of the world’s people will reside in urban areas. Rapid economic growth in the region, coupled with significant population increases and growing urbanization trends makes for a considerable potential for housing and housing finance growth. Rapid economic growth in the region, coupled with significant population increases and growing urbanization trends makes for a considerable potential for housing and housing finance growth. Household size is shrinking, and a significant middle class will be forming in the coming decades, mostly composed of young people who are eager to have their own, albeit modest, home. Household size is shrinking, and a significant middle class will be forming in the coming decades, mostly composed of young people who are eager to have their own, albeit modest, home. The averse attitudes to debt are changing, particularly for home ownership. The averse attitudes to debt are changing, particularly for home ownership. These developments are propitious to a scaled-up outreach of housing and housing finance markets. These developments are propitious to a scaled-up outreach of housing and housing finance markets. And private sector lending for housing would free scarce government resources for other social and economic needs. And private sector lending for housing would free scarce government resources for other social and economic needs.

10 Estimates of the growth potential Difficult to make precise estimates of the growth potential of the housing and housing finance sectors in the region. Some tentative projections: Difficult to make precise estimates of the growth potential of the housing and housing finance sectors in the region. Some tentative projections: Afghanistan: $2.5 billion investment ($276 million a year financing needs) in Kabul’s informal housing sector alone. Afghanistan: $2.5 billion investment ($276 million a year financing needs) in Kabul’s informal housing sector alone. Bangladesh: 3.5 million new rural houses required, and about million dwellings require incremental construction and repair. Bangladesh: 3.5 million new rural houses required, and about million dwellings require incremental construction and repair. India: US $108 billion investment up to India: US $108 billion investment up to Pakistan: US$5.6 billion investment for 2009 alone (US$2 billion or 1.26% of GDP financing need) for 470,000 housing units. Pakistan: US$5.6 billion investment for 2009 alone (US$2 billion or 1.26% of GDP financing need) for 470,000 housing units. Sri Lanka: up to US$8.8 billion financing needs by Sri Lanka: up to US$8.8 billion financing needs by 2020.

11 A shortage of over 38 million housing units in SA region only 24.7 m 5m 1m 7.6 m 0.65 m There are an estimated million homeless people in South Asia, out of a total region population of 1.5 billion (14 percent). Worse urban shortages are hiding behind squatter settlements and higher persons per room density. Source: Paper presented by Tatiana Nenova, Sr. Economist, World Bank, at SAPH-Forum Conference in Delhi, Jan 19-22, 2010

12 Total Mortgage Balances Outstanding and Market Shares, by country Country Bank Mortgage Financing State Specialized Mortgage Financing Private Specialized Mortgage Financing Islamic Mortgage Financing Afghanistan 100% (a) 0%0% included in (a) Bangladesh (Tk bn) 64%17%12%7% India (IRs. 3,970 bn) 66% (b) 4%30% included in (b) Pakistan (Rs bn) 76%13%0%11% Sri Lanka (Rs. 181 bn) 75%25%0%0% Source: Paper presented by Tatiana Nenova, Sr. Economist, World Bank, at SAPH-Forum Conference in Delhi, Jan 19-22, 2010

13 Housing Micro Finance some innovative approaches India: Housing Microfinance Program of NHB supporting Micro Housing Finance Corporation and many such MFIs India: Housing Microfinance Program of NHB supporting Micro Housing Finance Corporation and many such MFIs Mongolia: Ger area project sponsored by Japan Fund for Poverty Reduction (JFPR), Mongolia: Ger area project sponsored by Japan Fund for Poverty Reduction (JFPR), Sri Lanka: Women’s Bank program, Sri Lanka: Women’s Bank program, Thailand: Baan Mankong program (….) Thailand: Baan Mankong program (….) Indonesia: Subsidized Home Mortgage Program (….) Indonesia: Subsidized Home Mortgage Program (….) Bangladesh: Grameen Bank and Islamic Bank BD Bangladesh: Grameen Bank and Islamic Bank BD Pakistan: Micro-housing finance program of Tameer Bank, Kashaf Foundation, First Micro Finance bank etc Pakistan: Micro-housing finance program of Tameer Bank, Kashaf Foundation, First Micro Finance bank etc Afghanistan: MISFA Program and First Micro Finance Bank Afghanistan: MISFA Program and First Micro Finance Bank

14 Women Empowerment through Housing (Sri Lanka) Sri Lanka’s Women's Bank is a cooperative society built, owned and operated by and for poor women. Sri Lanka’s Women's Bank is a cooperative society built, owned and operated by and for poor women. The Women’s Bank in reviewing the housing conditions of its membership has found that most of them did not have a decent shelter to live in. They are used to construct their houses on incremental or progressive housing concept. The Women’s Bank provides loans for home improvement. Recovery is 99% The Women’s Bank in reviewing the housing conditions of its membership has found that most of them did not have a decent shelter to live in. They are used to construct their houses on incremental or progressive housing concept. The Women’s Bank provides loans for home improvement. Recovery is 99% In India, a HFC provides concessional housing loans if house is owned by housewife or joint. In India, a HFC provides concessional housing loans if house is owned by housewife or joint. Pakistan’s HBFC experience suggests that where housewife is a co-borrower, default rate is much lower Pakistan’s HBFC experience suggests that where housewife is a co-borrower, default rate is much lower Bangladesh: Grameen’s 97% borrowers are women Bangladesh: Grameen’s 97% borrowers are women

15 Way Forward South Asia-Pacific Housing Forum Physical (Conferences/Workshops) and Virtual ( Web-based service) knowledge sharing Physical (Conferences/Workshops) and Virtual ( Web-based service) knowledge sharing Each country has unique approaches and specific experiences to offer Each country has unique approaches and specific experiences to offer Intra regional direct assistance programs Intra regional direct assistance programs Regional platform for Capacity Building Regional platform for Capacity Building SAHF needs technical and financial support of multilateral agencies SAHF needs technical and financial support of multilateral agencies SAHF main focus to be ‘Affordable Housing for all” SAHF main focus to be ‘Affordable Housing for all” UNESCAP’s “Pro-Poor Housing’ initiative is commendable UNESCAP’s “Pro-Poor Housing’ initiative is commendable Coordination between SAPH-Forum Program, UNESCAP Pro-Poor Housing Initiative, and ADFIAP will serve the sacred mission of Pro-Poor and Affordable housing in the region.

16 PRO POOR HOUSING…. An idea whose time has come Member DFIs of ADFIAP to Play a Key Role ADFAIP to Coordinate with SAPHF-Forum Thank You Zaigham Mahmood Rizvi: