Need for affordable housing and microfinance for all

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Need for affordable housing and microfinance for all

Monday, 15 February 2021 | Moin Qazi

Need for affordable housing and microfinance for all

While India continues to record improvement in dealing with poverty, homelessness has elicited a poor response from our policymakers

Among the many challenges that need urgent attention, more so after the COVID-19 pandemic invaded our lives, is housing. This vital segment needs a scientific and creative intervention to make it a sustainable proposition. Lack of proper housing is one of the reasons, apart from loss of jobs, that led to the mass migration of labourers from cities to the villages, during the initial days of the countrywide lockdown. Hence, expanding access to affordable housing is essential not just for equitable development but also for social stability.

Looking at the gravity of the issue, Finance Minister Nirmala Sitharaman in her Budget speech announced the extension of the tax holiday on affordable housing projects for one more year. The Government has done this to ensure affordable housing for migrant workers. The affordable rental housing projects are part of the ‘Pradhan Mantri Awas Yojana (Urban).’

While we continue to record improvement in dealing with poverty, homelessness has elicited a poor response from our policymakers. Consequently, slums constitute 17 per cent of urban households in India and in Mumbai they make up 42 per cent of the households. These slum clusters lack necessary amenities like private toilets and potable water. A high population density and a weak public healthcare system mean more susceptibility to COVID-19 and other diseases and epidemics. Necessary precautions like social distancing to stay safe of the Coronavirus cannot be practised under such deplorable living conditions that prevail in slums and jhuggi jhopri clusters.

Human health and well-being depends on a range of interconnected social, economic and physical factors that impact the environment in which we live and sustain ourselves. The key to good housing is to ensure that residents have access to transportation, affordable healthcare, jobs, education as well as other essential services. A decent habitat and shelter can contribute in not just individual or societal well-being but also have the potential to catalyse overall economic growth. It is, thus, critical to recognise housing investment as a basic, fundamental building block of economic activity.

Housing is not a standalone issue and is closely intertwined with other factors and lack of sustainable housing is often the cause of a slew of health and developmental problems. Poor ventilation and the inability to maintain basic hygiene are major causes of poor health. Fragile building structures undermine safety and increase vulnerability to disaster. Lack of lighting and space limits the ability of children to study. Inadequate privacy and lack of sanitation contribute to a host of diseases, hence perpetuating poverty.

For many people in the developing world, the land on which they live is their only asset. If that property is not recognised as legally theirs, they lose out on several social benefits. Land ownership is often the bedrock of other development interventions. Owning land boosts nutrition, educational outcomes and gender equality. The converse is equally true. Where land security is absent or weak —when men and women do not have recognised legal rights to their land and can thus be easily displaced — all other development efforts go in vain and conflict arises.

Many who live in slums have little or no control over the ownership of the property they live upon. The lack of official land titles is a major impediment to the acquisition of housing finance. People do not have documentary proof of being owners of the land on which they live and are, therefore, legally insecure.

Many low-income villagers have owned their land for generations but lack formal ownership documents. Hence, they do not have access to formal financial services. Once their inhabited land gets formally titled, they could obtain access to several public benefits, including loans.

Traditional housing finance has not been able to offer much help to people in the low-income group. But a range of financial institutions are applying good microfinance practices, thus promoting housing. The increased provision of housing microfinance has resulted in safe and healthy housing conditions for millions. Successful housing microfinance providers have married the core principles of micro-credit — peer-based borrower selection and repayment enforcement, close follow-up on repayment and so on — with the technical expertise required to investigate land ownership and other classical housing finance principles.

This model has been highly successful wherever Governments are offering long-term tenancies and shared-ownership housing. But the sector is still in need of more sustainable business models to get legitimacy in mainstream finance.

Housing micro-finance can include a range of financial services that support improving or upgrading housing such as home repair and expansions, additional cooking space, water and sanitation services, energy efficiency upgrades, the purchase of inhabitable land or permanent structures and the construction of new housing.

The demand for housing micro-finance is high. The clients are already channelising a good portion of micro-enterprise loans for home improvement; micro-entrepreneurs also use their homes as productive assets for generating income. A home can be a place to store inventory, produce goods and run a business. A home is also a personal asset that usually appreciates in value over time. Home improvement, thus, not only enhances living conditions but is also an investment.

The Government also needs to use creative approaches for making rental housing a safe option for house owners. Its share in overall housing has been steadily declining. There is clearly a need to replace the current rent control laws with modern tenancy laws, so as to give full freedom to tenants and owners to negotiate the rent and the length of the lease.

Rules with respect to eviction also need to be reformed to restore the balance between the rights of tenants and the owners.

We need a differently structured and more professional market rental sector. A model Rent Act is needed to promote rental housing. There should be mutual agreement between the landlord and the tenant for a stipulated lease period prior to which the tenant can’t be evicted and after the expiry of the lease period, the tenant will not be permitted to continue in the housing unit.

However, rent control laws give tenants so much security that landlords worry that they may not regain possession of their property at the end of the lease period. People often leave their properties vacant until they get a tenant they are comfortable with.

It is time the Government puts rental housing to use. Its share in overall housing has been steadily declining. There is a need for replacing current rent control laws with a modern tenancy law, which would give full freedom to tenants and owners to negotiate the rent and the length of the lease.

Policymakers, financial institutions and housing experts also need to evaluate their current policies, cultures and ways of working. With a thoughtful approach, they can be better prepared to tackle this humongous problem. The Government will have to change course and shift away from the legacy mindset before the problem gets out of hand.

The writer is a well-known development professional. The views expressed are personal.

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