Housing Tenure for the Urban Poor : A Case Study of Mumbai City

1. Housing Tenure for the Urban Poor :A Case Study of Mumbai City Gaurang Desai University of Western Sydney 22 June 2007 Email : g.desai@uws.edu.au

2. Summary • Mumbai City and Context • Impact of regulations on real estate markets and land/ housing affordability • Topography & FSI Ratios • Urban Land Ceiling Act (ULCA) and Rent Control Act (RCA) • Coastal Regulation Zone (CRZ) • Housing Finance and the poor • Response from the poor • Squatter and slum settlements - Non formal, multiple and opaque tenure • Social and economic networks • Flexible budgets and Incremental Building • Housing quality – contextual to owner • Government response – Conferring ownership: • Targeted housing finance schemes • Dictated by opaque tenures, investment scale and need for private participation • Special housing projects for the poor (PPP housing, sites and services) • Possible Effects of tenure and identification of other solutions

3. Commercial capital and economic growth engine of India. Diversified economic base - value-added manufacturing, finance and software services. Reserve Bank of India and the two largest stock exchanges, the Bombay Stock Exchange and the National Stock Exchange located here. Accounts for 1/10th of factory employment and value-added manufacturing Mumbai Port handles more than one-third of the total value of foreign trade Mumbai Muncipal Corporation one of the richest, with a budget of more than USD 1.2 billion (Rakesh Mohan, 2003) Mumbai City: Economic powerhouse of India

4. Migration and Population Growth • Mumbai Metropolitan Region (MMR) is the fastest growing regions of India.Population increased from 7.7 million in 1971 to 18.3 million in 2001 (Source: Census of India)Projected to increase to 22.4 million by 2011 (Source: MMRDA) (Image Source: MMRDA 1999, pg 18)

5. Real Estate & Housing Affordability • Within a radius of 25 km from the city center, sea and water bodies occupy: 66% of the total area for Mumbai 22% in the case of Jakarta and, 5% for Seoul. (Source: Bertaud, 2002)Extreme topography compensation by liberalizing Floor Space Index (FSI) (Image Source: Bertaud, 2004)

6. Impact of Regulations on Land Use & Density • FSI in Mumbai city - 1.33 and 1.00 in the suburbs. • Most large cities varies from 5 to 15 in the Central Business District (CBD) to about 0.5, in the suburbs. • Urban Land Ceiling Act (ULCA) and the Rent Control Act (RCA) eliminate mechanisms for discovering efficient land use. • ULCA caps the amount of land that can be accumulated or transferred by the private sector. • Large tracts of land frozen due to lengthy legal disputes • Lack of economies of scale • RCA to protect tenants from arbitrary and exorbitant rents. • Depresses supply of new space as buildings under the act restricted from redevelopment or renovation. • Tenants pay rents as low as 1/100th the normal rents - disincentive to move, restricting dev

7. Impact of Regulations on Land Supply (Image Source: Bertaud, 2002)

8. Housing Finance: Policy Mismatch • Housing Finance companiesrequire: • Secure tenure as collateral • Minimum monthly income (30% of hhold income) • Require completion of dwelling • Equated Monthly Instalments • Large loans with longer duration • Urban Poor have no clear title and build: • Have flexible monthly budgets due to flexible incomes • Incrementally • Hesitant to take on debt. • Differing values on housing quality • Urban Poor require: • Smaller loans with shorter term for loans • Interest rates irrelevant • Flexible repayments

9. Housing response by the poor • Squatter and slum Settlements: • Incremental development • Social and economic networks • Sustenance landlordism and rental tenure • Non formal and opaque tenure

10. Government response “…the right to adequate housing has been recognized as an important component of the right to an adequate standard of living” Habitat Agenda, Paragraph 61 • Major policy Drivers: • Global campaign for secure tenure • National Housing and Habitat Policy 1998 • Belief that ownership facilitates integration of market forces, • Results in a more efficient land use and, • Provides incentives for the upkeep and maintenance of environs. • Problem Areas in Implementing secure tenure for poor: • Coexistence of multiple competing tenures including non-formal and legal tenure: • Rental, Leasehold, Freehold • Non-formal tenure – squatting and slums • Collective forms of tenure – Communal • Layered governance responsibilities – National, State and Local • Required Investments – Rs 1,51,000 crores • Government capable of providing only 25% (Source – Planning Commission, Ninth Five year plan 1997-2002) • Negative connotations to landlordism • Government approach: • Formalising housing and land tenure in slums • Sites and services; Permanent Housing • Refinancing at 2% discount for Housing finance companies lending to poor.

11. Possible effects of conferring ownership • May render large proportion of tenanted residents homeless • Increase land and home values and consequently rents • Lack of data makes outcomes unpredictable-unpredictability cannot be controlled • Downward raiding of slums and squatter houses – no security for poor • May not improve tax revenues as conferring ownership may encourage defaulters • Access to housing finance may not improve – Eligibility for Incomes and not assets

12. Thank You