Low Income Shelter Finance in Slum Upgrading

Update, October 2, 2009: “More than a billion people—one-sixth of humanity—live in slums, according to UN-HABITAT. In 30 years, that figure could rise to nearly a third. The scourge of urban slums has long plagued India’s major cities. In Mumbai alone, 6 million people are slum-dwellers.

In the last few years, the policy landscape for urban renewal, slum upgrading, and affordable housing has changed markedly, funded by governments partnering with major non-governmental organizations (NGOs), banks, developers, and foundations. 

This study, financed by United States Agency for International Development, was undertaken on behalf of the National Housing Bank and the Society for the Promotion of Area Resource Centres, a leading NGO addressing housing for slum dwellers.

To improve low-income housing worldwide, we recommend increased public/private cooperation among banks, NGOs, and the microfinance industry. Together they can develop microfinance for housing, enhance credit in slum upgrading finance, distribute public subsidies cost-effectively, and start and support programs to generate savings and income in slums.”

—Sally Merrill and Ajay Suri

Abstract

This report summarizes findings from the USAID-sponsored project on models of financing for slum upgrading in India, undertaken on behalf of SPARC, a prominent NGO involved in slum upgrading in India and internationally for over two decades, and the National Housing Bank of India (NHB), one of whose main goals is enhancing housing finance for low-income households. In preparing the recommendations, the Urban Institute and SDS India have worked together with USAID and an Advisory Group formed for this project. In addition to SPARC and NHB, the Advisory Group includes banks, housing finance companies (HFCs), foundations, microfinance institutions (MFIs), builders, and Indian research institutions addressing shelter and microfinance.

Introduction

This project was sponsored by USAID on behalf of two key entities in low income housing in India: the National Housing Bank of India, charged with assisting mortgage finance and low income shelter lending, and SPARC, a leading urban NGO with experience in worldwide as well as in India. A key aspect of the work was to convene an Advisory Board to meet with USAID project staff who helped and guide the project’s work and develop the conclusions. The Advisory Board included members from the National Housing Bank, SPARC, USAID, banks, HFCs, MFIs, builders, and research institutions addressing issues in low income lending.

In the past year in India, the landscape for low income shelter lending has changed dramatically, due to public policy initiatives, private sector and NGO activities, and policy initiatives and funding from international foundations and donors. Initiatives have come from NGOs such as SPARC, NSDF, and SEWA; from banks, particularly ICICI; from public bodies such as JNNURM, and the Mumbai Slum Rehabilitation Authority; from research by IFMR; and internationally from the Gates Foundation and MSDF. All of this activity is propelling low income shelter finance far more rapidly than only months ago.

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