The Hindu Business Line : Global Report on Human Settlement 2005

IN A world on the move, where 50 per cent of the population or 3 billion people are living in urban centres, UN-Habitat forecasts that in the next 25 years, 2 billion people will join those looking for housing, water supply, sanitation and other urban infrastructure services. This will create huge pressure on monetary and other resources.

The rate of house construction needed will be mind boggling — virtually 4,000 housing units per hour. The human settlement pressure will be felt mostly in the Third World countries, which are already facing high population density.

In India, for example, nearly half the population does not have proper housing due to growing population and limited land availability. the pressure on finite natural resource is going to be immense. By 2030, 40 per cent of the population will require proper housing and basic infrastructure facilities.

The housing crisis is already being felt in cities such as Mumbai where the sanitation and other infrastructure facilities are stretched to the limit. There is increasing pressure on housing finance companies to provide affordable credit.

The first global assessment of explosive growth in housing demand and financing has been conducted by the Global Report on Human Settlements 2005, spanning quarter of a century. The report especially examines financing urban shelter development and focusing on the shelter needs for the poor. It also examines the status of slum dwellers in the context of the United Nations Millennium target.

If adequate financial resources are not invested in the development of urban shelter and requisite services, this will put extra pressure on health infrastructure thus compounding the problems associated with poverty, deplorable housing conditions, poor health and low productivity.

Despite an impressive growth of 4 per cent in the world economy, poverty remains endemic in Africa and South Asia where 64 per cent of the population still earns below $2 a day. Most critically, those who belong to this low-income cannot afford better shelter.

In many poor countries development of urban infrastructure suffers due to budgetary deficit. Naturally, urban developers have started to look towards the global and national finance companies.

The report indicates that mortgage finance has been expanding during the last decade in many countries. This was not the case 20 years ago. The middle and upper income households have access to such finance while the poor are generally excluded due to lack of credit worthiness.

Novel and simpler methods of access to finance have to be devised if the poor are to included in development goals.

The report also notes that the problem in many developing countries, and even in some developed countries, is not that housing is expensive but that incomes are too low.

According to the study, this factor alone is significant in stressing the important role of public sector financing of shelter for the poor who cannot afford home ownership or market rents.

In household budgets, housing takes the least priority compared to livelihood, education, health and marriage expenses. This leaves very little capital saving for asset creation. Therefore, it is necessary for the public sector to step forward and finance urban shelter.

The report describes innovative, informal ways the poor can finance the construction and improvement of their homes. Their access to housing finance may depend upon social networks based on religion, family or ethnicity.

In this context, the urban poor can only afford to build a house in stages, as and when the finances are available. The report also shows that there is increased interest in shelter community funds, which are often linked to housing cooperatives as well as rotating savings and credit societies.

Micro-finance institutions can play an important role in bridging the gap in credit status or providing bridge finance to allow access by the poor sections to housing finance schemes, such as housing subsidies.

The study done by UN-Habitat, concludes that in the light of the success of general small loans and increasing urban poverty, community financing has many advantages for low income households.

Constraints to mobilising financial resources for investment in shelter development are both financial and non-financial in nature.

Non-financial constraints include land legislations as well as inappropriate national and local regulatory frameworks governing land use and occupancy and ownership.

In the light of this, the report seeks to address the role of secure tenure in housing finance and highlights the need for legal and institutional reform designed to protect the rights of both lenders and borrowers as well as to enhance access to credit.

Finally, the report concludes that finance is only one dimension of securing sustainable solutions that can fill the gap between two extremes of current systems and processes; affordable shelters that are inadequate and adequate shelters that are unaffordable.

The report, therefore, concludes that the focus of policy makers should be on both the cost of housing and the level of payment received by workers. Creating shelters for the poor should be part of social capital to which governments must stand committed.

(The author New Delhi-based freelance writer.)

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