The Hindu Business Line : Low-cost housing, of a high quality

Investment World - Real Estate & Construction
Industry & Economy - Real Estate & Construction
States - Karnataka
Low-cost housing, of a high quality

One project under the Ashraya scheme in Karnataka demonstrates what it takes to build quality housing for the poor.

House built for those in the low-income group in Karnataka.

Rohan Mukherjee

The twin cities of Hubli-Dharwad in Karnataka are home to over 8 lakh people. Almost a quarter of this population lives in slums. In a State that is short of 1.63 million houses for its inhabitants, it is hardly surprising that many of the urban poor live in temporary structures and dilapidated civic conditions.

The State government under S.M. Krishna, in 2000, developed a housing policy with a pro-poor focus. It set up a State-level corporation to fund the project-based construction of low-income housing at district level under a scheme called ‘Ashraya’.

In Hubli, as in other cities, the Ashraya scheme has helped to increase the supply of low-income housing. However, in a city experiencing rapid growth and inbound migration, demand for these houses has remained curiously low. By 2007, the average occupancy in urban Ashraya projects was 43 per cent and many houses suffered from poor quality of design and construction. Infrastructure and facilities such as roads, water, sewage, sanitation and electricity were not always available.

One success amidst many failures

Amidst the poorly performing projects, however, one community stands out as a clear success and offers important lessons for the future prospects of the Ashraya scheme. During the early stages of the scheme, the government constructed a colony named S.M. Krishna Nagar, which today boasts of 93 per cent occupancy and a vibrant community of 8,500 individuals living in 1,240 good quality houses with all basic amenities.

The key to the success of this project has been a set of institutional innovations that helped to bring down the cost of housing while retaining high standards of construction. Moreover, the location of the colony, only 2-3 km from the Hublicity centre, makes it a much more attractive place to live in than other Ashraya projects.

The biggest obstacle to creating a successful low-income housing project is the fact that it is for low-income groups, i.e. for people who cannot afford to pay large sums for housing. Normally, low-income translates into low cost, which means low operational budgets, leading to inferior quality of construction materials and designing abilities, which ultimately lead to cracked walls, caved-in roofs and water-damaged foundations a few years later.

When houses are not sturdy and their inhabitants know this, demand for future houses from the same source tends to diminish rather rapidly; hence the low rates of occupancy in Hubli.

But that is only part of the story. Site location is another major factor. Premium apartments on the outskirts of cities such as Delhi and Chennai are oversubscribed because their buyers can afford to transport themselves into the city for their needs. The same is not true for low-income families. For an economically weak household that earns not more than Rs 3,000 a month, the opportunity cost of a long-distance ride to the workplace, school, hospital or marketplace is significantly higher, and therefore projects located in the far-flung outskirts of cities are highly unattractive.

Knowing this, policymakers still find it difficult to optimally locate low-income housing projects, because land prices rise as one gets closer to the city. Moreover, the actual process of land acquisition becomes harder as owners are not always willing to sell, least of all to the government.

Good quality, at low cost

In S.M. Krishna Nagar, however, the planners were able to innovate in order to create good quality housing at low cost near the centre of economic activity in Hubli. The Ashraya scheme called for land to be provided by the State government and a housing construction loan of Rs 25,000 per family to be given to beneficiaries by the RGRHCL.

The district administration and the Hubli-Dharwad Municipal Corporation (HDMC) made site selection their first priority. They identified a 34-acre contiguous piece of land just outside the city.

The owner’s reluctance to sell was overcome in an unprecedented display of cooperation, with the local MLA stepping in to secure the deal at a competitive price. Infrastructure and facilities were provided by bringing in money from other schemes operating in the area, including the MLA’s own MLALADS funds.

The soil of the land, however, was of a type that would require the foundation of each house to go twice as deep as normal.

This could clearly not be achieved within a budget of Rs 25,000 per unit. The government approached the RGRHCL, which sanctioned a one-time increase of the loan to Rs 37,000 per unit.

This enabled the foundations to go deeper, with the added benefit that in future beneficiaries could construct a second floor. In order to further bring down cost while maintaining high standards, it was decided to manufacture cement blocks onsite and to increase the density of houses in the site in order to benefit from economies of scale.

These innovations together ensured that site location was prioritised and the quality of housing was high despite being low-cost.

Lessons for policymakers

Today S.M. Krishna Nagar is a bustling community and a thriving local economy. When interviewed last year, an overwhelming majority of residents spoke of a sense of security in having a ‘permanent address’ as opposed to living amidst the uncertainties of an inner city slum.

None of them was willing to sell their house (despite the significantly increased value of the land) and move back into the city. This, above all, is the sign of a truly successful low-income housing project. The lessons for policymakers are self-evident: prioritise site selection and do not compromise on quality.

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Note: S.M. Krishna Nagar is the subject of a case study that won second prize in Hidden Success, an international contest for the best academic papers on India’s urbanisation.

The contest was organised by the Massachusetts Institute of Technology (MIT) and the Institute for Financial Management and Research (IFMR), Chennai. The case will appear in an edited volume to be published by MIT in December 2008. Visit http://hidden-successes.mit.edu for more information.

(The author is MPA Candidate, Class of 2009, Woodrow Wilson School of Public and International Affairs, Princeton University.)