Dialogue 6 - A New Deal for Housing Finance (WUF13)

Wonderful.
A very warm welcome and good morning to you all.
Welcome to the World Urban Forum here in Baku.
Welcome to those joining us in this room and also to those joining us online on UN web TV.
We are being live streamed and also we will have a recording of this as well.
Thank you so much for being part of this really crucial dialogue, a New Deal for Housing Finance.
My name is Nazan Mashiri.
I am a former presenter and journalist at Al Jazeera English at Reuters and the BBC and a professional moderator.
I'm also senior advisor for Climate at Peace at Birkhoff Foundation in Berlin.
Over the next two years, I will be guiding you through this really high level discussion.
Throughout the session, we are going to encourage you to participate through Slido, so you can scan the QR code, get your phones out now and the QR code will be up there all the time.
You can answer questions.
It's really important because you'll have an opportunity to engage and later on in the session, we'll also open up the floor to questions from you.
So look, we all know that housing is far more than just a roof over our heads.
It is one of the largest economic sectors in the world.
It shapes productivity, health, opportunity, resilience, and also we know that despite its importance, current housing finance systems, including traditional mortgages are just not delivering on the affordability and the inclusivity that they need to be doing at a scale they need to be doing it at.
Across the world, we have billions of people who remain excluded from formal housing finance systems in many countries.
Housing prices are continuing to rise in many parts of the world and access to affordable, adequate housing becomes increasingly out of reach.
The question for us today and please bear this in mind for all of you here and those listening online is simple, but urgent.
What is it going to take to build a new deal for housing finance? Now I'd like to move into our fireside conversation.
We have two global leaders who've helped shape housing policy around the world and in their own countries, of course, from leading ministries and large scale housing programs to advance social housing informal settlements, and also territorial planning.
It's my pleasure this morning to welcome Her Excellency, the Executive Director of UN Habitat, miss Anna Claudia Rosbck.
A round of applause, please.
It is my honor to also invite the Minister of Housing and Territorial Planning for Uruguay, miss Tamara Pezro Marin.
Thank you so much.
Please take a seat.
Look, the conversation is not just about policy ideas today, it's about implementation, but difficult trade offs that we all have to make, unfortunately, and the realities of trying to make the housing systems work in very different contexts around the world.
So I'm going to start with you, Your Excellency, and the situation in Uruguay.
Uruguay, we know, has long approached housing not just as construction, although that's important too, but as a question of planning, social integration of communities, and access to well located land.
So I'd like to begin by asking you, looking back at your work, what would you say is the most important lesson for us all here today in terms of delivering affordable housing at scale? I Good morning.
It is a pleasure to be here sharing this conversation with Ana Claudia.
The main lesson, if I had to mention one that we have learned in Uruguay is that building housing also means building a habitat.
These are not the same thing.
These are separate things and The impact is very different if you work with the communities and you focus on the opportunities for the people.
When we think about integration and inclusiveness, if we don't address the question of land and land planning, we are approaching or we're trying to address the deficit of units on paper, but not really on the territory, and what we're generating is exclusion, disconnection, and segregation.
In Uruguay, We are working to achieve this vision based on three dimensions.
One is the importance of the land and the location of the land.
Second, public and private financing funding, and the institutional capacity that you also need in terms of public policies.
If these three components are aligned, then you really can deliver affordable housing.
Which is the goal.
It is also very important from our perspective to highlight that for us, the housing policy is not an end in itself, and it's connected to other policies and it needs for other policies to be implemented and it is a leverage for social equality.
I would like to highlight the importance of including communities as it has been discussed in this forum, including the communities is very nice.
It's a very nice thing to say, but what does it mean? How do you achieve this? Well, through very specific methodologies for interventions, just to share an example, in Uruguay, in the different programs and projects for improving neighborhoods that we have developed, we create commissions with the communities which they are involved then in the technical teams, in the developer teams that work in the neighborhoods and the communities because there are objective questions, sanitation, for example, lighting, you have to determine where these things will be, and then there are other factors where you can work more with the community because sometimes technical questions are predetermined.
Financing of the land, institutional capacity and including the communities, to me, these are the key learnings that we have extracted from the experience.
C there that policy isn't enough.
Also, we need to make sure the policy is inclusive.
I think those were some of the two clear messages that came out from what you said.
But executive director, I'd like to ask you, what do you think is the most important lesson, not just from your time at UN Habitat but from your previous career as well in terms of learning about the financing of affordable housing at scale because that's what we're really focusing on how to get a new deal.
Yeah, I think one important aspect is and this refers to minister's points.
We need to agree with the society how the housing challenge, how the housing crisis will be addressed.
If we need to tackle informal settlements, if we need to build new houses, and how we build the new houses, what type of new houses.
If you're talking about isolated, creating urban spraw or if we're talking about following the principles of the new urban agenda of balanced densification, more compact cities, and so on, because this will have implications in the cost.
And is the most expensive input of the housing value chain.
What is very important, and in that sense, having the endorsement of the society is critical.
Land is fundamental.
Land is expensive, is becoming more and more expensive.
We talk about integration, overcoming segregation.
Building essential areas is much more expensive, so we really need um, to have instruments, planning instruments and land policies that help us also to plan where the houses are going to be built, to reserve this land, to use spaces that are underutilized, and to look at the recycling options.
All that has implications on costs because if I can have public land, The land is for free.
50% of the time my problem is solved, more or less in the average.
If I cannot have, then I have to work with private owned land and there are several manners to work with private owned land.
If I can recycle, if I have buildings to recycle, in many countries we don't have buildings to recycle, then the cost will be different.
But major point through my life, through my career is that no country has been able to address housing in a sustainable long term way with international finance.
It is domestic finance.
If we look at the big gas in the world, I think I mentioned in other spaces, China was able to lift hundreds of millions of people from poverty, building houses, domestic finance.
Europe, had a rebuilt recovery program after the war, received a significant flow of finance from the US at that time, Marshall Plan, but then it built its own systems.
Latin America that has been able through several schemes, Uruguay, Brazil, Colombia, Mexico, Chile to design housing policies, to deliver housing, they use public savings.
Savings from the cooperatives, savings from the workers, combined with taxation, India, domestic funding.
This is for me the key aspect.
We can count on some seed funding that come from outside to start the process, but we need to build robust housing finance systems here.
Yeah, funding is a huge issue, as you mentioned there and it's a very difficult complex thing.
I guess for a ministry in Uruguay when you're trying to balance your budgets, how are you going to implement your housing and habitat plan under these kinds of conditions? I was listening to the director and three points, three areas of attention that I think it's worth sharing first.
How do we work when we are going to start with these policies from the government? How do we approach the project? We need an interinstitutional outlook How can you do this through the design? Because oftentimes, you have a project, but if you don't put at the center of the project, the rest of the relevant institutions, they come in too late.
Doing this simultaneously when you plan public policies is so relevant because funding is as important as management.
How do you manage the projects? How do you manage the programs? The ability to manage all these things simultaneously and to think the design to design in a shared way is a cornerstone of success.
Then director was talking about funding and about the fact that funding can not only be foreign So here we need a line of action, which is precisely how can we interact? How can we work with a private sector? It's not a matter of the government entering the private market.
It's more a matter of guiding private sector policies towards something which is for the common good.
We have a plan which has three components.
The tax incentives for offer, subsidies for demand, and support for families according to the different realities of each of these families and on the other hand, topping, capping prices for the housing that will be built.
This is an agreement with the private sector and that really helps.
Then being able to focus on everything related to informal settlements.
Infrastructures, services, how do we strengthen social tissue? How do we work on mobility to continue to build the city and for the citizency? Thank you so much the private sector in through subsidies, through taxation breaks.
I think that's being repeated in a lot of countries and that provides an incentive for them to actually start to think about housing in a different way.
But I wanted to come back to you, executive director about the strategic plan and what you're doing and trying to integrate a new housing deal into that.
Yeah.
So first of all, having discussions here at the Word Forum, this is a starting point for us because we also have to build this understanding of the different roles and different organizations.
We do have the major challenge of financing development, which is broader.
And then when we talk about housing, then financing housing specifically to individuals, but also connecting to infrastructure.
We need urban infrastructure.
We need to understand and what is the role then in a country of the national government? What is the role of sub national governments.
We spoke about major funding.
Funding usually is available at the national level and housing is very expensive and I agree with the minister.
It's not only in some countries, is in all countries.
All countries of this world, have some kind of incentive or subsidy for housing.
Housing is not produced here in this planet without subsidy.
Of course, you have segments of the society that don't need subsidy, but the majority needs some sort of income and subsidy.
The point is that when you have a gap of income, you need more subsidies, and this is the case of the global south because the salaries are really too low, vis vis-à-vis the price of the house.
But then you have the role of the local government as well and in our strategic plan.
We talk about urban planning and finance, we talk about multilevel governance and what is the role of the local government and why it's important that local government has financial autonomy, has financial capabilities.
Because it's up to the local government to connect everything else that belongs to a house because we're not talking about building houses, as the minister said, we're building habitats.
We need access proximity to services, to jobs, to opportunities.
We need the mobility systems, the transportation system, we need public spaces.
Uh, public spaces, community centers, places where women can be, places for the youth, places for the children, for the elderly.
This is all better provided by the local government because they are closer to the communities and they can mobilize also the local resources.
In that sense, Um, we have been doing some work, UN habitat, the UN system, the banks, and so on, and supporting municipal finance, supporting municipalities to increase their revenues, the land based finance, starting with the property tax because they need the resources, to play along with the major funding that comes for housing, and infrastructure.
These are more or less the layers of our strategic plan.
You need to plan and to connect land and finance at the local level.
You need multilevel governance.
We need to mobilize resources for the ecosystem, make sure that we expand our footprint in the development arena, which we are doing with the banks and we had an excellent conversation yesterday around the IFIs roundtable, but we have to make sure that we work with the countries to review and or to establish their housing finance systems that will survive and be sustained in the long run.
Minister, you heard they're connecting the central with the local governments because you're building habitats.
You need systems that can provide mobility for people, for youth, children, families in these habitats.
This session is called a New Deal for Housing Finance.
What do you think as a minister there in Uruguay, this New Deal should look like? Yes, that's why I was saying earlier that although as the director of UN Habitat was saying, this happens in every country and there are hurdles to access housing in every country.
These programs that I mentioned, this program that has these three components, but in the same program.
That's what makes it so special.
How can we know part of this is, how do we attract funding? Of course, the central part is domestic funds from the national government, but we also use private investment and multilateral contributions.
How do we attract investment? We need these three dimensions in the same program, the incentive, through taxation breaks, the capping of prices for these housing depending on the number of rooms and being able to support families.
To me, that's very relevant, being able to concentrate these three components in the same program because this is what makes it possible for us to reach families which are not completely vulnerable but which still need support from the administration.
In this way, we can provide solutions for this bracket of middle income families and lower income families that maybe could pay a monthly fee but really are not able to save.
They need support of the administration to be able to access housing.
That's why Doing this simultaneously in all the public on the relevant public spheres is so relevant.
Thank you very much.
They're really interesting.
I wanted to ask you finally, Executive Director.
I know this is $1 billion question, but practically, if I had right now a check for $1 billion for you and I was handing it over and I'm not related to Fahad Masri, by the way, the billionaire owner of Everton in the UK.
He's not my father.
But anyway, if I had $1 billion to hand over to you, how would you use it to fund this new housing deal and what would you do with that money? Well, I think I would distribute this money.
I would try to blend and to connect this money with other money.
First of all, I would see what are the needs and where is the priority.
This is, I think, how government should work and allocate the subsidies and the investments as well and distribute it fairly.
But also look what are the resources that are available and how we can multiply this 1 billion.
This is the key issue.
Um, what kind of savings are available from people, what kind of resources the private banks have, what kind of resources the development banks have? And how can I divide this 1 billion between guarantees that could be risk the investments and therefore increase the amount of funding, subsidies to close the gap between purchase power and the cost of goods.
But I also would reserve some money for something that the minister said and we haven't been talking much about that, which is the management of the whole thing because as part of the management, we need to talk about the social work.
And include that in the cost as well.
Because if we look at, you know, the whole, you know, the cost of producing a house, we can talk about the building itself, the materials, the labor.
We can talk about the infrastructure, what you need to add in terms of infrastructure to connect to the city.
But basically, you have to work with the population as well.
In many cases, we are talking about population living in very vulnerable conditions, moving into buildings.
We had the discussion in the opening about high rise.
We're talking these days that we have to go more densities because we don't have spaces.
These are major social challenges and we hope that these new housing projects, developments will be sustained over here.
And there is a management, a condominium management, there's a social manager that's embedded in all that.
Quite often we don't put this component when we calculate the cost of the house, but this is very, very expensive.
I think part of the 1 billion needs to be dedicated to that.
It could be done by local governments.
It could be done by cooperatives, as is the case of Uruguay.
It can be done by social organizations.
We spoke a lot about community led.
It can be done by the financial institutions themselves.
But I'm sure that 1 billion um, can be multiplied if we are able to establish this social contract on what is that we have to fund and what are my first question, what is the division of labor? If we have clarity on that, this 1 billion can be many billions.
Well, you heard it there from Her Excellency, miss Anna Claudia Rosbck, Executive Director of UN Habitat, that if you did have $1 billion spare, you could actually multiply it and you know that we'll be in safe hands.
Thank you so much to the Executive Director.
And also to Her Excellency, miss Tamara Pezo Marin, the Minister of Housing and Territorial Planning of Uruguay.
Thank you so much to you both.
Thank you.
Thank you so much.
Thank you so much.
Thank you.
Wonderful.
We're going to move on now and I want to talk a little bit about how we're going to explore how housing finance can move beyond traditional mortgage models towards approaches that connect land, planning, infrastructure, and long term social outcomes.
Again, throughout the session, you can just scan that QR code.
Please do that right now because there are some questions that we really want to get your input into those questions.
So now it's my great pleasure to invite Mr.
Anna Karimov, the first Deputy Minister of Finance of the Republic of Azerbijan our hosts here at the World Urban Forum.
He will be giving our keynote speech.
Thank you so much, Mr.
Kov.
Thank you.
Very nice to meet you.
Thank you.
Dear participants, friends, colleagues, first of all, welcome to Baku.
It's a privilege to host this global forum in our city.
Actually, it's a time when we all try to answer one of the important questions, which is, how do we make housing financing affordable, inclusive, sustainable, and financially viable? Churchill used to say, we shape our buildings, thereafter, they shape us.
So now we're discussing the shaping of our future.
Housing policy is no longer about buildings.
It's about dignity, but it's also opportunity.
How a young family can build a future, communities remain socially stable and most important, how the growth becomes truly inclusive.
Perhaps the most striking statistic is that, and I heard it a lot during the first days of the forum, that nearly 3 billion people may require housing already by 2030, 3 billion persons.
So inspired by motivational speech of two great speakers earlier today by Her Excellency Minister Marin and Her Excellency Executive Director, I would like, with your permission, also share some of the experience of housing finance in Azerbaijan where we try to bring also some innovative mechanism for housing financing, especially under estimate that the domestic finance is very important in this regard.
So over the last two decades, Azerbijan has built a housing finance system designed to combine social inclusion and also financial sustainability.
Mortgage fund has become institutional backbone of domestic housing finance system.
Just let's have a look at some statistics.
This fund has supported more than 58,000 housing loans.
So 58,000 families has been supported through this mechanism.
9,000 rent to own contracts.
This is very also favorite instrument, while the families can rent and eventually become the owners of the housing, the owners of the future.
Fund currently manages more than $2 billion.
What makes this model is very important that it's not only combined state support, but also capital market financing because we talk a lot about that it's not only about financing, but also it's about management.
On one side, government supports concessional social mortgages for vulnerable groups.
On the other side, there is a bond issuance in domestic capital market and this balance matters greatly.
Standard mortgages are available to citizen, but there's also concessional housing for vulnerable groups like refugees, internally displaced people, military personnel, socially important groups, teachers, and of course, the families of the persons who returned from the war.
Another major transformation has been digitalization.
Because as Her Excellency Mr.
Marin mentioned, it's not only about financing, but it's also about management.
Digitalization is very important part of management in the housing finance Azerbijan.
Fortunately, the process is fully electronic.
Now application checks, approvals, all of them are digitalized through government systems.
But I would like to speak honestly.
There is still remains high demand for housing, and that's why the reform should continue.
Along with the mortgage fund, there's also state housing construction agencies that provides concessional terms, apartments, housing to vulnerable groups.
The best part of it is that they are already ready for occupation.
Probably the last mechanism I would like to touch upon is a state return program.
You know, Azerbijan after a long would say waiting period, were able to return its territory.
Following the liberalization of territories, the Grid return state program has been launched.
In 2020, since the stabilization, more than $10 billion was allocated forest and construction and rebuilding, so families are returning to cities and villages.
But we also should remember that housing remains a major economic driver.
It's not only about social cohesion policy, but it also creates a multiplier effect on manufacturing, employment, infrastructure, and urban development.
We're having a lot of efforts now on green bonds, green taxonomic frameworks, renewable energy integration, digital catastro systems, green building standards.
That's why there is another quote I would like to mention today.
As architect and urban singer Yang Gail used to say, first life, then spaces, then buildings.
Actually, this principle should guide us all because housing finance is not merely financing some square meters.
It's about financing human potential.
It's about new deals for urban development.
Thank you very much.
Thank you so much to Mr.
Anna Kadimov, the first Deputy Minister of Finance of the Republic of Azerbijan, member of the Supervisory Board, mortgage and credit guarantee fund of the Republic of Azerbijan our hosts.
Can I please ask if we can get some more chairs up here for our next session? Thank you so much.
I want to just thank everyone so far because we have clearly seen some common themes emerging from our conversations.
Housing finance cannot be treated in isolation.
That's very, very clear.
It's deeply connected to land, to governance, infrastructure, planning, regulation, and inclusion.
It was very interesting there that we heard from the first Deputy Minister that we need to combine, yes, the concessional financing, but also the capital markets too.
So we need to have the concessional financing, those types of mortgages, which are for more social parts of the community, whether there are teachers or nurses or people coming back from the military, Also, I really liked your point about what do we talk about when we talk about habitats and buildings? Very interesting that you quoted that it's light first, then it's spaces, then it's the buildings.
The executive director made it very clear that we're not talking about new houses, we are talking about habitats.
We have to connect those habitats to the most expensive parts of the city, which are usually the center of a city where a lot of the business and finance takes place and it's going to be very, very complex to do that.
I'd like to also move on to our next panel question and our next panel, which is going to be on the root causes and the future pathways, which I think is really important.
We have this Slido question that we asked you to fill out earlier.
You can just scan that code there, and we asked you what is the single most important reason housing finance systems fail to deliver affordability at scale.
I would say actually that all of those are actually really important reasons, but we're asking you for one key important reason.
And kindly, please get your phones out, you can log in, and you can answer that.
As you answer this question, I'd really like you to help me welcome our distinguished panelists.
Firstly, I'd like to welcome Mr.
Sanjay Shukla, the Managing Director of India's National Housing Bank with more than 30 years experience in housing and retail asset finance.
Thank you.
And also doctor Mai Abdel Hamid, who is the head of Egypt Social Housing and Mortgage Finance Fund.
Please take a seat.
You can sit closest to me.
Yeah, just over here.
Thank you so much and you can take a seat here.
Thank you.
Miss Kesa Rust, who is the Founder and Executive Director of the Center for Affordable Housing Finance in Africa.
And doctor Sriniva Samp, the Director for Water and Urban Development Sector at the Asian Development Bank.
And last but not least, Mr.
Ali Al Ahmed, the General Manager of Supply Chains at the Ministry of Municipalities and Housing of Saudi Arabia.
In this segment, we're going to really dig deep into the structural drivers behind the housing finance crisis and explore some concrete reform pathways and some practical implementation approaches from very different contexts and region.
We're so lucky actually to have you all here because we're looking at various contexts around the world.
I just asked you what is the most single important reason that housing and finance systems failed to deliver affordability at scale? Look, I think it's clear that everyone systems are too fragmented.
Yes, it's clear that everyone has different views, but the main one is that housing systems are too fragmented.
Can I also ask if you do need headsets? We are speaking in English, but if you do need headsets, our wonderful translators are doing an amazing job over there.
But I'm going to come firstly to you, Mr.
Skler as the managing director of India's National Housing Bank with more than 30 years experience.
India, of course, is an extremely important player globally, economically, but also you have a housing issue in the country.
You saw there, one of the biggest issues that our audience found was that housing systems are too fragmented.
What do you think about that? I do agree with this to some extent.
But in the larger seat today, I represent the world's largest social housing program which government of India is running.
And given the size of India, it is the seventh largest country by size and probably second by population.
So running a program is not that easy, but with a combination of so many things, Is a very diverse country where we have different approach of settlement in different parts of the country.
But we have been able to manage it through a consistent drive which we have in PMAY one.
We have delivered 29.5 million houses 2014-2019.
And in the second term of the same government, we are going to deliver again 3 million houses.
So every year we are going to deliver, you know, 29.5 million was delivered in 2014 to 191,930 million will be in the next five year.
Out of this million, 20 million will be in urban space, and 10 million space.
So when we started this, in fact, when you said, I can give you $1 billion check, we didn't have anybody to give me $1 billion check, but what we did, government came up with a very innovative idea because most of the banks, and I'm sure in every part of the world, they are supposed to do priority sector lending.
Whatever was the shortfall in the private private sector lending by the banks, that fund was collected and was given to us at a concessional rate of 4%.
In India today on deposit, we get about 7% and mortgages is about eight to 9%.
So that gives you some background.
With 4%, we multiplied the fund to five to seven times, and we funded the primary lending institution because in India, apart from bank, we have 94 mortgage companies, which are primarily into the mortgage lending of urban and urban poor and the economic poor weaker section.
In fact, 34 companies in the recent past have started only catering to the urban poor.
We have got close to 7 million urban poor account, and the delinquency rate in India is sub 1%, which is, in fact, so we did multiply the fund which came from India at concessional and we blended it with the fund which we raised at the concessional rate.
And the second see alone, if we talk about the urban poor housing or economic weaker section housing.
It cannot be run only on the subsidy.
So we have to come up with a complex model where a part of subsidy, even in certain cases, the land is given by the bank.
Construction is done by the person who gets the allotment of the land.
In the second case, partly we fund the subsidy also because on the interest portion, which mortgage which he takes and he pays on that.
So the system is very easy.
In fact, the number itself is speak.
It is not very difficult to build.
In fact, we delivered 29.5 million houses under the first program, and 30 million also a big number.
So that's quite a lot to do because the population of India is really growing and 39 million sounds like a lot, but still a lot more to do, right? Yeah.
And especially when we have capped the funding which came from overseas or international finance, I would say, to the extent of 15%.
The rest 85% was, you know, mobilized by ourselves in form of the domestic saving, in form of some tax concession, in form of the innovative scheme which the government has started for our housing where they come up with a deposit scheme for housing.
Thank you so much.
We'll come back to you a little bit later.
But I'd like to turn to doctor A Hamid, who's been sitting patiently here.
You are the head of Egypt social housing and Mortgage Finance Fund.
It's a really crucial institution in Egypt at the center of your large scale social housing efforts.
What's your perspective would you say on the root causes of this challenge of delivering affordable housing? Also, what do you think about the poll about housing systems being too fragmented, 35% of you think that? Thank you so much for inviting me to this important dialogue.
I've had a lot of insights from the opening session and the opening remarks and from my colleague in India as well.
I've been heading the social housing fund in Egypt for 12 years now.
Prior to that, I was promoting the mortgage market and trying to build a whole ecosystem for housing finance in Egypt.
That has taken me seven, eight years before I joined this project as the CEO.
Definitely, our scale is a bit smaller than India, given the difference in size of population and size of the country.
We are 100 million people and we had our supply deficits, especially for low income people at the start.
The housing system is really too fragmented.
We needed to create a lot of a whole ecosystem to be able to deliver housing that are subsidized and financed.
So it's not just about creating the financial markets and the secondary markets for bonds and so on.
We had a lot of issues and too many stakeholders involved in the housing delivery.
And since we are not building houses only, but happy that as discussed, we needed to have a lot of coordination with all the stakeholders to build this whole ecosystem.
So there is Ministry of Justice involved in the registration of title because banks need to register mortgages at this stage.
You need to have service land the offered by the government in reasonably good location and we get this land for free, as well, capital markets, as you said, you need to establish the trust of the banks that you want to offer mortgage products to people who were believed by banks as not bankable at all at the start.
We had too many challenges and we needed to bring in all that on the table.
Prior to the establishing the fund, we had funding from the World Bank for 200 million for subsidy.
And we had the money staying in that was in 2010 and I had the money sitting in my accounts and I can't find houses that I can subsidize.
We needed first to build the houses, the right housing set a targeting mechanism for eligible beneficiaries and had the money I had the money and I couldn't find the I had the money in the bank.
Exactly.
Yeah, so that was a key lesson.
In 2014, the government decided to create a fund that is specialized in the delivery of the houses, facilitating the mortgages, paying the subsidy, and all these issues.
We brought all stakeholders in the board of this fund and we had this institutional stability that I consider a blessing because we were able to plan for the whole 12 years on what to deliver, all the issues with local governments.
We had six ministers on board.
We had a special law that sets the eligibility criteria that we can review periodically each and every year.
So far, those ten, 12 years we have managed to deliver more than 800,000 households.
We had this 1 billion deal you talked about.
I took extra financing from the World Bank for 1 billion to subsidize That was in 2015.
We had a loan agreement for 500 million extra over the initial 200 million and then an additional 500 million, overall 1.2 billion from World Bank for subsidy.
But this subsidy, we created a subsidy system that should reach those who are really in need different subsidy amounts to different income categories.
We set income ceilings every year We do not allow people who own houses to access this program.
We had to establish new cities with all the services required connection and connectivity to the major cities, a lot of investments, but the money of subsidy helped us to mobilize much more funding from private banks.
We started from zero mortgage market size to now around more than 2.5 billion of mortgages extended only to those low income beneficiaries that applied through our bank.
In addition, that scaled up to other levels of income because we created a whole system of housing finance.
At the start, I had three public banks that were forced to start financing those beneficiaries that apply for subsidized government programs.
But since we structure that very well and set the right incentives for the lenders, now we have more than 32 lenders, which is more than 60% of the banking sector, including foreign banks, regional banks, and so on.
Because we managed to structure a product that is at market rate, we pay interest rate subsidy every month to lenders.
We pay cash subsidy to beneficiaries that is deducted from down payment.
The house is in a sense subsidized very well and this ensures that the beneficiaries repay very well.
We have a good NP issue so far.
Thank you so much.
We'll come back to you a little later on.
But that was really fascinating.
I wonder if the funding scene from 2010 and 2015 is the same as today, especially the World Bank and the situation currently with the global realities that we're all facing, unfortunately.
But a question to miss Cassia Ross, I think it's wonderful to have you here because you work for one of the world's leading housing policy outfits, the Center for Affordable Housing.
You've just been listening in to the other panelists and also you've seen what the audience here thinks about housing systems being too fragmented.
What do you think is maybe still missing from this discussion? Thank you.
I think that answer that's there, housing too fragmented, every single one of the other reasons are because of it being too fragmented.
That's why it's the main one.
And a key thing that we're missing, which was implied by both of the previous speakers has been information, right? So we have a disconnect between expectations and reality.
Our housing finance systems are expecting a population that is formerly employed.
They're expecting large scale developers that can build 1,000 units at a time on a regular basis.
It's expecting municipalities who deliver infrastructure, it's expecting land that's titled, all of those things are our expectations.
The finance sector says, we'll come and we'll engage and there is money, there's money in Madame Ma's bank.
But The reality is that those things aren't in place and yet the whole point of finance actually is to overcome the gaps.
That's the miracle of finance, is to fix those problems.
Can't do it by itself, of course, but often I think that finance can lead.
It can really change the context of the environment.
I mean, an example, for example, in Kenya, you have the Kenya mortgage refinance Company, which is available, it's providing liquidity into banks so that they could offer mortgages.
But the level of mortgage lending is still quite low in Kenya, certainly given the level of development happening because the developers don't like mortgages.
Well, why don't they like mortgages? They charge 30% more on the ticket price of their houses if you buy that house with a mortgage.
I said, What are you talking about? A mortgage is cash.
They want cash because the cash they use as construction finance.
The reason they do that is that they can't access construction finance because the titling system isn't sorted.
They're unable to access finance in the absence of title.
If they want to build, they need someone to finance them.
They ask for cash and they give a 30% discount which effectively means that there's a 30% surcharge on a mortgage loan because it's had to wait for the title to be in place.
So that's just a gap in the housing delivery value chain.
And that housing is not even affordable.
Well, and then there's that too.
So there, the disconnect, similarly, we saw that in Angola, an astonishing development in Angola where 30,000 units were developed and the so called affordable house was over $100,000.
Well, that might be affordable at a global level, but in Angola.
How do we know what do people actually earn? How much do they spend on their housing? What does that mean in terms of the housing they can afford? We have this grand almost Hollywood definition of what housing would look like, and then a sense that it's all going to be created once in one process that gets delivered and financed at the end.
When we know certainly in the African continent, the majority of people are building their housing incrementally by themselves.
Now, they could really use support in this.
They could use infrastructure they could use the roads, they could use supply chain facilitation so that the cement that arrives in their neighborhood is an affordable price.
Then of course, the technical capacity and the bylaws.
A really interesting example in Cape Town recently is that they issued a by law that recognizes microbers So micro Builders have been building in backyards forever, forever, and in fact, they build more housing in South Africa than the formal C microbers? Micro builders, they build one, two, maybe ten units, often in backyards of existing properties.
It's the whole context that makes that possible.
But they're building small.
They have maybe a pickup truck, sometimes maybe it's only a wheelbarrow.
And there's but they're not the large scale that build 1,000 units at a time.
Um, they were called informal for the longest time.
But the city of Cape Town has now created a by law that recognizes them.
Suddenly like that, they're formal, which means they can be regulated so the quality of their build is improved.
That means that if they're regulated, a bank can actually take a look and say, yeah, that's a business that I can provide finance to.
So a lot of the things that make or break a finance system are actually the wider regulatory environment and then the creativity of the finance system to respond to it.
It's basically formalizing things, so that they can access those formal institutions.
I'm going to hesitate on that word because formalizing, again, is an expectation often that doesn't match the reality.
Yeah.
It's recognizing the legitimacy and containing the operations so that they're healthy, and that there isn't the corruption and so on, all of that stuff.
The reason that we're regulated is so that we behave well in whatever sector.
You want that.
I'm nervous of calling that formal because formal has another set of expectations.
Sure.
And so interesting.
I think the Gen Z generation now are wondering whether they should even ever be able to afford something to buy and a lot of people are renting nowadays.
Even in areas you'd think would be able to afford 100,000, I don't think that's the case anymore for the new generation of people, but I want to come back to the Slido because we've got our next question.
Can affordable housing at scale happen without major public subsidy? Yes, only in some contexts or no.
Please go ahead and answer that question.
I'm guessing that yes, no is going to be the answer.
It's a big no.
Only in some context is going down down down.
I Okay, so fascinating.
I'm going to come to you, Mr.
El Al Ahmed from the Ministry of municipalities in Saudi Arabia.
You've been sitting and listening in to all the great panelists that we have here.
Of course, your municipality in Saudi Arabia is trying to expand access to affordable housing there for the neediest groups.
What are the challenges there, would you say? How would you react to this poll which overwhelmingly is telling us that affordable housing at scale needs major public subsidy.
Good morning, everyone.
Nice to meet you all today.
I think the beauty of gathering here and back, whether Bijan, the previous three to four days showed us that we all speak the same language.
Just in the previous session now Her Excellency just mentioned the value chain that starts with the land, moving to the infrastructure, moving to award the project to real estate developers and contractor, and then moving of the beneficiaries until the other supporting services around the house that increase the quality of life.
And my fellow panelists said the same thing about the value chain.
Maybe we went to address the challenges one step further to classify them in two dimensions.
The first one is demand and the other one is supply.
On the demand part, we classified every Audi citizens that is eligible for housing based on a number of factors.
One of the major factor was their income.
If your income is 4,000 or more, you are eligible for affordable housing.
How much is that in Dallas? It's about $1,000.
So you need to have $1,000? $1,000 as a monthly income to be eligible for affordable housing.
Then after you are eligible for affordable housing, there is a number of subsidized packages by the government in collaboration with local banks in Saudi.
More than 13 banks in Saudi give these real estate loans.
The real estate loans jumped in the previous five years from 400 billion Saudi reals.
Now we are touching nearly 1 trillion Saudi reals, 900 and more billion reals and subsidized real estate loans given to the Saudi citizens eligible for housing.
These loans are being more attractive, Saudi because the government either subsidize the interest of the loan or they hand you nonrefundable, 150 or 100 if you apply for a loan and get a house subsidized by the government.
This is for the first classification regarding people that have maybe $10,000 of income or more.
For people who has less or has no income at all, there is a program under the Ministry of housing in Saudi called the Developmental Housing.
It's done in collaboration with charity funds.
We either take the money from the government or from charity funds or from charity givers.
We put them all in one pool and right now there is more than 200,000 families in Saudi that are benefiting from these houses.
109,000 of these houses are built by the ministry itself.
The other houses are bought from the private sector.
This is from the demand part.
From the supply part, we have done a collaboration either with real estate developers on private sector or with manufacturer and supplier of building materials.
We have given the building materials a new platform for central procurement called Supply Pro.
Supply Pro utilizes the economy of scale at Saudi, meaning that we negotiate with manufacturer and supplier, not for 1,000 house or we are negotiating for 1 million house, get the best price, secure our supply chain, make our real estate developers and contractor utilize these agreements in order to get the best prices.
This will reflect on the price of the house at the ends for the beneficiary.
We have also done a number of agreements with real estate developers, either local real estate developers or international real estate developers from across the world to come to Saudi.
And this is an invitation to a lot of contractors and real estate developers who are willing to come to Saudi Arabia and start getting a quota or a location of these housing units.
You are more welcome to visit us, to sit with us, to see the opportunities that we can offer, and I think we can work together to introduce a number of methodologies and business model to the Saudi people regarding how to deliver affordable housing and utilize the infrastructure that we have in Saudi.
We have the subsidized loans, we have the subsidized infrastructure, and we have the subsidized loans.
I think it's a great opportunity to collaborate and talking to you here in B was a great privilege to introduce this opportunity.
Well, you heard there, it's open call to anyone listening online or here that Saudi Arabia is open and wants the expertise and clearly you have the subsidies and the funding available.
You're very lucky there to have that.
If we could just bring the slido back up.
So the question was, can affordable housing at scale happen without major public subsidy? We've just heard there that it definitely cannot and we need additional help and we heard the example from Saudi Arabia.
But I'd like to come to you, doctor Srinivas Samas.
You've been sitting there very patiently listening in, taking it all in.
You are the Director for the Asian Development Bank's Water and Urban Development Sector Office.
You have more than a quarter of a century of experience in urban infrastructure and also housing finance, which is great because this whole session is about housing finance.
I'd like to get your reaction, first of all, to the poll, but also, I want to just pick your brains on this question about affordable housing at scale.
The reality is, aside from Saudi Arabia, maybe some other examples, that it is so difficult for countries, especially in your part of the world, to reach scale without significant public funding and support for land, infrastructure, and the basic services you need to get those habitats going.
Thank you.
First and foremost, I'd really like to appreciate you and Habitat for organizing this very important conversation and for inviting Asian development Bank to this very important discussion.
Nasrin, I think what you asked is a very, very fundamental question.
I would flip the argument as it depends on who your target audience is.
If you're talking about the bottom of the pyramid in the cities, absolutely, I think you are going to be requiring some form of support.
Now, what do I mean by that? It's not necessarily only cash transfer.
You really have to design the settlements.
This is where the confluence of urban planning, policies, urban transport, and social housing or affordable housing comes in.
We have seen experience of our own projects in one of the countries, we had a client who wanted to do a PPP project and the entire burden of the associated infrastructure was put on the private sector.
Where was that? Was in the Pacific Island, let's not get into the names of the countries.
But what happened was that because everything was loaded to the private sector, the bids came in about three times what the government had expected.
As a result of that, what we are now working with a few other countries are to try and identify how public financing could come in and address some of the basic infrastructure so that you deris these projects.
Because if you start to really look fully serviced land to be provided to people who you think should be able to afford it, it's not going to be possible.
We heard about $100,000.
Probably we are looking at similar numbers, whether it's India, Philippines, Indonesia, Vietnam.
The story is the same.
This is where I think it's important to distill who you're talking about in terms of audience.
We have also been brought into a certain situation when there are emergency relief and there again, Our mandate has been not just design houses, but design communities where we've been able to bring community infrastructure.
I want to cast our mind slightly to the people who are really at the bottom of the pyramids of our cities, who are migrant workers, who are living in informal settlements, who are probably completely unbanked and you touched upon this Nazaren as you were speaking also, what we are really now looking at is, can we bring in rental housing to scale for two reasons.
One, As a city dweller, if I moved in from another city, it's quite likely that I may not want to invest in housing, and I want to look at a good quality affordable housing where my family and my kids can live comfortably and actually grow my business or whatever the case may be.
Secondly, for the reason that we talked about, it's simply beyond my ability to even get a mortgage.
I would have even if it's 10% loan to value, I may not have that kind of equity as a migrant worker.
What we have been doing is to work with several of our client countries to develop rental housing as a new asset class.
And this has really picked up, and even in the very large program that Mr.
Shukler was talking about in the subsequent stage of PMAY two, it has been recognized that rental housing is going to become a very large segment.
So one example that we've done along with our colleagues from World Bank is to set up a shelter fund in the state of Tamard in India, where we have invested into a shelter fund through which I projects are being delivered for rental housing, whether it's migrant workers, industrial workers, working women hospitals and that's completely changing the dynamics of how you can reach affordability.
I do want to emphasize on that because most of our conversation in this meeting and elsewhere during this event has been mostly about financing affordable housing.
I think what we need to think about is, how do we increase access to affordable housing in our urban areas and in rural area so that we have a much more equitable solution for this rather than just only looking at finance.
It's contrary to what the title of the discussion is, but I do want us to emphasize how do we deliver that solution.
Thank you.
Yeah, I guess yesterday I was moderating a session on informal settlements and slums here.
One of the biggest questions also is for renters and the people taking advantage in those informal settlements.
Renting is also part of the problem as well and the landlords and the landowners who are renting at just crazy prices that people can't afford.
So if I may, I think that's a very important point.
In one of the sub projects of this in entrepreneur state, what we've done is through an app based system, there is a working women's hotel that had been set up across the state.
We see a huge uptake in these because they find this accommodation far more secure than private landlords and there is no cash transfer.
Everything is app based.
So we've been able to use digital platform extremely well.
If I'm a woman coming into the city, I register myself.
If there's an accommodation available, I straightaway move in, or else, I'm put on a waiting list.
As the waiting list clears, I could come in and we have priced this at pretty much at the market rate, but what it does, it provides them safe, secure, clean accommodation and it's transformed the way we've been able to deliver this and we normally get about 80 to 90% occupancy within about six months' time.
Even in smaller cities, we're able to hit 100% within a year's time.
Well, it's great to see the Asian Development Bank doing so much on this really important issue.
If I could just go to the next slide though.
And this I think is a really important question.
I really appreciate your help with this.
Which actor has the biggest responsibility for fixing housing finance systems? I know we're putting a few of you on the spot here because we've got obviously some national government actors sitting up here.
If we look at the results, let me just go through it.
We have national governments, city governments, private sector, development finance institutions or all equally.
I know what my answer would be.
Yeah.
But let's just have a look at the answer.
I think actually most of you are probably going to say all equally? Thumbs up.
Yeah.
Okay.
Wonderful.
If I could just turn to my panelists.
Look, I don't want to put you on the spot here and I don't want to point any fingers, but at the same time, I think it's really important that we try to think back to our fireside chat where we discussed who needs to step up for a New Deal for housing finance.
Maybe if you could just take a couple of minutes each just to reflect on this question about who needs to step up? I guess everyone needs to step up, but there are some people who need to step up more than others.
If I could start with you, Ma.
We're going to go in a different order.
We're just going to head down.
I think national governments need to exert the most efforts with the rest of the stakeholders.
I wouldn't say no, but not equally.
I mean, the pioneers should be the national governments, then I tend to disagree with the statement all equally.
The national governments need to exert much more efforts.
Maybe we can put that up on the screen.
60% of you said all equally.
They think all equally.
40% national governments, which is what you're saying.
Yeah.
Please go ahead.
More or less.
Because to build the whole ecosystem for the housing finance sector, you need someone to champion the dialogue with all the stakeholders.
As I explained in my first statement, you have a lot of stakeholders involved in this housing finance process and you want to make sure they're all helping you to reach your target.
So In our experiences, as I said, we needed to bring all those stakeholders on the table to establish this housing finance system, set the right package of incentives because in the end, you need some incentives to encourage banks to come in.
You need to tailor a good product for them.
They want to ensure good repayments from beneficiaries.
I believe definitely with the help of the development finance, with some concessional lending like the ones we've had from the World Bank, we managed to the subsidy.
We have the fiscal component covered from this loan to pay for the cash subsidy, for instance, and to cover for some interest rate subsidy.
You need all of this, but you need to have a political will from the national government to make this all work.
Otherwise, as I said, I had money, but I didn't have a system that was quite functioning, so I didn't manage to achieve a breakthrough up till we managed to get all the stakeholders on the table, set the right benchmark, set a smart subsidy system.
That is, you don't your subsidy, you give equal subsidies to all beneficiaries.
You want to maximize the leverage you can get.
You set the debt to income of 40% and then you cover the rest by subsidy.
Not everyone should be subsidized equally.
All these are efforts that should be exerted by national governments and unified bodies like us to set the proper strategy so as not to waste your subsidy, you want to make sure your subsidy reach the targeted group.
You want to leverage this subsidy on to multiply effect.
I paid 1 billion in subsidy.
I need to see 10 billion in construction who are paying taxation.
You need to calculate and recalibrate your models all through the process and assess the impact of this subsidy you are paying on the housing finance system in a sense.
For instance, 1 billion should generate 10 billion in taxation from private banks.
And this we have seen, we have nine times leveraging of private money and we do these assessments every now and then to make sure we are on the right track and that we are reaching the right outcome from them.
Thank you so much.
Just a quick heads up to the audience.
After this segment, we are going to come to you.
You're going to have opportunity to pick the brains of the panelists.
Start thinking about any questions you have, any burning questions you'd like to ask, okay? I'd like to go over to Mr.
Sanjay Shukla.
Again, just your quick reaction on which actor has the biggest responsibility here.
We haven't put national banks, but I guess that comes under national governments as well.
But, um, Again, who do you think has the biggest responsibility for fixing housing finance systems? So when we looked at this poll, in fact, I was given, and my fellow speaker, they said all equally.
But yes, a national government has to set the goal, set the agenda, and all are equally important and they play a vital role.
National government, I can speak from my experience when we delivered 29.5 million houses in five years.
It wasn't possible and especially the city government also equally they were playing the equal role because in India, we have a democratic society at different levels, the different governments, they are not the central government, the party which is ruling in the central is everywhere in the states.
So national government had set the agenda.
The developmental financial institution played a very important role like us.
We gave conal finance to ensure that, you know, delivery was done at a very reasonable price.
The private sector also with the PPP model, in fact, we allotted land to some, you know, part in the major cities where we gave land at a sensational rate and the private sector were asked to build on that and the combination of higher income group, lower income group, and economic weaker section.
The charity was not charity, subsidy was passed on to economic weaker section, and the higher income group was sold at a much higher rate.
And city government, the land allotment urban local bodies was their job.
So I personally believe all of these play equal role.
One link is missing, which is a mortgage lending institution because that is very important, especially when you're delivering mortgage to economic weaker section or urban poor or people who are on the bottom of pyramid.
First coming to a common underwriting standard because when it comes to lending, everybody tries to lend to people who are in the higher income group or the middle income group, but this segment is completely ignored.
So in 2007, We had addressed this issue and a lot of mortgage companies which are lending to economic weaker section or urban poor or middle income group, they came in existence.
And today, we have more than 7 million live account where we have delivered mortgage to this.
So that's one link which is missing, which I thought I share.
Thank you.
Thank you so much for that.
Cassia, I just feel like this is such an important question, but I do feel like the housing finance system is so unfair and it's just in a way set up to fail in many contexts.
It just needs so much more to be done.
How do you feel about this question and about the answer from the audience? I want to answer this question by looking at the last one actually, because I was going to say, yes, in some cases, and in fact, we can see it, affordable housing is being delivered at scale without subsidy.
Not always beautifully, but sometimes very beautifully, and it's being delivered by small scale players who are building it themselves and sometimes they get penalized for that effort and they're certainly not supported in it.
I think that that's the space actually to use that's where the clue is.
How we get to scale.
We imagine scale as these large systems, but in fact, multiplying the massive impact of lots and lots and lots of small efforts together.
In Johannesburg, for example, there is a lender who provides mortgages to small scale landlords and the lender is called tough.
And they provide these mortgages to people who are new entrepreneurs who might access a few sectional title units or condominiums together, and then they refurbishment and they offer them.
That finance provides and has provided, I think it's upwards of 60,000 units across South Africa with no subsidy on the build side.
In fact, the finance is more expensive because it has a lot more support in it than traditional mortgage lenders and they've put that effort in to actually understand the risk of the client and to engage with that client.
Where there was a subsidy was because the national government through its National Housing Finance Corporation, gave subsidized capital to that mortgage lender.
So If we think about what is the role of who, national government will set some frameworks, but I'm really frightened that national government thinks they need to put the money in all themselves.
They actually just need to light a few fires.
Maybe that's not the best metaphor, but some way to just stimulate a level of activity in different places.
There is a real need, I agree with Sanjay, for the financial sector to think and engage creatively and our assessment of risk is so narrow minded in terms of how do we engage with households who are informally employed and there's such good work being done in India, but also in other places in Africa and around the world around underwriting for informal incomes and recalculating and calibrating how to offer finance that responds and that meets the needs of the people who actually need that capital.
So I want to say that the national government and then for goodness sake, also the municipal government need to play a leadership role, but that's not in the funding or the financing or the subsidization themselves.
South Africa has a long history of housing subsidies which have done beautiful things in the country, but also have started to crowd out some of the players and some of the entrepreneurial activity that could be rising and engaging in the market.
Um, and what we want to do is to afford people the agency to engage in markets with the targeted support around the things that are actually blocking their efforts.
Thank you so much for that.
And doctor Samba, when we started this whole dialogue, we asked the question, what would it take to build a new deal for housing finance? I guess that's really the question we're trying to answer here.
Could you just very briefly try to help us with that question? Look, I do want to look at this one and while on the face of this, I think it doesn't give me any surprise because each one has an important role to play.
What I'm surprised is, at least in the audience here, city governments are not represented.
The reason why I'm picking that up, they are closest to the clients.
They are the ones who had to find land, they are the ones who have to consult stakeholders.
Maybe it's just a representation of who we are today, perhaps I wouldn't dwell too much on that, but I think each one of them actors are going to be critical.
We've talked about national level agencies and institutions creating that ecosystem, playing that catalytic role coming in.
The city governments obviously will have to integrate transport, land supply, consultation to make sure that planning permissions are in place to promote that.
Of course, development banks like ourselves always will look at how do we leverage our own limited pool of capital that's available to support what the national agenda is and come to the local level.
What we really want to see is, how can we bring the community and the private sector delivery model.
If we could use state capital or development capital or international financial capital as a tool for de risking private capital, I think we will be able to unlock that What it needs to be done is to really create a layered structure of financing that allows private capital coming.
There is one segment that has not been talked enough again, is the role of philanthropic capital.
In the capital stack, how do we bring philanthropic capital that will allow you to de risks, perhaps take a first loss position, that will unlock capital that's available.
We all know that there is far more capital available that is not coming in because the projects are structured very well.
If we could be creative enough as a collective group here that's represented to to deliver solutions on the ground and unlock private capital.
I think we would certainly be able to open this up.
But yes, each one will have a very differentiated role to play in order to deliver affordable housing.
I think we all want to unlock the private capital, all of us.
Over to you, Mr.
Ali Al Ahmed and really keen to hear from you because obviously you are the general manager of supply chains at the Ministry of Municipalities and housing in Saudi Arabia.
What are your thoughts on the poll and who do you think has the biggest responsibility for fixing the housing finance systems? It's a great question.
I think definitely a shared responsibility between public sector and private sector, but it should really start with the national government.
One of the most successful programs that the national government in Saudi have started a program called Dafi or you can call the trustee in English.
It's an off plan sales program, meaning that the government is overseeing, creating, and monitoring, and ensuring that any Saudi citizen who buys an off plan house, meaning that he buys the house now and he moves in 36 months later after the house is built, Everything regarding creating the account for real estate developer or contractor, building that house is monitored by this program by the government and making sure that the installments from the beneficiary business account or bank account goes smoothly in a streamlined process and manner from the beneficiary to the real estate developer or contractor, making sure that he will receive his house in the promised contract time in three years.
This program has increased the trust 200% by the private sector to join the public sector and subsidizing the real estate loans to beneficiaries who buys off plan houses from the government and private sector as well.
I mean, 13 banks in Saudi have all established a new department dedicated to off plan sales just after this program has been launched by Saudi Arabia back, I think ten or nine years ago.
So it really is about trust, building that trust so the private sector feels that it can invest because it needs to get a return, obviously, otherwise, there's no incentive.
Exactly.
Yeah.
Okay.
Thank you so much to our panelists.
A big round of applause.
They're not going anywhere, but let's just applause them anyway.
All right.
So now is the time where we would like to open the floor to you, our wonderful audience here in the room.
Thank you so much for engaging with the Slido.
We're really, really appreciative of that.
We'd like to open the floor now for any burning questions you may have.
It would be wonderful if you could direct those questions to the panelists that you feel most appropriate or you don't have to and I can direct that question if needs be.
But please do raise your hands if you do have a question and we will bring the microphone to you, but please make sure it's a question rather than a statement.
Thank you so much.
We have this lady here first in the middle there, and then we have a gentleman there at the back.
Maybe we can start with a gentleman and then we'll go to the lady in pink or red.
Yeah.
Thank you.
Please introduce yourself.
My name is Ian Morgan.
I'm a consultant in housing finance.
I have a question for either the representative from Egypt or India.
How do you think about balancing subsidy programs versus the demand supply value chain versus supply? It seems like in some ways, it's easier to do demand subsidies, but how do you think about balancing with supply subsidies? Okay, so doctor Hamid, great question there about how you see how can you balance these two things? I think it's very, very important.
Maybe we start with doctor Hamid and then we can move over to Mr.
Shukler from India.
So thank you.
In fact, balancing subsidy, in fact, what we have done in our program because as I mentioned, it was not a completely subsidy oriented program.
In fact, it was done, as doctor Sama said.
First, we had three layers at the bottom of pyramid.
Bottom of pyramid is, I agree that they need 70, 80% of subsidy or 60%.
But as we move up, like the total outlay of the housing program, what we had, the subsidy portion was only 28%.
The rest 72% was managed either by giving, you know, the tax break or, you know, to the higher income group or people who are investing in the mortgage bond or coming through.
It's a balance.
It cannot be only subsidy oriented theory, otherwise, it will be having a lot of burden on the estate exhequeer.
So exit bottom of the pyramid, and when we move to middle income group, middle income group, we actually have six programs which we run.
One was interest subsidy program, middle income group where the house size we capped to 90 square meter and the income was capped, plus one more important fact that the house owner has to be a co owner has to be women.
Without women's subsidy is not being given.
Either it be mother or wife, women of the family has to be co owner, so that the purpose was there to give, you know, the women ownership of the house because India largely earlier, it was a male dominated society.
So it has a multiple multi fragmented approach, like 10% of the total interest payment was subsidized by the government every year, 10% every year, and it is a five year program.
Then we had affordable rental housing which, as doctor Sampat rightly said in a second, where yes, government gave subsidy is giving subsidy in the form of getting the land availability.
It's not actually subsidy, but it is giving land availability at a cheaper rate.
The construction is being done by the private player.
Thank you.
In fact, they have come up with a very good model in Tamila.
So much.
Amy, do you want to answer the question? In Egypt, we also are focused on demand side subsidies, more or less to beneficiaries.
Those targeted beneficiaries, as I said, we define the income groups we want to address, we keep some priorities.
Women headed households definitely and households with children rather than newly married or single persons.
But more or less demand cash subsidy that is deducted from down payment, but it differs from one category of income to the other and interest rate subsidy and different interest rate subsidy at lower rate for middle income.
And there is some degree of supply side subsidy as well.
So we don't include the cost of the landing in the unit price.
So government is providing land for free for us as a fund, and we don't include the cost of the land or the infrastructure inside the unit so that we keep the house price at last manageable and reasonable.
So we sell the house at cost without the infrastructure subsidy and without the land cost as well.
Thank you so much for that question.
Great question.
I hope it was answered.
We have another question here.
Would you like to introduce yourself? We have the names hopefully up here of our panelists, so you can address them directly.
Yes.
Hello.
My name is Paula Siva I'm from the International Institute of Evironment and Development.
My question is mostly to miss Rest from CAF, but also if anyone else has any thoughts is about the opportunities and risks associated with property tax to finance forms of housing development.
And if there are any examples of how this measure is being implemented, what can that teach us? Thank you.
Talking about any particular context or country in the world? Perhaps in the context of African cities, but if there are any other examples, of course.
The risks around property tax and opportunities and opportunities, the risks and opportunities, over to you.
Thank you.
That's such a great question.
There are not very many cities that have property tax actually, and it's such a significant form of funding for infrastructure, quite critical.
Partly, you can fund it from the national fiscus, but if you're funding it locally from what you've generated locally, that makes sense.
Um, but it's also such an important part of the social contract between the state and the residents.
If you do that and your property taxes, then of course, that's a cost that low income people would struggle to bear and certainly in subsidized housing environments, then you have a sense where somebody becomes asset rich or even historically so they have a property and they weren't paying a tax and then this new tax arrives and then maybe they'll get squeezed out, and then that feeds a process of gentrification and so on.
Um, I think that I think the first principle is property tax is absolutely necessary and it's an important part of that infrastructure investment process.
But to really recognize the capacities of the households to pay and how much for a long time, it was a comment that was made in South African cities it was too expensive to collect property taxes from people for whom it would be a bit of a stretch in any event, And I think now we have technology that in fact could make that process cheaper, yet still maintain that relationship of payment for services received, and that then creates the basis for those taxpaying residents to demand those services.
I wonder if there is a space also for deferring the payment of property tax to a sale process if somebody does eventually leave so that they don't get squeezed out because they can't afford the property tax right now.
There are some neighborhoods also in South Africa where the neighborhoods are becoming very valuable under the feet of very poor residents who live there and they shouldn't be squeezed out just because the area, they should be able to benefit from that value.
The last thing to think about though here in all of this is this notion, and we see it a lot in Latin America, and it's something that's promoted by the Lincoln Institute and we've learned a lot about land value capture.
And that's really, really important as an opportunity that when the municipality makes an investment into land and the benefit of that investment translates into some sort of financial benefit for whoever is on there that they can express.
So that would be a company or a corporation that should be somehow accessed by the state to invest in the social services for which it's responsible and which lower income people can't pay.
So it's a complicated answer.
There's lots to think about, but the bottom line is it should be fair and it should enable better investment in services for low income people.
Wonderful.
It should definitely be fair.
I agree with you.
Just a quick response.
I think that's a very important question because yes, it's also very politicized.
But from a urban finance point of view, I think property taxes offer a huge amount of opportunity.
It's a question of how do you demonstrate your stakeholders the transparency.
We've seen some municipal governments having very steep property tax increase, but they've been able to articulate the benefits of what that does in terms of improved infrastructure, delivery service delivery.
We've also seen how some municipal governments are joining hands with other utilities like electricity to demonstrate that if your electricity bills are going to be of a certain level, which means you are able to afford those things.
Clearly, if you are at a very different band or you're not paying anything, there is some mismatch.
Through that also it's been coming up.
The third bit is that they are able to, in some sophisticated countries within the spectrum of developing world, they're able to collateralize some of the property tax collection to attract specific private sector investment coming, which then becomes easier for lenders like us to then be able to raise security against those.
Wonderful.
I'm really loving your questions.
They're so detailed and really technical and bringing out the best in our panelists right now.
We have another question over there.
Thank you.
My name is Ricardo da I'm from Portugal.
I've been designing and implementing affordable housing programs.
My question is, what could be the role in these affordable housing programs to have a share for market prices, not just for housing but also for retail, so you could allocate part of the risk of the financing and attract private capital into it.
Thank you.
Is that happening in Portugal? We have done two operations, as Concession of Public Works for Lisbon that could attract private developers to put money in.
Actually, they put all the financing and the municipality just unlocked the land.
Wonderful.
Okay, so maybe I can address this question first for you, Time.
And then put your hands up if you want.
Yeah, we're launching something similar this month.
I've been trying to do this with the private developers all through the past ten years and we have been looking at different incentives to convince them to come in and sell the properties at fixed prices to low income households.
What we managed finally to come up as an incentive is to give them some commercial and retail prices to cross subsidize the price of the houses for social income.
We are piloting this month and probably next week, maybe I can tell you some results, but I think it's going to work because there is an element of cross subsidy and we've selected the pieces of land in good locations for the housing part and the commercial part as well so that there is a cross subsidy element between the different income levels.
It sounds like both of you need to connect afterwards, right? Yeah.
So in India, we did in 1994, but almost 30 years back, there's a province called West Bengal West Bengal government allotted a piece of land to a private developer and he was asked to build LG, lower income group, MIG and LG.
In India, we have a floor space index on the piece of land, how much can you build? So it is four times of the land what you have four X, 2.83 X.
It's a state subjects is different.
What they did on the lower income group and middle income whatever he had to forgo because the prices was fixed by the government that in those days, the lower income group was priced at 2.8 lac rupees.
It comes to about $5,600 in those days, one was 48 rupees.
So 5,000 MIG was priced at eight lac twice of that, and HIG they give you make high rise, and we will give you permission to build three times of what you could have built normally.
So this is how society still exists.
And then the maintenance was the maintenance burden was on the higher income group for the entire complex.
The entire complex was divided into three parts.
The da, they named it locally, but still that complex is maintained beautifully in Calcuta.
But that is how the first and it was a very successful model post that we did in similar other provinces, also 23 other provinces.
Rajasthan, we have the similar where give higher floor space index.
For spending how much you can build on a piece of land.
If you're subsidizing the LG and MIG, buy that.
The same developer has been built.
Doctor Samath, you wanted to come in quickly? Yes, I think it is a very important point because mixed use development actually, as Mr.
Chuckle was saying.
What we are now doing and it's happening live as we speak in several of our transport projects, and you'll be interested because what we're doing is wherever there are metro rail projects that are being financed by ADB, we're working very closely with local governcy.
Strategically located stations are being given higher flow space index to go vertical for what we call as transit oriented development.
The Metro trains.
Yes.
So it does three things.
One is you're able to deliver work and living spaces much closer to transport, so you're not pricing out.
Secondly, you're able to exploit commercially locations that can then attract cross seriation that miss Chuckle is saying.
The third bit is, it also then allows the private sector to actually maintain these assets much One note of caution there is that if any government is looking at that, do not just get fixed around delivering X units because private sector is very smart to say, yes, we have delivered X amount of units, but look at what do you want in terms of total space that you're delivering.
There are ways and means they can do it.
It's a very good tool, but needs to be done very carefully.
Cassia, It's a nice example in Kenya and when the municipality is unable to deliver infrastructure or it doesn't deliver it as quickly as the development would require, you have a master plan settlement and the first tracts of land this particular development is called Asi and it's in the Greater Nairobi metropolitan area and this large tract of land, the first sections of it were offered up to the logistics, industrial use land use.
And they of course, required infrastructure.
The infrastructure was then put into the ground on the basis of what they were paying for the land.
That infrastructure though was put to a scale that could cover the whole piece of land, which then made it possible for the next phases the commercial infrastructure roads.
Well, the roads was the infrastructure and then the water and the sanitation and the power and the municipality couldn't do that.
The master plan settlement did it and financed it with the money coming from the logistics plants.
And they of course, have a wider space for that investment in terms the payment.
After that, the residential could come in and cross subsidize the cost of the infrastructure and made that possible.
They could stop there and just offer high level housing, but they're now moving into looking at worker housing as well in that space because the land has been sorted.
Wonderful.
I'm not sure if you want to come in, Mr.
El Ahmed.
Any thoughts on this coming from the municipality world in Saudi Arabia yourself? Yes.
Maybe I just want to echo the phrase that miss Mehmed just mentioned regarding using commercial real estate.
20 we are doing the same thing in Saudi Arabia right now, especially with a huge pieces of land that we want to collaborate with real estate developers to develop them.
Right now, we are offering the edges of the land regarding the commercial parts for maybe 30 to 40 years for each real estate developer in exchange of their collaboration in a number of aspects, especially regarding subsidizing or supporting the prices of developmental housing.
I just want to thank all of our wonderful distinguished speakers for this really amazing and rich discussion.
Thank you so much for your questions.
If you do have any other burning questions, you can approach the panelists afterwards.
I'm sure they'll be happy to have a quick chat with you.
I think what's clear is that today's dialogue has really reminded us that the housing Challenge is not simply about finance, although, of course, that's very, very important.
It's about how societies organize land, opportunity, inclusion, infrastructure, which we just heard about governance and development priorities.
We've also heard clearly that addressing this issue over the global housing crisis needs coordinated action from everyone.
But of course, national governments and cities have a big role to play, but we also need financial institutions, communities themselves, like the example in Cape Town there, development actors, the private sector, we all need to do our bit to make sure that we get this new deal.
Central banks, if you can allow me.
Central banks are crucial in this dialogue as well.
Thank you.
They help you with the banks.
Above all, we've heard that housing finance systems must be redesigned to work not only for the markets, but for people themselves.
Big round of applause to My Ahmed, To Sanjay Shukla, to Keesa Rast, to doctor Sriniva Samath and Mr.
Ali Al Ahmed.
Thank you so much to our panelists.
You may leave for the stage.
Thank you so much.
Later.
Thank you.
To conclude this really important session, I would like to invite Mr.
Rafael Toots, the Director of Global Solutions Division from UN Habitat.
Thank you so much, Mr.
Toots.
The floor is yours.
Thank you very much moderator.
First of all, a big thank you to all the panelists, to the keynote speaker, to the participants of the fireside chat.
The MC, the audience, everyone, very much.
Thanks for engaging over the last 2 hours very actively.
Indeed, this session brought a wide range of perspectives into this room.
We heard from national housing banks, social housing funds, city leadership, banking sector, development finance institutions, and housing finance experts.
And I believe this diversity is exactly what the housing finance challenge requires.
It is a complex problem that requires solutions to bring different stakeholders together, and I think we have made a good step in this session in achieving that.
Because housing is indeed one of the largest sector of the global economy and the current finance systems are not delivering affordability and inclusion at scale.
Too many households are remaining outside formal finance because of irregular incomes, lack of collateral informality, and rigid lending models.
The problem is not only a shortage of money, it's also about how finance is structured, who it serves, and what outcome it rewards.
I'd like to summarize the key takeaways for this session.
First, we need to move beyond mortgage only thinking.
Mortgages matter, but they're not enough.
Housing finance must include incremental housing finance, rental finance, community led finance, guarantees, blended finance, land based finance, and public housing banks.
Two, public finance must be catalytic, not passive.
Subsidies, guarantees, refinancing, service land and infrastructure investment can reduce risk and crowd in private capital, but public support must protect housing social functions and avoid fueling speculation.
Three, land, planning, infrastructure, and finance must be aligned.
Finance alone cannot solve affordability if land is poorly managed.
Infrastructure is missing and planning systems are fragmented.
Cities and subnational governments are essential because they shape service lands density, infrastructure, permitting and permit and local implementation.
Four, inclusion requires designing for real lives.
Housing finance must reflect how low income and informal households actually earn, save, build, rent, and repay.
This means we need flexible underwriting, smaller loans, progressive housing, rental options, and partnerships with community organizations.
So this session should not end as a discussion only.
It should lead to reform pathways.
Let us leave this session with one clear message.
A new deal for housing finance is not only about mobilizing more capital, it is about building better systems, creating better incentives, and directing finance towards affordable homes, inclusive cities, and dignified lives for all.
Thank you very much.
Thank you so much to Mr.
Rafael Ts, Director of Global Solutions Division at UN Habitat.
Absolutely, housing is not just about a roof over your head.
It's about making sure that we make the most out of this economic opportunity as well, which I think is really, really crucial.
I'd like to take this opportunity to thank our wonderful panelists and speakers, and also to thank you, the audience, for waiting patiently, for asking brilliant questions, and to all of you watching from your offices or home online on UN WebDP.
Also a final thanks to our brilliant interpreters.
As always, you've done an amazing job today.
Thanks to you and Habitat for hosting this amazing discussion here in Azerbijan Baku.
Thank you to you all.
And for the panelists who are still here, a quick photo.
I guess everyone's left, but maybe a photo with Mr.
Rafael to.
Yeah.
Thank you.
Yeah.
Yeah, please.
Please, please.