Looking for Help in Dhaka

by Anna Fogel

I sat at the small, local restaurant on a side-street of Dhaka, Bangladesh, in a room filled with Bengali men and the music blasting from the Bollywood movie playing in the background, trying to focus on the conversation I was having about affordable housing development in South Asia. I had found the restaurant on my search for dinner and the two Bengali men who had joined me for dinner found me sitting alone in the restaurant. We started talking about their business, a structural design and engineering firm that works on all types of commercial and residential projects around the world, from their base in Newark, New Jersey, to Dhaka, Bangladesh. One of the men was the CEO of the international business and when he heard more about my background in housing finance and low-income housing development, he asked about good examples of affordable housing development in this part of the world. This idea – of a best practice or key example of affordable housing development – is one that is often requested; there are many developers who would incorporate housing into their portfolio if there were successful examples to imitate.

I have searched for exemplary and illustrative low-income housing projects in South and Southeast Asia (I spent six months working on slum redevelopment financing and housing financing in India, and recently worked on housing finance in the Philippines) and around the world, and have consistently run into a roadblock in finding meaningful or illustrative projects. The project and financing must be profitable, providing a level of sustainability for the developer and also allowing and ensuring that the housing will target a low-income market. One of the main issues with housing and housing development in this part of the world is scale – according to government statistics, India has a housing gap of 50 to 60 million, with some estimating closer to 100 million homes needed. In Bangladesh, Cyclone Sidr, which hit in mid-2007, caused flooding in over 40 percent of the country and destroyed or damaged over 500,000 homes. For a housing project to be relevant, it must be scalable, sustainable and of course, transferrable.

While there are many exciting examples of housing projects, they are often missing a key feature of a successful housing example. One of the recent examples of for-profit low-cost housing development coming out of India was developed by Tata, who was recently touted for developing its low-cost Nano car. Tata’s New Haven is an apartment that will sell for $7,800 to $13,400 and 1,300 apartments are being developed outside of Mumbai. They are small apartments – with a minimum size of 670 square feet – but still offer a potentially scalable, affordable, for-profit approach to low-cost housing development. There are innovative financing schemes, especially targeting non-profit developers, such as Homeless International’s CLIFF (Community Led Infrastructure Finance Facility), a strategic venture capital facility that, as they describe, “enables organized communities of the urban poor to expand their existing portfolios of demonstration construction projects that work for the poor as well as for the city as a whole”. Part of the goal of CLIFF focuses on the demonstration impact of significant projects, recognizing the lack of demonstrable models and successful examples in the housing field. There are housing developers who have focused on cost-cutting mechanisms such as relying on local materials, though often these smaller developers cannot reach beyond middle- or low-middle-income. However, building for middle-income is another strategy, hoping for a trickle-down effect by easing the housing crunch in the middle-income range. Finally, there are of course U.S. examples of for-profit low-cost housing developers, but there are questions about their transferability to more challenging locations.

There are a number of key challenges that arise in the finance and development of affordable housing projects in the South Asia region, and around the world in developing countries. One issue is a lack of supportive infrastructure – the height of buildings are often legally prohibited by zoning laws because the infrastructure, including sewage systems and electricity grids, cannot support this level of density. In countries and cities where housing is most severely limited infrastructure already strains under the high density and system demands. (As I sat at dinner with my engineering experts, the power went out a number of times, leaving us in complete darkness – punctuated only by the cell phones of waiters coming around to check on us.) The regulatory environment is also prohibitive – many real estate development issues spring from insecurity of land tenure and inadequate titling rights and laws. Nonexistent or unreliable titling can prevent developers from getting the rights to build on land, and can limit the possible financing for the developers and their potential residents if they cannot rely on titling to secure loans. There are many other challenges, from government corruption to natural calamities, that limit developers’ and housing financers’ success. In many countries, such as Bangladesh, new housing should be designed to be resistant to common natural calamities, such as earthquakes, flooding or hurricanes.

Consider this post a cry for help, for suggestions, for recommendations, for guidance. There are so many people working in these fields and in parts of the world where housing is such a focus who are desperately searching for innovative financing methods, creative building solutions, and sustainable development techniques.

Credits: Image of Tata's New Haven housing development from Tata.