ACCLSS TO HOUS|NG AT

THL 8ASL OF THL PYRAM|D:

LNA8L|NG MARKLTS FOR AFFORDA8LL HOUS|NG
Wltb tbe support ot:
ADvANCLD
RLLLASL:
NLW HOMLS
Rights and Pernissions
Tbe materlal ln tbls publlcatlon ls copyrlgbteo. Quotlng, copylng ano/or reproouclng portlons or all ot tbls work ls
permlsslble uslng tbe tollowlng cltatlon:
Samaranayake, Saona, 8uolnlcb, valerla, Kayser, Ollvler. 2011. Access to Houslng at tbe 8ase ot tbe Pyramlo,
Lnabllng Attoroable Houslng Markets. Asboka: Full Lconomlc Cltlzensblp, Hystra.
Written by:
Saona Samaranayake, Consultant, Manager, Global Learnlng, Full Lconomlc Cltlzensblp,
Asboka: |nnovators tor tbe Publlc
valerla 8uolnlcb, Cblet Lntrepreneur, Full Lconomlc Cltlzensblp,
Asboka: |nnovators tor tbe Publlc
Ollvler Kayser, Managlng Dlrector,
Hystra
Copyedited by:
Sumatl Nagratb, Dlrector, Mlrabllls Aovlsory Servlces
Designed by:
58y7
2011, Asboka: |nnovators tor tbe Publlc, Hystra
Tbls report was maoe posslble tbrougb tbe generous support ot:
ACCLSS TO
HOUS|NG AT THL
8ASL OF THL PYRAM|D:
LNA8L|NG MARKLTS FOR AFFORDA8LL HOUS|NG
ADvANCLD RLLLASL: NLW HOMLS
AcknowIedgenents:
Tbls report bas been a collaboratlve ettort.
Tbe autbors woulo llke to tbank tbe ploneerlng practltloners, soclal entrepreneurs ano lnoustry
eperts wbose work ano lnslgbts bave contrlbuteo to tbls report. We applauo tbelr years ot ettort
ano bope tbls work sbeos llgbt on, ano belps aovance tbelr work.
For tbelr lnput, analysls, researcb, collaboratlon on case wrltlng ano establlsblng tbe aestbetlc ot
tbls report, speclal tbanks are oue to:
8ruce Ferguson Lucle Klarstelo Pllar Martlnez
Ross Mytton Sbveta Sarln Klrtee Sbab
Davlo Smltb vlsbnu Swamlnatban Marljn Splllebeen
|n partlcular, tbe partlclpants ot tbe Global Summlt ot Houslng Lntrepreneurs belo ln 8arcelona,
2010, oeserve a tbank you tor tbelr lnput on tbe cases, ano tbe recommenoatlons presenteo to
varlous stakeboloers ln attoroable bouslng at tbe eno ot tbls report.
About the Authors
Ashoka lnnovators for the PubIic: tounoeo ln 1980, Asboka ls
tbe worlo's worklng communlty ot more tban 3,000 leaolng soclal
entrepreneurs. |t cbamplons soclal cbange loeas ano supports tbe
entrepreneurs beblno tbem by belplng tbem get starteo, grow,
succeeo ano collaborate. As Asboka epanos lts capaclty to
lntegrate ano connect soclal ano buslness entrepreneurs arouno
tbe worlo, lt bullos an entrepreneurlal lntrastructure comprlseo ot
a serles ot global lnltlatlves tbat supports tbe tast-growlng neeos ot
tbe cltlzen sector.
Asboka's vlslon ls to create cbange tooay, tor an 'Lveryone a
Cbangemaker
TM
' soclety to become tbe reallty ot tomorrow. For
more lntormatlon, vlslt www.asboka.org.
Ashoka's FuII Econonic Citizenship {FEC}: ls one ot Asboka's
global lnltlatlves strlvlng to enable an envlronment wbere every
cltlzen bas tbe opportunlty ano tbe capaclty to eerclse bls or ber
economlc, soclal ano cultural rlgbts. To acbleve FLC, a cltlzen must
bave access to essentlal prooucts ano servlces requlreo to enable
bls/ber actlvlty as consumer, prooucer ano boloer ot assets. FLC
seeks to eno tbe ecluslon ot two-tblros ot tbe worlo's populatlon
tbrougb catalyzlng buslness soclal alllances ln sectors tbat aooress
baslc buman servlces sucb as ln bouslng, bealtbcare ano small
tarmlng. Tbese collaboratlons are calleo Hybrlo value Cbalns
TM
wblcb comblne tbe resources ot tbe buslness ano cltlzen sectors to
transtorm markets ano reoene value ln game-cbanglng ways.
Hystra: ls a new, bybrlo type ot consultlng rm. Hystra works
wltb buslness ano soclal sector ploneers to oeslgn ano lmplement
bybrlo strategles tbrougb lnnovatlve buslness approacbes tbat
are protable, scalable ano eraolcate soclal ano envlronmental
problems, ano comblne tbe lnslgbts ano resources ot buslness ano
cltlzen sectors. Hystra ltselt ls a bybrlo organlzatlon, a tor prot
tool tor soclal cbange. Hystra conslsts ot a core team ot tull tlme
consultants ano ot a growlng network ot partners alreaoy present ln
7 countrles. For more lntormatlon, vlslt www.bystra.com.
Foreword by HiIti Foundation
Tbe pursult ot attoroable bouslng tor low-lncome communltles llvlng
at or near tbe base ot tbe pyramlo ls notblng sbort ot a campalgn
to transtorm llves. 1 bllllon people across tbe worlo are oeprlveo
ot, or llve ln lnaoequate bouslng. For low-lncome communltles wltb
scarce means ano resources, bouslng represents not just a place to
llve but also a place to work, an asset tbat allows access to loans tbat
lmpacts bealtb ano potentlally tbe eoucatlon ano upwaro moblllty ot
tbelr cblloren.
Tbe Hlltl Founoatlon ls commltteo to creatlng sustalnable socletal
lmpact ln tbe areas ot attoroable bouslng, baslc eoucatlon, communlty
oevelopment, culture, olsaster rellet, ano soclal entrepreneursblp. |t
ls because ot a slmllarly broao ano slmultaneously oeep commltment
to all ot tbese sectors, tbrougb tbe work ot nearly 3000 soclal
entrepreneurs, tbat Hlltl Founoatlon supports tbe work ot Asboka
arouno tbe worlo.
|n collaboratlon wltb Hystra, a bybrlo strategles consultlng rm, Asboka bas conoucteo tbe
tollowlng lnvestlgatlon lnto access to bouslng at tbe base ot tbe pyramlo, speclcally tor low-
lncome urban owellers worlowloe.
Tbe stuoy unpacks varlous mooels tor acblevlng attoroable bouslng tor all, ano surtaces cross-
cuttlng lnslgbts ano barrlers taceo. Tbe stuoy also loentles promlslng avenues tor movlng
tbe sector torwaro lncluolng recommenoatlons tor varlous stakeboloers ano trameworks tor
engaglng ln collaboratlve actlon, calleo Hybrlo value Cbalns tbat leverage tbe strengtbs ot
multlple players.
At tbe Hlltl Founoatlon, tbe message tbat corporatlons are able to relntorce tbe work ot
oeveloplng attoroable bouslng, creatlng bybrlo value tbat progresses us turtber tban tbe
market or cbarlty alone can oo, resonates wltb our commltment to cballenglng soclety's
lntractable problems.
Tbe notlon tbat tbe eno user's eperlence must orlve our work ls a message tbat resonates
oeeply wltb our values as a tamlly ot companles. We are prouo to sponsor tbls lmportant stuoy.
LG8LRT APPLL
Managlng Dlrector
ano 8oaro Member
Hlltl Founoatlon,
Llecbtensteln
|ntroouctlon ..................... ..................................................................................................................... 8
Key Hlgbllgbts ot tbe Report ................................................................................................. 9
Major Actors ln Attoroable Houslng ................................................................................. 10
Denlng Key Concepts ......................................................................................................... 11
Wbat ls Attoroable Houslng? .............................................................................................. 11
Commonly Useo Terms ano Acronyms ............................................................................ 12
Dellverlng New Home Solutlons ......................................................................................... 12
Market-8aseo Cases ........................................................................................................................... 14
Houslng For All - |nola.................................................................................................... .... 15
[amll 8ora........................................................................................................................ ......22
|nslgbts: Wbat tbe Market-8aseo CasesTell Us .......................................................................... 30
|nslgbts: 8arrlers to Scale .................................................................................................................. 34
Lano Rlgbts ............................................................................................................................. 34
Flnance ...................................................................................................................................... 36
Supportlve Pollcy ................................................................................................................... 38
Collaboratlve Actlon ........................................................................................................... 40
Recommenoatlons tor Stakeboloers |nvolveo ln Attoroable Houslng........... .........................42
Flnanclal |nstltutlons:......................................................................................... .................44
Commerclal 8anks.................................................................. .............................. .............. 44
Mlcronance |nstltutlons............................................................ ........................................46
Houslng Flnance |nstltutlons............................................. .................................................48
Cltlzen Sector Organlzatlons........................................... ................................... ...............50
Real Lstate Developers....................................... ............................................... ..................52
Publlc Sector Actors: Natlonal Government, Local Government, Munlclpalltles ano
Publlc Houslng Flnance Agencles............. .............................. .......................................... 54
|nvestors ano Funoers ............................................................................................................ 57
Multllateral ano 8llateral |nternatlonal Development Agencles .................................. 57
Pbllantbroplsts ano Founoatlons.............. ... .....................................................................58
Soclal |nvestors............................................ ....... ................................................................ 60
Prlvate |nvestors...................................................................................................................61
ACCLSS TO HOUS|NG AT THL 8ASL OF THL PYRAM|D:
LNA8L|NG MARKLTS FOR AFFORDA8LL HOUS|NG
ADvANCLD RLLLASL: NLW HOMLS
lNTRODUCTlON
8
lntroduction
My bouse ls my worksbop, my savlngs ano my place to rest.
- Manjula-8en, lncense stlck maker ln Abmeoabao, |nola.
We are at a moment ot great opportunlty ano obllgatlon ln tbe orlve towaros attoroable
bouslng tor low-lncome communltles. Tbe current low-lncome bouslng market ls wortb USD
424 bllllon,
1
a slzable ano lmpresslve gure glven tbat very tew market-baseo bouslng solutlons
aooress tbe neeos ot tbe poor or oo so etclently. One bllllon lnolvlouals arouno tbe worlo,
tbat ls 1/6
tb
ot bumanlty, llve ln slums ano lnaoequate bouslng. |t lett uncbeckeo, tbls number
wlll trlple by 2050.
2
Aooresslng tbe enormous quallty ano quantlty sborttalls ot bouslng solutlons avallable to
serve tbe neeos ot mllllons ot low-lncome tamllles wlll requlre barnesslng tbe ettorts ot olverse
players. |t wlll requlre tbougbttul collaboratlon ano long-term commltment to scalable, global
solutlons trom actors tbat span prlvate, soclal ano publlc sectors.
We no ourselves at a moment wben sucb players elst ano wben tbe tloes ot globallzatlon,
sboreo up by a orlve tor lncluslvlty, make attoroable !"#$%&' )"* +,, an lnltlatlve wbose tlme bas come.
Over tbe past tour years, Asboka's Houslng tor All program, supporteo by tbe Hlltl
Founoatlon, bas catalyzeo several successtul bouslng lnltlatlves aooresslng tbe neeos ot low-
lncome communltles ln |nola, Colombla ano 8razll. Lacb one ot tbese lnltlatlves ls oeslgneo to
conLrlbuLe Lo advanclng aordable houslng markeLs tbrougb commerclal approacbes baseo
on (or enableo tbrougb) buslness-soclal collaboratlons calleo Hybrlo value Cbalns.
Proouceo ln collaboratlon wltb Hystra, a consultlng rm speclallzlng ln bybrlo strategles, tbe
complete verslon ot tbls report, publlsbeo ln Aprll 2011, bullos on tbe practlcal eperlences
ot tbe oozens ot ploneerlng soclal entrepreneurs ano corporatlons wbo bave enoeavoreo to
provloe attoroable bouslng solutlons tor low-lncome communltles over tbe last 20 years. |t
loentles tbe barrlers to scale tbese solutlons tace, ano proposes a serles ot recommenoatlons
tor tbe varlous stakeboloers lnvolveo ln attoroable bouslng, spannlng prlvate, soclal ano publlc
sectors. Tbe tollowlng Aovanceo Release ls an abbrevlateo report tocuslng on new bomes
solutlons, teaturlng Asboka's Houslng For All lnltlatlve ln |nola, ano [amll 8ora ln Kenya.
Tbls report was lntormeo by an ln-oeptb stuoy ot lnternatlonal eamples ot promlslng
ano alreaoy successtul attoroable bouslng solutlons tbat provloe botb new bomes ano
bome lmprovement solutlons tor tbe urban poor. Detalleo researcb, on-slte vlslts ano tbe
perspectlves ano teeoback ot acaoemlcs, lnnovators ano practltloners bave been lncorporateo
lnto tbls work.
We bope tbls report wlll serve as a call to actlon ano lllustrate to multlple stakeboloers bow
tbey mlgbt engage ln ongolng ettorts to aovance bouslng solutlons tor mllllons ot low-lncome
tamllles arouno tbe worlo.
+ |atoo, 3. aoo 3oo|o|c|, V. (20+0) ! #$% !&&'()*$ +,- .&,/(& 01()2$, avao 3os|oess |ev|e., Seotebe 20+0.
2 C|T| Seceta|at ac|||tateo b ||-/3|T/T (20+0) 3(*4&')2 3$)5-$ 6$*5-'78 ') 6&59: 71-,521 ;(-7'*'<(7,-8
=)59$-(7',):, C|oba| |aoo Too| |et.o' 3|e +, |ac| 20+0.
lNTRODUCTlON
9
Key HighIights of the Report
A hone, tor low-lncome populatlons ls so nuch nore than a roof overhead. Homes
bear lncome generatlon, llvellbooo ano bealtb lmpllcatlons ano can lmpact a bousebolo's
access to nance, soclal stature ano tbe upwaro moblllty ot tuture generatlons.
Attoroable ln attoroable bouslng ls not synonynous with subsidized or cheap.
|nsteao, attoroablllty ls synonymous wltb wbetber a bouslng solutlon ls -..-%&-/,0 by ano
-11*"1*%-.0 tor low-lncome populatlons wltb lmpllcatlons on oeslgn, quallty, access to
retall nance ano access to lntormatlon about tbese solutlons, ln aooltlon to approprlate
prlce polnts.
To moblllze tbe capltal requlreo to aooress global bouslng sborttalls, narket-based
housing soIutions not oepenoent on subsloles but otterlng servlces at market prlces
are necessary. Sucb market-baseo approacbes can lnoeeo be vlable among low-lncome
communltles, but are untortunately tew ln number. Tbose tbat are successtul employ a
comblnatlon ot strategles, naxinizing vaIue for Iow-incone cIients by reducing costs,
bundIing vaIue, integrating nancing and nobiIizing the resources of the connunity.
Tbe strategles requlreo tor catalyzlng successtul market-baseo solutlons can rarely be
aovanceo by one actor or sector. Ranglng trom governments, CSOs, bullolng materlal
manutacturers, olstrlbutors ano retallers, nance provloers, soclal lnvestors ano tounoatlons,
a diversity of actors coIIaborating in concerted ways ls requlreo to overcome tbe
multlolmenslonal cballenge tbat ls tbe quest tor attoroable bouslng tor all. Tbe resultlng
Hybrid VaIue Chains are lnnovatlve operatlng trameworks wblcb bolo promlse tor scallng
up attoroable bouslng solutlons.
Wblle tbe potentlal ot market-baseo approacbes ls clear, so are tbelr llmlts, botb ln terms
ot tbe barrlers tbey tace to growlng ano scallng, but equally lmportantly, tbelr Iinited
capacity to reach the poorest of the poor. Reacblng tbese populatlons requlres tbe
carefuI and coordinated appIication of subsidies - wblcb lmplles a more tbougbttul
approacb tban slmply glvlng bomes away, or subslolzlng prlces wblcb otten unoercuts buoolng
market-baseo lnltlatlves.
Satety
HeaIth lnpIications
8aslc bealtb consloeratlons
Sanltatlon
Clean water
Seconoary lmpacts on
eoucatlon ano proouctlvlty
LiveIihood lnpIications
A place ot work
A proouctlve asset tbat can
be leverageo
An appreclatlng asset
5ociaI lnpIications
A soclal symbol ano source
ot olgnlty
Polnt ot connectlon to
communlty ano soclal tabrlc
More than a Roof Overhead
Satety
HeaIth lnpIications
8aslc bealtb consloeratlons
Sanltatlon
Clean water
Seconoary lmpacts on
eoucatlon ano proouctlvlty
LiveIihood lnpIications
A place ot work
A proouctlve asset tbat can
be leverageo
An appreclatlng asset
5ociaI lnpIications
A soclal symbol ano source
ot olgnlty
Polnt ot connectlon to
communlty ano soclal tabrlc
More than a Roof Overhead
lNTRODUCTlON
10
Regaroless ot tbe nature ot attoroable bouslng lnltlatlves, wbo leaos tbem ano wbetber
tbey are market-baseo or subslolzeo, severaI key barriers constrain the potentiaI
growth and scaIe ot vlrtually all attoroable bouslng solutlons. Cblet among tbese barrlers
are Iand rights, access to nance, Iinited cross sector coIIaboration and poIicy
environnents not conouclve to aovanclng attoroable bouslng solutlons.
Several oloer ano more scaleo lnltlatlves bave scaleo ln part oue to creative approaches
to tackIing one or more ot tbese key barriers to scaIe. Tbese approacbes otter key
lnslgbts tor market-baseo ano subslolzeo ettorts to aovance tbe oevelopment ot attoroable
bouslng solutlons ano markets.
Hone
lnprovenents
New
Hones
Major Actors ln
AffordabIe Housing
Publlc Sector
Cltlzen Sector
Organlzatlons
Flnance
Provloers
Low-|ncome
Selt bulloers/ Masons
Dlstrlbuters
Houslng Proouct
Deslgners/ Manutacturers
& Tecbnlcal Asslstance
Provloers
Low-|ncome
Home 8uyer
Constructlon
Companles &
Developers
Deslgners/
Arcbltects
Lacb ot tbe solutlons proleo as a part ot tbe Access to Attoroable Houslng report, are
comprlseo ot several types ot actors, wblcb span prlvate sector, soclal sector ano publlc
sectors. Several actors sucb as CSOs, publlc sector agencles ano nance provloers are
common to new bome as well as bome lmprovement solutlons.
Major Actors ln AffordabIe Housing
lNTRODUCTlON
11
New Homes or Houslng
upgraoes are ot approprlate quallty
Deslgneo accorolng to neeos
ano senslbllltles ot tbe communlty
Represents tbe rlgbt value to
consumers, ln terms ot locatlon,
accesslblllty, lntrastructure ano
otber tactors
|n terms ot cost to tbe
bousebolo over tbe llte ot tbe
lnvestment
|n terms ot avallablllty ot aoequate
consumer tlnanclng optlons
|n terms ot avallablllty ot
lntormatlon on bouslng optlons
ano tlnance optlons
Appropriate AttainabIe
AffordabIe
Housing
New Homes or Houslng
upgraoes are ot approprlate quallty
Deslgneo accorolng to neeos
ano senslbllltles ot tbe communlty
Represents tbe rlgbt value to
consumers, ln terms ot locatlon,
accesslblllty, lntrastructure ano
otber tactors
|n terms ot cost to tbe
bousebolo over tbe llte ot tbe
lnvestment
|n terms ot avallablllty ot aoequate
consumer tlnanclng optlons
|n terms ot avallablllty ot
lntormatlon on bouslng optlons
ano tlnance optlons
Appropriate AttainabIe
AffordabIe
Housing
Defining Key Concepts
What ls AffordabIe Housing!
Most oevelopeo countrles employ a commonly accepteo cost guloellne tor attoroable bouslng,
tbat a bome sboulo cost no more tban 30 ot a bousebolo's gross lncome over tbe term ot
tbe lnvestment. (KPMG 2010). Tbere bave been tew attempts to oene attoroable bouslng
ln tbe contet ot bouslng solutlons tor low lncome communltles ln oeveloplng countrles tbat
account tor nuances outsloe ot cost.
Altbougb lt ls otten consloereo so, attoroable bouslng ln tbls contet ls not slmply cbeap
or low cost bouslng. Ratber lt ls bouslng, or bouslng upgraoes tbat are appropriate to 8oP
populatlons, ano attainabIe by tbe 8oP.
3
Not all low-cost bouslng solutlons are attoroable, l.e. --attalnable or approprlate-- tor tbe
8oP, as evloenceo by multlple eamples ot government subslolzeo bouslng tbat remaln unoer-
occupleo by tbe populatlons tor wblcb tbey were lntenoeo. Conversely not all attoroable
bouslng solutlons are low cost solutlons eltber. Some are blgb cost lnterventlons tbat are
maoe attoroable ano attalnable only tbrougb tbe appllcatlon ot subsloles. Tbls report ooes not
tocus on sucb solutlons.
Anotber lmportant olstlnctlon, creatlng an attoroable bouslng solutlon tor tbe 8oP ooes
not necessarlly lmply a reouctlon ln quallty. |n tact tbe most approprlate solutlons caretully
balance quallty ano attoroablllty, cuttlng costs by lncorporatlng sweat equlty ot tbe low-lncome
communltles or tbrougb creatlve oeslgn ano long-term cost savlngs solutlons.
3 / s|||a aoooac| to oeo|o aooab|e |oos|o |s aoooteo b ||-ab|tat. T|e| aoooac| ocoses oo 't|e eoeat|oo o |oos|o ooootoo|t|es
at|e t|ao |ooses, eao|o t|at eo|as|s |s |a|o oo easoes t|at eoab|e |oo|v|ooa|s, |oose|o|os aoo va|oos soc|a| ooos to |ave access to a
aoe o |oos|o |ooots t|at a eso|t |o a o.e|||o t|at so|ts t|e| oeeos, oeaoos aoo ab|||t to oa. (|| ab|tat, 200`)
lNTRODUCTlON
12
|N|T|AT|vL/
ORGAN|ZAT|ON
ACRONYM DLSCR|PT|ON
Cltlzen Sector
Organlzatlon
CSO
|ntercbangeable wltb non-governmental organlzatlons (NGO) or non-prots
or voluntary sector, Asboka bas colneo tbe term Cltlzen Sector Organlzatlon
to reter to all lnltlatlves, trom grass roots to multllateral tbat emerge trom tbe
soclal/cltlzen sector
Mlcronance |nstltutlon MF|
Flnanclal lnstltutlons tbat provloe nanclal servlces to low lncome populatlons,
sucb as loans, savlngs, money transter servlces ano mlcro lnsurance. Orlglnally
blgbly rellant on soclal collateral, mlcro nance mooels bave now evolveo
consloerably to lncluoe lnolvloual lenolng ano are emerglng trom olverse
players lncluolng CSOs, cooperatlves, communlty-baseo oevelopment
lnstltutlons llke selt-belp groups ano creolt unlons, commerclal ano state banks,
lnsurance ano creolt caro companles, telecommunlcatlons ano wlre servlces,
post otces, ano otber polnts ot sale. (www.cgap.org)
Hybrlo value Cbalns HvC
|nnovatlve operatlng trameworks, ano strateglc collaboratlons between prlvate
ano cltlzen sector organlzatlons tbat bave tbe capaclty to transtorm markets by
leveraglng tbe strengtbs ot tbese olstlnct actors.
8ase ot tbe Pyramlo 8oP
Tbe term useo to cbaracterlze tbe worlo's populatlon llvlng on less tban USD
3000 PPP ln 2002 USD as tbe per caplta, tbe rougb oally equlvalent ot $3 per
caplta per oay. (Hammono et al. 2007)
Houslng Flnance
|nstltutlon
HF|
Lmerglng class ot nanclal lnstltutlons speclallzlng ln bouslng nance. Tbose
worklng wltb low lncome populatlons mooel tbe practlces ot MF|s.
Home |mprovements
Synonymous wltb lncremental ugraolng or selt bullt or progresslve
bouslng
New Homes
New bomes, as oescrlbeo ln tbls report, are typlcally multl-unlt bouslng
oevelopments, oeslgneo ano prlceo tor low lncome communltles, wltb at least
mlnlmal levels ot lntrastructure, ano clear transter ot tltle to low-lncome cllents
tbat purcbase tbese bomes.
|N|T|AT|vL/
ORGAN|ZAT|ON
ACRONYM DLSCR|PT|ON
Cltlzen Sector
Organlzatlon
CSO
|ntercbangeable wltb non-governmental organlzatlons (NGO) or non-prots
or voluntary sector, Asboka bas colneo tbe term Cltlzen Sector Organlzatlon
to reter to all lnltlatlves, trom grass roots to multllateral tbat emerge trom tbe
soclal/cltlzen sector
Mlcronance |nstltutlon MF|
Flnanclal lnstltutlons tbat provloe nanclal servlces to low lncome populatlons,
sucb as loans, savlngs, money transter servlces ano mlcro lnsurance. Orlglnally
blgbly rellant on soclal collateral, mlcro nance mooels bave now evolveo
consloerably to lncluoe lnolvloual lenolng ano are emerglng trom olverse
players lncluolng CSOs, cooperatlves, communlty-baseo oevelopment
lnstltutlons llke selt-belp groups ano creolt unlons, commerclal ano state banks,
lnsurance ano creolt caro companles, telecommunlcatlons ano wlre servlces,
post otces, ano otber polnts ot sale. (www.cgap.org)
Hybrlo value Cbalns HvC
|nnovatlve operatlng trameworks, ano strateglc collaboratlons between prlvate
ano cltlzen sector organlzatlons tbat bave tbe capaclty to transtorm markets by
leveraglng tbe strengtbs ot tbese olstlnct actors.
8ase ot tbe Pyramlo 8oP
Tbe term useo to cbaracterlze tbe worlo's populatlon llvlng on less tban USD
3000 PPP ln 2002 USD as tbe per caplta, tbe rougb oally equlvalent ot $3 per
caplta per oay. (Hammono et al. 2007). 8oP ls useo lntercbangeably wltb low-
lncome communltles ln tbls report.
Houslng Flnance
|nstltutlon
HF|
Lmerglng class ot nanclal lnstltutlons speclallzlng ln bouslng nance. Tbose
worklng wltb low lncome populatlons mooel tbe practlces ot MF|s.
Home |mprovements
Synonymous wltb lncremental ugraolng or selt bullt or progresslve
bouslng.
New Homes
New bomes, as oescrlbeo ln tbls report, are typlcally multl-unlt bouslng
oevelopments, oeslgneo ano prlceo tor low lncome communltles, wltb at least
mlnlmal levels ot lntrastructure, ano clear transter ot tltle to low-lncome cllents
tbat purcbase tbese bomes.
ConnonIy Used Terns and Acronyns
DeIivering New Hone 5oIutions
New bomes, as oescrlbeo ln tbls report, are typlcally multl-unlt bouslng oevelopments, oe-
slgneo ano prlceo tor low lncome communltles, wltb at least mlnlmal levels ot lntrastructure,
ano clear transter ot tltle to low-lncome cllents tbat purcbase tbese bomes.
Creatlng new bomes solutlons tbat are responslve to tbe neeos ot low lncome communltles ls
cballenglng work. Tbere are blgb costs tor rst movers ln tbls space as tbey work to construct
multlple stages ot tbelr value cbaln trom securlng lano, to promotlng tbe new bomes to
provlolng tbe eno user nance. (Asboka, 2008).
Tbe comple ano sltuatlonal nature ot tbe actlvltles requlreo typlcally lmply tbat no one player
can manage tbese tunctlons. Ratber, tbe oynamlcs ot tbe new bomes value cbaln lnolcates tbat
concerteo ettorts between multlple partles are requlreo.
lNTRODUCTlON
13
DeIivering New Hones: ChaIIenges and Needs
C
h
a
I
I
e
n
g
e
s
N
e
e
d
s
Flnance Sales Atter
Sales
Constructlon Home
Deslgn
Procurement
ot Lano
Requlres government
collaboratlon tor etenslon ot
lntrastructure
Greater transparency ln
approvals processes
Deslgn must take lnto
account soclal olmenslons ot
8oP (communlty space, space
tor lncome generatlon
actlvltles)
Requlres lnput trom tbe
communlty ano CSOs
representlng tbem
Dlrect sales ano marketlng
to low lncome communltles
by tbose trusteo by potentlal
cllents (l.e. communlty
members or CSOs)
Complementary servlces to
cllents, asslstlng tbem wltb
llvellbooos/tlnanclal access
Flnance provloers wltb lower
cost structures ano aoapteo
processes tor 8oP cllent
acqulsltlon
Apply benetlts ot
stanoarolzatlon wbere posslble
Greater ettlclencles ln
constructlon processes
|ncorporate communlty
resources ano labor wbere
posslble, allowlng sweat equlty
to contrlbute to purcbase prlce
Funoeo ano establlsbeo
mecbanlsms tor upkeep ot
communlty areas ano routlne
repalrs
Communlty capaclty bullolng
Llmlteo attoroable contlguous
lano
Llmlteo lntrastructure ano
utllltles
Llmlteo lano close to work
opportunltles
Lengtby cumbersome
processes tor approvals tor
constructlon/ purcbase ot lano
Llmlteo eperlence oeslgnlng
bomes tor 8oP neeos
Llmlteo opportunltles
tor brlnglng oown constructlon
relateo costs, wltbout oeeply
compromlslng quallty
Wastage ano lnettlclencles
are proportlonally more
oetrlmental to marglns (oue
to lower cost ot bomes)
Lack ot consumer mortgage
tlnanclng optlons tor cllents
Llmlteo lntormatlon on cllent
creolt wortblness
Hlgb transactlon costs tor
relatlvely small mortgage
amounts
Dlttlcult to reacb
olsaggregateo consumers to
sell a number ot new bome
oevelopments
Dlttlcult to communlcate
otterlngs oue to lack ot
unoerstanolng ot cllent values
ano/or trust ano creolblllty
lssues
Cllent engagement ls a
multl-step process, lncluolng
eoucatlon, marketlng ano otten
gulolng tbe cllent tbrougb
acqulrlng tlnance
Llmlteo capaclty ot low-lncome
communltles manage upkeep ot
common areas
8elow ls a look at tbe cballenges taceo at varlous steps along tbe new bomes value cbaln, ano
corresponolng neeos.
MARKLT-8ASLD CASL
HOU5lNG FOR ALL - lNDlA
14
The Market-Based Cases
Atter an etenslve revlew ot over 70 bouslng solutlons, we loentleo geograpblcally olverse
cases tltleo Market-8aseo Cases, ot wblcb two are lncluoeo bere. Tbese cases are termeo as
market-baseo oue to two prlmary crlterla:
Tbe lnltlatlve oellverlng tbe new bome solutlon ls not blgbly subslolzeo
Tbe cllent purcbaslng tbe new bome pays market value tor tbe purcbase
From tbese Market-8aseo Cases, wblcb lllustrate promlslng approacbes to oellverlng new
bomes, we surtaceo some key cross cuttlng tbemes. Apart trom contet speclc tactors,
we loentleo tour key barrlers tbat, accorolng to tbe practltloners lnvolveo ln tbese cases,
restrlct tbe scale ano repllcablllty ot tbelr solutlons.
Tbese 8arrlers are:
1. Tbe lack ot access to clear ano secure lano tltle (bereatter, Lano Rlgbts)
2. Tbe lack ot access to approprlate nance optlons tor low-lncome
cllents (bereatter, Flnance)
3. Tbe lack ot access to a pollcy envlronment supportlve ot attoroable
bouslng markets (bereatter, Supportlve Pollcy)
4. Llmlteo collaboratlve ano cross-sector collaboratlve actlon
MARKLT-8ASLD CASL
HOU5lNG FOR ALL - lNDlA
15
Housing For AII - lndia
Executive 5unnary
Asboka's Houslng For All (HFA) |nltlatlve, supporteo by tbe Hlltl
Founoatlon,
1
works to catalyze sustalnable ano scalable new bome ano
bome lmprovement solutlons tor low-lncome communltles. |t ooes
so by aovanclng buslness mooels tor collaboratlve actlon between
prlvate ano soclal sector actors capable ot oellverlng solutlons ln tbls
sector.
2

Launcbeo ln 2008, HFA
3
|nola brings together reaI estate
deveIopers wltb access to lano ano capltal, Citizen 5ector
Organizations {C5O} wltb tbe ablllty to aggregate oemano ln target
communltles, ano housing nance institutions wllllng to leno to
low-lncome cllents. All partners benet trom tbese engagements:
low-lncome communltles buy attoroable new bomes wltb optlons to
nance mortgages ano oown payments, real estate oevelopers ano
nance lnstltutlons galn new cllents, CSOs recelve a tee tor tbelr
servlces ano turtber tbelr objectlves to belp communltles tbrougb
provlolng access to bouslng solutlons.
8eneclary tamllles bave, on average, 5 tamlly members collectlvely
earnlng an average lncome ot USD 6-10
4
per oay2 Low-lncome cllents
assume a mortgage agalnst tbelr new bomes ano repay regular loan
lnstallments to tbe nance provloer. New bome oevelopments are
oeslgneo wltb a long-term commltment
to communlty neeos, notably tbrougb:
1) malmlzlng space utlllty accorolng to
tbe lltestyles ot tbe target customers,
2) creatlng common spaces tbat
preserve tbe soclal oynamlcs ot low-
lncome communltles, ano 3) ln some
oevelopments, lncluolng tbe oeslgnatlon ot
pbyslcal space tor CSO resource centers
wbere capaclty bullolng actlvltles sucb
as tralnlng tor llvellbooo oevelopment ls
provloeo.
Currently, tour projects (all ln Abmeoabao)
are ln varlous stages ot oevelopment,
wltb tbe rst epecteo to be complete at
tbe eno ot 2010. Rougbly 2500 units are
on offer for Iow-incone custoners
across the 4 projects. AII projects
are scheduIed for conpIetion by the
end of 2011.
Twenty ve units
5
in the rst
deveIopnent have been soId to
Iow-incone connunities. Aovance
booklngs (tbrougb payment ot a oeposlt
ot below 5 ot tbe value ot tbe bome)
ln tbe otber tbree projects are ongolng
ano were at 1540 at tbe tlme ot wrltlng.
Loan disbursenents for nortgages
are aIso ongoing, with 670
6
Ioans
originated to date.
PRO[LCT DLTA|LS
Geography:
|nola, Gujarat, Abmeoabao (more cltles ln
plpellne). Otber HFA projects ln Colombla,
8razll ano Lgypt
Product:
New bomes ln new apartment oevelopments
5takehoIders:
Prlvate: Real Lstate Developers: Santosb
Assoclates, vlntron, D8S. CHL (Communlty
Houslng Llmlteo) - constructlon management
company ano KSA DPS - arcbltecture ano oeslgn
Flnance: SLWA Mlcronance, Mlcro Houslng
Flnance Company, GRUH Flnance, Dewan
Houslng Flnance Lto.
Soclal: SAATH ano Mablla Houslng Trust (Selt
Lmployeo Women's Assoclatlon, SLWA)
STAKLHOLDLRS CONTR|8UTLD GA|NLD
RLAL LSTATL
DLvLLOPLRS
Lano procurement,
oellvery ot complete
bouslng unlts
Access to new markets, CSO
marketlng partnersblps, casb
Now benets ot sborter term
ano pre-solo oevelopments
F|NANCL
PROv|DLRS
Consumer nance tor
low-lncome cllents
Access to new cllent base
ano opportunltles to cross
sell, support trom CSOs
PRO[LCT
MANAGLMLNT
COMPAN|LS AND
ARCH|TLCTS
Tecbnlcal epertlse,
oeslgn lnnovatlon
Opportunlty to work on
lnnovatlve oeslgn cballenges,
new market epertlse
COMMUN|TY
ORGAN|ZAT|ONS
Knowleoge ot target
populatlon, network ot
potentlal cllents, lnput
on approprlate oeslgn tor
bomes ano oevelopments,
communlty ano llvellbooo
generatlon projects
Servlce tee tor sales ano
marketlng, opportunltles
tor equlty ano olversleo
revenue streams, ablllty to
eteno bouslng to cllents
LOW-|NCOML
CUSTOMLRS
Demano tor new bomes Tltleo ano oeslgn customlzeo
new bomes wltb access to
baslc utllltles, contlnueo
support trom CSOs
MARKLT-8ASLD CASL
HOU5lNG FOR ALL - lNDlA
16
Wblle pre-booklngs look posltlve ln
early stages ot tbe projects, tbe oegree to
wblcb low-lncome communltles are able
to assemble necessary oown payments,
ano can access ano tben repay mortgage
nanclng over several years, remalns to
be seen.
The Business ModeI

Partnership: C5O and reaI
estate deveIopers
As ot mlo 2010, tbe above actors are
engageo ln tbree klnos ot partnersblp
mooels to oellver a total ot 2500 new
bomes to low-lncome communltles by eno
ot 2011.
1. CSO ls engageo as one ot many
posslble marketlng agents by tbe
oeveloper ano recelves a commlsslon
tor unlts solo.
2. CSO ls an ecluslve marketlng agent
tor a perloo ot tlme ano recelves
commlsslon. |n one ot tbe lteratlons
ot tbls partnersblp mooel ln |nola,
tbe partner CSO tounoer bas
assumeo a posltlon on tbe oeveloper
corporatlon's 8oaro. Tbls ensures
greater plannlng ano oeslgn lnput
by tbe CSO to represent tbe cllent
neeos ln tbe oevelopment ot bomes
ano atter sale ot bomes.
3. CSO ano oeveloper corporatlon
are tormally engageo ln a tor-prot
jolnt venture allowlng equltable
olstrlbutlon ot rlsk ano returns.
Tbese varylng partnersblp oynamlcs
are complementeo by tbe servlces ot
nance provloers, arcbltects ano project
management companles to enable target
cllents to purcbase blgb quallty attoroable
bomes.
THL STORY OF
SUN|TA KANHAYALAL

Sunlta llves ln a small one-room bouse ln a slum ln |nolranagar,
15 km away trom tbe clty ot Abmeoabao ln Gujarat, |nola. Sbe bas
been llvlng tbere wltb ber busbano ano two sons tor more tban
10 years, earnlng ber llvellbooo by worklng as an attenoant at a
bank tor tbe past oecaoe.
Now tbat ber sons are grown up, ano are wage-earners tbemselves,
tbe tamlly wblcb ls lncreaslngly crowoeo ln tbelr one-room
space bas tbe capaclty to attoro a blgger bome. Ownlng a bome,
a secure asset, bas been a longtlme oream ot Sunlta's. However,
tbere was neltber a bome on tbe market tbat sbe coulo attoro, nor
olo sbe bave access to nanclng optlons wblcb woulo allow ber to
consloer sucb a large purcbase.
Tooay, ber sltuatlon ls mucb oltterent. Sunlta bas maoe an aovanceo
booklng tor an apartment wltb an Lambba HFA |nola project, ano
wlll soon reallze ber oream ot ownlng a bome wltb more space tor
ber tamlly ano better tacllltles. Tbe bome costs USD 9050, ano sbe
ls ln tbe process ot belng approveo tor a mortgage loan tbat wlll
bave ber paylng rougbly USD 85 per montb tor 15 years.
Sunlta was maoe aware ot tbese attoroable bouslng optlons tbrougb
tbe work ot communlty organlzatlons wbo market tbese unlts.
Tbe communlty organlzatlons also bullo tbe capaclty ot woulo-
be customers llke Sunlta, tbrougb llvellbooo tralnlng, access to
government resources ano otber servlces.
Sunlta Kanbayalal, HFA |nola cllent, soon to move
lnto ber new bome.
|
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MARKLT-8ASLD CASL
HOU5lNG FOR ALL - lNDlA
17
5aIes and Marketing: Aggregated
denand through C5Os
CSO partners play tbe role ot marketlng agents wbo aggregate
oemano tor tbe oeveloper as well as tbe nance provloers lnvolveo ln
tbe project. Tbey market new bomes to low-lncome cllents tbrougb
varlous cbannels wblcb lncluoe elstlng pbyslcal spaces organlzeo
by tbe CSO to aooress several neeos ot tbe communlty, ano olrect
marketlng manageo by elo workers.
Financing: New Market, New Products,
Many Unknowns
Houslng nance tor low-lncome communltles ls a relatlvely nascent
market ln |nola. HFA |nola works wltb several lenoers trom MF|s to
commerclal banks wbo are all on a learnlng curve ln terms ot oenlng
prooucts ano servlces responslve to tbls market, wblcb are ln llne
wltb tbelr cost structures ano buslness mooels.
At tbe tlme ot wrltlng, 670 loans
7
were orlglnateo, supplleo by lenoers
at a malmum Loan to value (LTv) ot 80. Loan amounts range trom
|NR 300,000 to 600,000 (USD 6500-14,000), wltb a tenure ot 15
years ano at lnterest rates ranglng trom 12 to 14. Average montbly
payments amount to rougbly |NR 3000 to Rs 6000 (USD 65-140), ano
typlcally range trom 35 to 40 ot a bousebolo's montbly lncome.
Several potentlal buyers ot bomes, tbougb conoent ot tbelr capaclty
to pay montbly lnstallments on a bome mortgage, eperlence oltculty
accumulatlng tbe nearly 20 oown payment requlreo to orlglnate a
mortgage loan.
Tooay, nance provloers lncluolng MF|s bouseo wltbln partner CSOs,
are looklng to provloe sborter-term loans to nance speclcally tbls
oown payment. On tbe one bano, sbort term nanclng along tbese
llnes mlgbt be lookeo at as necessary to enable low-lncome tamllles to
buy tbese bomes. Conversely, conventlonal nanclal wlsoom, wblcb
cautlons agalnst etenolng nance beyono 80 loan to value on a
bome, suggests tbat oolng so woulo ecesslvely lncrease tbe oetaults
on loans. Tbe years to come wlll oemonstrate tbe approprlate balance
ot sbort term ano long term nance ano wbetber customers are able
to attoro oown payments ano tbe mortgages tbey take on.
/ to|ca| s|o |oe, /|eoabao |oo|a
|
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coostoct|oo o |o.-|ocoe c||eots |o
/|eoabao, |oo|a
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/|eoabao, |oo|a
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MARKLT-8ASLD CASL
HOU5lNG FOR ALL - lNDlA
18
Launch HFA lndia
Dec.
2008
Feb.
2009
Expansion in
Ahnedabad and
signing of LOl
2,700 Iakh lNR
675 FaniIies
HFA |nola Tlmellne
Flnanclal value Creatlon
Soclal value Creatlon
Project Mllestones
{TotaI faniIes served}
First project
discussion and
signing of LOl
May
2009
Launch of On
5hanti Nagar
Nov.
2009
Feb.
2010
HFA partner CHL sets
up offices in lndia
May
2010
Launch of
Unang
Lanbha
5,600 Iakh lNR
1,400 FaniIies
june
2010
Launch
of
5wapna
5akar
976 Iakh lNR
244 FaniIies
Oct.
2010
Launch of CHL project
june
2010
5igning of
LOl for
Pune
project
1,000 Iakh lNR
250 FaniIies
jan.
2011
Expansion to
Chennai and
Iaunch of HFA
lndia pIatforn
Feb.
2011
Expansion
to
BangaIore
8,000 Iakh lNR
2,000 FaniIies
1,200 Iakh lNR
3,000 FaniIies
Feb.
2011
Urban Design
ChaIIenge
''Honechangers
Conpetition''
juIy
2011
First draft of
NationaI AffordabIe
Housing 5tandard
CSO
HOUS|NG F|NANCL CL|LNT
DLvLLOPLR/
TLCHN|CAL
ASS|STANCL/
PRO[LCT
MANAGLMLNT
Payment

Houslng Loans
Marketlng, Demano Aggregatlon, Communlty |nputs
Lcluslve Access to New Homes tor Cllents
P
a
y
m
e
n
t
[olnt venture
CSO as Developer 8oaro Member
Mooel 2
Mooel 1
!
!
!
Proouct
Servlce
Payments
Legeno
Cltlzen Sector
Organlzatlon
Customer
Prlvate
Lnterprlse
L

c
l
u
s
l
v
e

A
c
c
e
s
s

t
o

N
e
w

H
o
m
e
s

t
o
r

C
S
O

C
l
l
e
n
t
s
Commlsslon/Servlce Fee
!
HFA lndia VaIue Chain
HFA lndia Operations
HFA lndia TineIine
Developer
acqulres lano
ano subcontracts
procument ot
bullolng materlals
varlous
avenues lncluolng
deveIoper's
revenues, C5O
investnent,
connerciaI
nance and
private
investors
Mortgage
nanclng provloeo
by HF|s. MF|s
provloe loans tor
oown payment
DeveIopers
work together
with C5Os
and architects
to design
deveIopnents
LiveIihood
generation and
connunity
services
support by
C5Os in
coIIaboration
with the
deveIopers
Developer ano
oeveloper/ CSO
[v partnersblp
sub contracts
constructlon
process
Direct saIes
to faniIies
through C5Os
engaged as
narketing
vendors or
partners with
deveIopers
Prlvate Sector Actors Soclal Sector Actors
PROCURLMLNT
PRO[LCT
F|NANCL
RLTA|L
F|NANCL
PRODUCT
DLS|GN
PRODUCT
DLv
AFTLR
SALLS
MARKLT|NG
AND SALLS
MARKLT-8ASLD CASL
HOU5lNG FOR ALL - lNDlA
19
ls the soIution 5OLVlNG THE PROBLEM!
Through coIIaborative entrepreneurship nodeIs,
HFA projects provide affordabIe and quaIity
hones with cIear titIe and access to basic services
{water, eIectricity, sewage etc} to a snaII nunber of
BoP faniIies. ln doing so, these projects iIIustrate
successfuI business nodeIs to scaIe affordabIe
hones for Iow-incone popuIations.
ProbIen Magnitude
17 mllllon bousebolos llve ln slums
8
ln |nola.
Declt ot 24.7 mllllon unlts corresponolng to 35 ot urban
populatlon.
9

QuaIity of 5oIution
Well oeslgneo apartments wltb access to baslc servlces
ano gooo quallty materlal useo tor constructlon.
CSOs ano cllents' lnput on oeslgn to ensure optlmal
utlllzatlon ot common ano lnolvloual spaces.
Malntenance not yet aooresseo: eltber aomlnlstereo by tbe
oeveloper, or CSO-leo, or resloent-manageo.
Housing lnpact - The Nunbers
1540 tamllles bookeo apartments ln 4 new bome
oevelopments ot average unlt slze ot 300 sq tt
10
, rst ot
wblcb wlll be completeo at tbe eno ot 2010.
Housing lnpact - QuaIity of Life
Prloe, elevateo soclal status ano pbyslcal ano nanclal
securlty trom ownlng a bome ano leverage-able asset.
Lpecteo lmproveo quallty ot llte ano proouctlvlty tor
beneclarles, oue to legal ano organlzeo access to baslc
servlces llke water, electrlclty ano pbyslcal securlty, ano
tunctlonal common spaces.
Lpecteo lmproveo bealtb outcomes oue to lmproveo
sanltatlon conoltlons, access to sewage ano sate structures.
Lpecteo lmproveo access to soclal lntrastructure sucb as
eoucatlonal centers ano communlty centers, wblcb are llkely
to tollow bouslng oevelopments.
Partnerships cataIyzed by HFA lndia tap new,
protabIe narket opportunities for deveIopers and
nance providers. They aIso bring new revenues
to C5Os, whiIe aIIowing Iow-incone custoners
to afford a hone purchase.
5oIution reaches the upper segnent of the BoP.
However, resuIting new hones are a signicant
and difcuIt investnent for even the upper BoP.
1 to 3 mlnlmal lncomes (~ USD 1-2 per person per oay)
per beneclary tamlly ot 5.
Customer recelves loan tor 80 ot bome value ( USD
6,500-14,000) over a 15 year term, at 12-14 lnterest rates,
l.e. montbly lnstallment ot USD 65-140, typlcally representlng
rougbly 30-35 ot a bousebolo's montbly lncome.
A prevlously absent attoroable bouslng proouct tor tbe
upper 8oP ls now avallable ln tbe marketplace ano bas tbe
potentlal to stlmulate posltlve market competltlon ano
potentlally lower tbe prlces.
Aovanceo booklng tees bave been wltborawn by rougbly
20-30 ot potentlal customers to oate.
11
|t ls estlmateo tbat
most ot tbese wltborawals bave to oo wltb tbe oltculty ln
assembllng tbe 20 oown payment.
For reaI estate deveIopers, whiIe Iow-incone
housing deveIopnents are a Iower nargin venture
than upper scaIe deveIopnents, severaI factors
nake these ventures conparabIe in terns of
returns on investnent.
Potentlal lower cost ot capltal, oue to several posslble
sources ot lnvestment tor attoroable bouslng projects,
lncluolng soclal lnvestor tunos, or subslolzeo tunolng.
Marglns reouceo to 16-25
12
as opposeo to a regular
30-60, but comparable or blgber return on lnvestment
oue to aovanceo volume baseo sales ot unlts by CSOs
ano avallablllty ot oown payment tunos betore project
completlon.
Large market potentlal wltb tew elstlng competltors.
Real estate oevelopers galn rst mover aovantages ano
torm relatlonsblps wltb strong CSOs wblcb torm slgnlcant
barrlers to entry tor later entrants.
ls the soIution ECONOMlCALLY VlABLE!
EvaIuation Franework
MARKLT-8ASLD CASL
HOU5lNG FOR ALL - lNDlA
20
ls the soIution 5CALABLE AND REPLlCABLE!
ls the soIution ENVlRONMENTALLY 5OUND!
To be repIicated, this nodeI requires nding the right
set of partners, wiIIing to tackIe this narket and work
together, as weII as coIIaboration with the pubIic
sector for infrastructure and approvaIs. RepIicabiIity
depends on:
Tbe Ablllty to no:
1) Wllllng prlvate sector oevelopers lnteresteo ln tbls
market opportunlty.
2) CSOs wltb oeep knowleoge ot communltles ano
complementary marketlng, tralnlng ano oemano aggregatlon
competencles.
3) Dlverse nance provloers wltb wllllngness ano capaclty
to nance sbort ano long term capltal requlrements
ot low lncome communltles wbo may not bave tormal
oocumentatlon ot lncome.
4) Arcbltects wltb a keen sense ot oeslgn tor low lncome
communltles ano ablllty to lncorporate communlty lnput.
Players wbo take on a role slmllar to Asboka's
lnvolvement, convenlng olsparate stakeboloers wltb varylng
agenoas arouno a comple, ano potentlally beneclal market
opportunlty.
Favorable pollcy envlronment wblcb ooes not olstort tbe
market (tor e.g. a pollcy tramework tbat provloes tree lano
to all slum resloents ls not conouclve to market sales ot
unlts).
Cooperatlon trom government tor approvals ano provlslon
ot eternal lntrastructure (access roaos, publlc transport,
water ano electrlclty supply).
Because it Ieverages the conpetencies and
notivations of pIayers that exist in the narket
{deveIopers, nancers and C5Os}, this nodeI
requires each pIayer to invest resources {avaiIabIe
Iand, nance, etc} in order to scaIe up.
The foIIowing circunstances constrain HFA lndia
projects' abiIity to scaIe:
Untavorable pollcy envlronment wltb teolous ano corrupt
cbannels tor constructlon permlts oelaylng project tlmellne,
a crltlcal tactor ln optlmlzlng casb Now ano malmlzlng tbln
prot marglns.
Scarce access to attoroable lano to bullo resloentlal sltes
ln tbe urban areas, especlally lano wltb access to publlc
lntrastructure.
CSOs ano prlvate sector partners unaccustomeo to tbe
otbers' soclal versus buslness mlnoset ano work culture,
necessltatlng tlme to learn to work togetber.
Llmlteo lnterest on tbe part ot prlvate sector oevelopers
oue to lower marglns, llmlteo awareness ano lack ot
conoence ln market slze ano prospects.
Llmlteo capaclty ot nance provloers ano lack ot aoequate
nance prooucts tor nanclng requlrements ot lntormal
borrowers.
Low lncome communltles' besltatlon wltb aovanceo sales
betore completlon ot actual pbyslcal structures, wblcb ls an
lmportant conoltlon tor acceptable return on lnvestment
tor oevelopers.
Lnvlronmental sustalnablllty ls not artlculateo as a prlmary goal ot tbe HFA program.
C5Os benet fron additionaI revenues and vaIue
created for connunities.
CSOs compensateo tor marketlng ano promotlon costs
tbrougb tbelr networks, wblle tbey bullo turtber skllls ano
competencles worklng ln partnersblp wltb prlvate sector
players.
CSOs also palo 1-2 commlsslon tor every unlt solo
tbrougb tbelr networks.
13
CSOs etenolng to tbelr beneclary populatlons,
a customlzeo bome otterlng wltbout bearlng relateo
oevelopment costs.
WhiIe the housing projects of HFA lndia are not
subsidized by donor funds, the C5O partners of
these nodeIs utiIize grant funding for generaI
operations.
ls the soIution ECONOMlCALLY VlABLE!
MARKLT-8ASLD CASL
HOU5lNG FOR ALL - lNDlA
21
Postscript
Future subsidies possibIe, with potentiaI inpacts on price
Subsloles ot |NR 200 (USD4.50) per sq toot
14
are avallable trom tbe state to real estate oevelopers aooresslng tbe
neeos ot low-lncome populatlons. Tbese subsloles are yet to be reallzeo ano lncumbent on oevelopers to pursue
wltb tbe state. Sboulo tbey be successtul ln reallzlng tbese subsloles, tbe lmpact on sale prlces ot bomes, ano wbetber
savlngs wlll be passeo on to customers remalns to be seen.
5caIe through advancing knowIedge and standards
Wltb a clear unoerstanolng tbat prospects tor scale ano repllcatlon are lmpacteo by tbe project ano contet speclc
constralnts mentloneo above, Asboka lnvests resources ln tbe oevelopment ot lnoustry stanoaros, tools ano
knowleoge plattorms wblcb promlse lmpllcatlons tor a wloe range ano varlety ot contets. Among lts lnltlatlves, are
collaboratlons wltb olverse stakeboloers towaros a natlonal (|nolan) attoroable bouslng stanoaro wblcb alms to coolty
energy, quallty ot constructlon, oeslgn ano envlronmental stanoaros tor attoroable bouslng. |n an ettort to promote
lncreaseo knowleoge sbarlng ano tbe oevelopment ot web baseo tools tor a varlety ot stakeboloers to assess market
opportunltles, Asboka ls launcblng a global Houslng For All Knowleoge Plattorm ln Aprll ot 2011, lntenoeo to be an
onllne communlty ano resource center tor varlous stakeboloers to assess market opportunltles.
+ / ,o|ot |o|t|at|ve o t|e |at|o ||t| |a|| Tost aoo t|e ||t|
Cooo, baseo |o ||ec|teoste|o, t|e ||t| |ooooat|oo soooots va|oos
|o|t|at|ves .|t| t|e cooo t|ee o eoo.e|o oeoo|e to |e|o
t|ese|ves. |tto.//....|||t|ooooat|oo.o/oe.aso
2 oos|o o /|| |o|t|at|ves ae act|ve |o 3az||, Co|ob|a aoo |ot.
3 /s|o'a aoo t|e ||t| |ooooat|oo oo oot oov|oe ao oaoc|a|
soooot to |o|eeot|o oatoes .|o oe||ve |oos|o so|ot|oos.
\|||e /s|o'a |e||o.s ae |ovo|veo |o |/ |oo|a oo,ects, t|e oo
|ooe ece|ve ooo|o o st|oeoos o /s|o'a.
+,S |otev|e. .|t| V|s|oo S.a|oat|ao, ||ecto |/ |oo|a,
Seotebe +, 20+0
6 Tota| oobe o |oaos o|sboseo as o Seotebe 6, 20+0
|eta||s o |oao oes o |otev|e. .|t| V|s|oo S.a|oat|ao,
|/ |oo|a ||ecto, Seotebe +, 20+0
8 |c||ose C|oba| |ost|tote, oos|o |o||c aoo |bao ||aoo|o |o
|oo|a, o S` 8 ++`
` |c||ose C|oba| |ost|tote, oos|o |o||c aoo |bao ||aoo|o |o
|oo|a o ++`
+0 |otev|e. .|t| V|s|oo S.a|oat|ao, |/ |oo|a ||ecto,
Seotebe +, 20+0
++ |otev|e. .|t| |a,eooa os|| |aoa|o Tostee S//T, ooe 30,
20+0
+2, +3 |otev|e. .|t| eaot |a|'|, |aoa|o ||ecto V
\o|o.|oe Cooo ooe 28, 20+0 aoo |ao|s| |aoc|o||, C|C |3S
/ooab|e oe State |to ooe 2`, 20+0
++ |otev|e. .|t| eaot |a|'|, V|otoo, ooe 28, 20+0
MARKLT-8ASLD CASL
jAMll BORA
22
janii Bora
Executive 5unnary
Wltb more tban 300,000 members, [amll 8ora
1
([8) ls tbe largest
mlcrotlnance lnstltutlon ln Kenya.
2
8eyono mlcro creolt, tbe
organlzatlon provloes savlngs accounts, llte ano bealtb lnsurance,
counsellng servlces tocuseo on communlty capaclty bullolng, buslness
classes ano larger tlcket bouslng loans.
Leveraging its assets as a nicro nance institution and its
experience deIivering a host of services to its nenbers, jB
Iaunched its affordabIe housing initiative in 2002. |t olo so by
purcbaslng ano oellverlng prlvate lano
!
60km outsloe ot Nalrobl. |ts
vlslon was to create a complete ecosystem tbat woulo provloe lts
members wltb resloentlal, commerclal ano soclal servlces.
"

PRO[LCT DLTA|LS
Geography:
Kaputel Town, Kenya 60 KM outsloe tbe clty
center ot Nalrobl
Product:
New bomes ln new townsblp
5takehoIders:
Prlvate: Constructlon ano Lnvlronmental Lperts
(e.g., arcbltects, englneers, protessors, ano roao
bulloers), Funolng Partners
Soclal: [amll 8ora
Flnance: [amll 8ora
STAKLHOLDLRS CONTR|8UTLD GA|NLD
[AM|| 8ORA Provloes bomes, lano
tenure, commerclal
propertles, loans tor tbelr
purcbase , lntrastructure,
communlty centers
Home loans are a new llne
ot prooucts cross solo to
elstlng cllents, aooltlonal
revenues trom rent on
commerclal unlts
PR|vATL FUNDLRS
(e.g., Acumen Funo,
Stromme Founoatlon)
Provloe tunolng tor tbe
project
Lqulty, |nterest |ncome,
|mpact lnvestlng relateo
soclal value
HOUS|NG
PROFLSS|ONALS
(e.g., arcbltects,
englneers, protessors)
Tecbnlcal, envlronmental ano
constructlon
knowleoge
Servlce tee tor tecbnlcal
aovlce, knowleoge ot a new
market segment
|NDUSTR|AL /
COMMLRC|AL
LNTLRPR|SLS
[obs to Kaputel resloents,
rent tor otces
Labor ano new markets
[AM|| 8ORA
MLM8LRS
Demano tor bouslng,
constructlon labor
New bomes, aooltlonal
lncome tbrougb
constructlon jobs
Lacb resloent ot tbls new town, calleo Kaputel, purcbases new bomes
ano tberetore access tltleo lano ano lntrastructure. All resloents are
elstlng [8 cllents wbo bave a strong borrowlng blstory wltb tbe MF|
ano are eltber entrepreneurs or can support local entrepreneurs. [8
ls tbe ecluslve provloer ot nanclng tor purcbase ot tbese bomes.
5
Cost ot bomes oepenos on bow long tbe cllent bas been a member
ot [8 ano can range trom 350000 KLS(USD 4320) tor tbose wbo
bave been members over 10 years up to 750000 KLS (USD 9375) tor
newer members.
|n total, [8 plans to lncluoe 2000 new
bomes (tor 10000 lnolvlouals), cultural ano
soclal centers, ano commerclal/ lnoustrlal
areas ln Kaputel. Total cost ls estlmateo to
be KLS 900 mllllon (USD 11.25 mllllon),
balt tor resloentlal oevelopment ano tbe
otber balt tor commerclal oevelopment.
Constructlon costs bave been reouceo
tbrougb stanoarolzeo oeslgn, local
manutacturlng ot bullolng materlals ano
constructlon ot bomes by resloents wbo
are palo by [8. Tbe project ls nanceo
tbrougb prlvate loans, [8 company savlngs
ano consumer oown payments, wltb
mlnlmal tunolng tbrougb oonatlons.
Kaputel ls stlll unoer constructlon
6
as
legal protests
7
trom local envlronmental
NGOs ano nelgbborlng towns bave
oelayeo tbe process. As ot September
2010, two neighborhoods,
enconpassing ~500 hones in
totaI, have been buiIt and ~200 are
under construction. Residents are
noving into conpIeted houses on
an ongoing basis.
8
5one faniIies,
that have aIready bought hones,
have deIayed their nove due to
personaI considerations of distance
to work, and inpact on businesses.
[8 bas also openeo two scbools ln Kaputel
a prlmary scbool ln [anuary 2009 ano
MARKLT-8ASLD CASL
jAMll BORA
23
a seconoary scbool ln [anuary ot 2010.
9

Management epects tbe townsblp to be
completeo early 2012.
10
Wltb a current waltllst tbat tar eceeos
tbe avallable bomes, [8 ls ln negotlatlons
tor tbe purcbase ot aooltlonal lano to
create anotber townsblp. As tbe company
contlnues to epano, [8 belleves lt must
actlvely manage lts costs, wblle looklng
tor lnnovatlve ways to lncrease quallty
ano servlce tor resloents.
11
The Business ModeI
Several teatures ot tbe [8 operatlng
mooel, lncluolng englneerlng ln-bouse
materlals proouctlon, lmplementlng a
stanoarolzeo manutacturlng process, ano
leveraglng lts elstlng cllent base ano sales
cbannels, bave alloweo [8 slgnlcant cost
reouctlons ln oellverlng bomes to low-
lncome bousebolos.
Procurenent: Cutting costs
through naking buiIding
nateriaIs on-site
[8 evaluateo ano reouceo multlple cost
orlvers ln tbe procurement ot raw
materlals. Flrst, [8 bougbt cbeap lano
near tbe townsblp to etract tbe raw
gravel neeoeo tor constructlon. |t also
bullt a temporary, baslc tactory ano blreo
THL STORY OF [ANL NGO|R|
[ane Ngolrl, a tblro generatlon slum oweller, llveo ln a small one
beoroom sbanty ln tbe Matbare slum ot Nalrobl, along wltb ber tour
cblloren. Her bome was a 6 square meter, muo structure. A balt
complete wall olvloeo ber bome trom ber nelgbbor's, wbo maoe a
llvlng trom tbe lllegal brewlng ot alcobol.

[ane was a commerclal se worker wbo bao been struggllng tor
many years to support ber tamlly wben sbe touno out tbat sbe was
H|v posltlve. |n late 1999, lt took tbe Matbare brancb manager,
[ane Njokl, several montbs to convlnce [ane ano ber colleagues
tbat anotber llte was posslble tor tbem. Tbe entlre group oecloeo
to become [amll 8ora members ln December 1999 ano tbelr llves
slowly but surely cbangeo.
[ane took sewlng classes ano starteo ber own tallorlng buslness. Sbe
buys olo clotbes ano recycles tbem lnto cblloren's oresses tor sale.
Sbe purcbaseo ber rst slmple secono bano manual sewlng macblne
wltb a loan ot USD 40 trom [amll 8ora.
[ane's buslness ls growlng ano sbe bas taken out ano repalo [amll
8ora loans 11 tlmes over tbe past 10 years. However, even wltb a
relatlvely stable lncome, an lmproveo bome remalneo unreallzeo
oream. Glven ber prole as a H|v posltlve tormer-se worker wltb
no tormal lncome or otclal aooress, commerclal banks woulo not
consloer ber a canoloate tor a bome loan.
|n 2002, [ane turneo to [amll 8ora tor a bome loan tor a bouse ln
Kaputel. Glven ber strong track recoro wltb prevlous buslness
loans, [amll 8ora accepteo ber loan appllcatlon ln 2008. |t took [ane
sl years to save enougb tor tbe oown payment ot 10 (USD 440).
Tooay, [ane llves ln a two beoroom bome ln Kaputel. Sbe bas a
kltcben, a batbroom, a slttlng room, two beorooms, a garoen ano
enougb space to sew ano grow ber buslness. Sbe pays USD 40 a
montb, wblcb ls not mucb more tban wbat sbe palo tor rent ln Nalrobl.
[ane says sbe ls prouo to be a bome owner ano sbe tbanks Goo
every oay tor tbe mlracles tbat bave bappeneo ln ber llte. Sbe says
tbat even tbougb sbe ls H|v posltlve, sbe ls oetermlneo to llve to
see ber cblloren grow up ano also wants to see ber granocblloren.
[ane Ngolrl
outsloe ber new
bome ln Kaputel
[ane Ngolrl ano tamlly members ln ber new slttlng room
|
|
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t
o
s

.

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a
MARKLT-8ASLD CASL
jAMll BORA
24
members to proouce cement blocks ano root tlles, savlng on botb
labor ano transportatlon costs. On slte proouctlon costs were KLS
30 per block ano KLS 17 per tlle, wbereas purcbaseo macblne cut
blocks woulo bave cost KLS 28-35 eacb plus KLS 4,000-8,000 (USD
50-100) ln transport.
12
Tbe tactory bas also provloeo jobs to over 100
[8 tamllles, lmprovlng tbelr ablllty to pay back loans.
5aIes and Marketing: Cross seIIing to
entrepreneurs with strong credit history
[8 leverages lts elstlng sales cbannels to cross sell new bouslng loans
to lts base ot approlmately 300,000 cllents across Kenya. Houslng
loans are approveo tor cllents wbo bave a mlnlmum tbree year
engagement wltb [8 ano successtul repayment ot at least tbree buslness
loans. Tbose ellglble tor bome loans ln Kaputel are eltber proven
entrepreneurs or baroworklng lnolvlouals wbo can support tbe work
ot entrepreneurs. [8 proactlvely selects entrepreneurs wbo can eltber
provloe gooos ano servlces to tbe town (e.g., tooo sbops), wbo can
serve tbe surrounolng areas (e.g., carpenters), or bave outgrown tbelr
current buslness space ano neeo blgger bomes or tbe commerclal
area ot Kaputel.
13
However, several entrepreneurs are besltant to
move to Kaputel untll a crltlcal mass ot resloents moves ln, to support
tbelr buslnesses ano electrlclty (currently solar powereo) ls provloeo
as a utlllty.
Product Design and DeveIopnent:
ProfessionaIs working with the connunity
on standardized hones
To ensure quallty constructlon, [8 blreo protesslonal arcbltects,
englneers ano protessors to oeslgn ano oversee tbe constructlon ot
tbe townsblp, ln consultatlon wltb resloents.
Wltb an empbasls on cost cuttlng, tbese blreo protesslonals oevelopeo
several stanoarolzeo bome layouts tbat coulo be mass proouceo, ano
lnvolveo slmple, low tecb constructlon processes ano coulo leverage
cost savlngs tbrougb scale. Lacb bome was bullt wltb eltber 2 or
4 beorooms, a kltcben, slttlng room ano batbroom.
14
Homes are
baslc ano nlsblngs are mlnlmal, as empbasls ls placeo on structural
sounoness, quallty ano space etclency.
|nltlally, Kaputel olo not bave access to government utllltles, wblcb
necessltateo tbe provlslon ot baslc servlces tbrougb alternatlve
means, tor eample tbrougb solar panels on bomes. [8 recently began
worklng wltb Kenya Power & Llgbtlng Company to brlng electrlclty to
Kaputel. To aooress tbe water consumptlon neeos ot tbe communlty,
Unlverslty ot Nalrobl protessors were blreo to conouct a byoro-
geologlcal stuoy. Tbey touno a water source at a oeptb ot 85 meters ano
boreboles were orllleo to create a byoro-pump system. Aooltlonally,
bybrlo wastewater management systems bave been lmplementeo to
recycle 70 ot water utlllzeo ln Kaputel.
15
Cuttlng costs ln a low cost
bouslng project ls a comblnatlon
ot bunoreos ot aspects ot bullolng
materlals proouctlon, oeslgns ano
constructlon metboos, lay-out plans
etc. Tbere are no sbortcuts or slmple
solutlons to cuttlng costs. Lvery llttle
oetall counts, ano only tbe sum ot
all tbese mlnor savlngs can leao to a
solutlon tbat ls truly ano attoroable
bome tor tbe poor.
|ngrlo Munro,
Founoer ano Managlng Trustee,
[amll 8ora
MARKLT-8ASLD CASL
jAMll BORA
25
Financing: lnstaIInents roughIy equivaIent to sIun
rent, covering construction costs
As a mlcronance organlzatlon leaolng an attoroable bouslng lnltlatlve,
[8 otters nanclng to all ot tbelr bome buyers. Lacb cllent recelves a
loan wltb a tenure ot 5-20 years ano an lnterest rate ot 8.5-10.
16

Cllents make a oown payment ot 10 ot tbe total cost ot KLS 350000
to ~700000 (USD 4,375-8,750) ano tbe average montbly lnstallment
ls KLS 3,500 (USD 40).
17
Tbrougb lowerlng lts own cost ot capltal by utlllzlng patlent capltal
trom lts lnvestors, [8 otters a low lnterest rate to lts cllents. Comblneo
wltb an lncreaseo tenure as compareo to otber mlcronance loans
ottereo, montbly lnstallments work out to amounts slmllar to wbat
resloents tormerly palo as rent ln Nalrobl slums.
18
Tbe purcbase prlce ot tbe bome covers all constructlon costs ot tbe
bome (rougbly KLS 150,000 / USD 1,875 tor 2-beoroom), 50 ot
lntrastructure ano lano cost (KLS 75,000 / USD 938), ano a mooest
margln.
19
Tbe remalnlng 50 ot lntrastructure cost ls covereo tbrougb
rent payments trom commerclal ano lnoustrlal space.
Houslng projects tor tbe
poor tall because tbey tocus only on
bouslng. You can't separate bouslng
trom tbe otber lssues because poor
people bave so many neeos. Poverty
bas to be tackleo trom all angles.
|ngrlo Munro,
Founoer ano Managlng Trustee,
[amll 8ora
/e|a| s|ot o |aoote| To.os||o oooe
coostoct|oo
|
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t
o

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MARKLT-8ASLD CASL
jAMll BORA
26
Tine Line
janii Bora Operations
janii Bora VaIue Chain
jB set up
IocaI factory to
nass produce
tiIes and
cenent bIocks
Project
nanced by
consuner
down
paynents,
jB Trust and
private Ioans
jB provides
housing Ioans
at 8.5-10
interest for up
to 15 to
20 years
ProfessionaIs
design the
standard,
green
connunity
with the
residents'
input
[8 provloes
communlty
malntenance
ConnericaI
center
provides
IiveIihood to
residents
Protesslonals
supervlse ano
oversee quallty ot
contructlon,
IocaI residents,
nost of
whon are jB
nenbers,
buiId hones
Advertisenent
to current
nenbers and
approvaI of those
with strong
credit record and
IiveIihood
opportunities in
Kaputei
Prlvate Sector Actors Soclal Sector Actors
PROCURLMLNT
PRO[LCT
F|NANCL
RLTA|L
F|NANCL
PRODUCT
DLS|GN
PRODUCT
DLv
AFTLR
SALLS
MARKLT|NG
AND SALLS
jB Purchases Iand
fron private
owner
Feb.
2002
5ept.
2002
[amll 8ora
Project Mllestones
First pIan for
Kaputei
conpIeted
jan.
2003
Oct.
2003
june
2004
5ept.
2010
5chooI finished, Con-
nerciaI pIan approved,
200 additionaI faniIies
nove to Kaputei
Tenporary
factory buiIt
jB receives 1,000+
appIications within
the first nonth
Kaputei project
approved by County
CounciI
jan.
2005
NEMA
rejects
Kaputei
project
jB wins High Court
appeaI and resunes
production one
nonth Iater
2007 Mar.
2007
2009 2010 5ept.
2009
To date 300 faniIies
noved into Kaputei
CL|LNTS
|NDUSTR|AL/
COMMLRC|AL
LNTLRPR|SLS
PR|vATL FUNDLRS
[AM|| 8ORA
CONSTRUCTON
PROFLSS|ONALS
Labor
Lmployment |ncome
Ottlces
Rent
Tecbnlcal Aovlce
Servlce Fee
Consumer tlnance
Home
Constructlon |ncome
!
!
!
Lqulty Project tlnance !
!
!
Proouct
Servlce
Payments
Legeno
Cltlzen Sector
Organlzatlon
Customer
Prlvate
Lnterprlse
|nstallments
Labor
!
MARKLT-8ASLD CASL
jAMll BORA
27
ls the soIution 5OLVlNG THE PROBLEM!
janii Bora is providing quaIity hone soIutions
with titIed Iand to nicronance nenbers by
taking a conprehensive approach to Iow-incone
popuIation needs. lnpact so far has been snaII as
the project is in nid stages of construction.
ProbIen Magnitude
~1.5mllllon slum owellers ln Nalrobl ano 7.5 mllllon ln
Kenya.
20
Many bousebolos (~6 members eacb) llve ln a slngle room
wltbout securlty ot tenure.
~ 94 ot Nalrobl's slum owellers are wltbout access to
aoequate sanltatlon.
QuaIity of 5oIution
Deslgn ano overslgbt ot bome constructlon by protesslonal
arcbltects ano englneers, wltb quallty control on eacb bome.
Ltenslve consultatlons wltb potentlal resloents to ensure
neeos are aooresseo.
|ncluslon ot commerclal space tor entrepreneurlal
buslnesses ano llvellbooo generatlon.
Housing lnpact - The Nunbers
Over 2000 [8 member appllcatlons tor a bome ln Kaputel.
470 bomes bullt ano tamllles serveo.
50 entrepreneurs currently worklng ln townsblp, provlolng
jobs to otber members (worklng trom resloentlal bomes at
tlme ot wrltlng, as commerclal center ls not yet bullt).
Housing lnpact - QuaIity of Life
Ownersblp ot a bome ano lano tltle, a leverageable asset,
ls an lmmense source ot pbyslcal ano nanclal securlty ano
prloe, elevatlng soclal status.
Lpecteo lncreaseo bealtb outcomes oue to lmproveo
sanltatlon conoltlons, access to clean water ano sewage
systems.
Lpecteo lmproveo proouctlvlty outcomes oue to
lncreaseo space tor llvellbooo actlvltles ano solar llgbtlng
lncreaslng proouctlve bours.
Lpecteo lmproveo eoucatlon outcomes oue to
communlty access to new resources llke nursery scbools,
playgrounos, sports tacllltles, llbrary ano communal balls.
The Kaputei Town Housing Project is a viabIe
nodeI for janii Bora, investors and invoIved
stakehoIders. The provision of nance for
purchase of hones nakes this soIution a viabIe
one for BoP connunities in Nairobi desiring
hone ownership.
5Iun dweIIers pay roughIy the sane
instaIInent as their previous rent.
Cllent tamllles llve ln tbe Nalrobl slums, paylng average
rent ot KLS 3500 (USD 40 tor 2-beorooms), rougbly
equlvalent to lnstallments ln [8 program.
Typlcal cllent tamlly earns between USD 80 to USD 200
per montb.
21
Cllent acqulres loan tor 90 ot bome value (KLS 350,000
to 700,000 le USD 4,375-8,750) over a 5-20 year term, at
8.5-10 lnterest rates.
New bomes result ln lncreaseo lncomes tor some
resloents wbo are employeo by [8 ln bome constructlon.
janii Bora is striving for nanciaI sustainabiIity,
ensuring Ioan repaynent through seIection of
creditworthy cIients.
|n 2010, [8 repalo ln tull a USD 250,000 loan to Acumen Funo.
Purcbase prlce ot bomes allows break even on eacb bome,
lano plot ano relateo lntrastructure.
[8 cbarges tees tor aooltlonal servlces ottereo by [8 to
resloents (e.g., scboollng, electrlclty, townsblp malntenance).
Creolt etenoeo at low rate ot 8.5-10 maoe posslble by a
ml ot tunolng sources lncluolng company savlngs, member
oeposlts, ano oown payments.
Home loans granteo only to creoltwortby [8 members
(mlnlmum 3 years as [8 cllents, at least 3 loans alreaoy
repalo, capable ot 10 oown-payment).
22
Other stakehoIders benet fron additionaI
revenues and vaIue created for connunities.
Fee tor servlce tor bouslng ano envlronmental eperts,
arcbltects etc.
Local entrepreneurs access new revenue streams ano ablllty
to epano buslness/revenue wltb aooltlonal work space.
[obs createo tor 100+ [8 members ano local Maasal communlty.
The soIution is econonicaIIy viabIe and is not
reIiant on subsidies. CIients pay the fuII cost of the
hone, Iand and reIated infrastructure. AdditionaI
prograns such as the schooI and other faciIities
are subsidized by jB.
ls the soIution ECONOMlCALLY VlABLE!
EvaIuation Franework
MARKLT-8ASLD CASL
jAMll BORA
28
ls the soIution 5CALABLE AND REPLlCABLE!
ls the soIution ENVlRONMENTALLY 5OUND!
janii Bora has attenpted to buiId an
eco-friendIy township after IegaI ghts with
environnentaI NGOs.
[8 prevalleo ln court proceeolngs atter a 2-year legal battle
agalnst NGOs, wbo clalmeo Kaputel woulo olsturb wllollte
mlgratory patterns.
janii Bora's abiIity to scaIe is constrained by a
Iack of partnerships and access to funds:
Llmlteo amount ot tunos tor olsbursable loans oue to lack
ot access to tunos wltb low cost ot capltal ano long term
maturlty.
Dltcultles convlnclng woulo-be 8oP cllents to relocate
outsloe tbe clty, especlally to new townsblps, betore
a crltlcal mass ot resloents ls reacbeo (oue to llmlteo
llvellbooo optlons, lncreaseo commute tlmes, ano lack ot
publlc lntrastructure ln new townsblps).
Lack ot government relatlonsblps to ettectlvely provloe
publlc lntrastructure ano utllltles (ano loeally llmlt [8's
lnvolvement ln creatlng access roaos, electrlclty water ano
sewage systems).
Lack ot partnersblps wltb prlvate sector players tbat
coulo boost employment opportunltles ln new townsblps
or otberwlse allevlate [8's neeo to relnvest ln varlous
processes, sucb as tralnlng labor ln constructlon practlces ln
potentlal new townsblps.
Going forward, janii Bora is attenpting to
address these barriers by:
Recently becomlng a reglstereo bank, glvlng lt access to
tunos wltb lower cost ot capltal.
Consloerlng partnerlng wltb otber organlzatlons to
lncrease scale ano reouce costs.
To be repIicated, this nodeI requires:
Large pool ot low-lncome lnolvlouals wllllng to move,
ano an ettectlve organlzatlon, wltb oeep knowleoge ot tbe
communlty able to aggregate oemano.
Unoerstanolng ot low-lncome lnolvlouals' creoltwortblness
(llkely requlre a long term relatlonsblp wltb cllents).
Access to attoroable, long-term nanclng wltb low cost ot
capltal or subsloles to otter low-lnterest loans.
Avallablllty ot attoroable ano contlguous lano, ln close
enougb prolmlty to clty centers.
Lconomlc opportunltles near locatlon ot new bomes, or
transportatlon to tbese opportunltles.
A culture ano envlronment wbere stanoarolzeo low tecb
bullolng ls acceptable.
Proouctlve relatlonsblps wltb local groups ano nelgbborlng
towns to avolo oelays ano potentlal legal battles ano
protests.
|ncluslon ot sewage system tbat cleans ano recycles water
back lnto tbe communlty.
Homes powereo by solar panels ano tecbnologles sucb as
bybrlo waste water management.
MARKLT-8ASLD CASL
jAMll BORA
29
!"#$#%&'($
At Kaputel, [amll 8ora bas been able to oevelop a sustalnable, relatlvely closeo ecosystem by allowlng communltles to
engage ln tbe constructlon ot tbelr own bomes, by supplylng lntrastructure ano relylng on members' entrepreneurlal
nature to stlmulate llvellbooos. However, as tbe organlzatlon consloers growlng tbelr bouslng lnltlatlve botb ln Kaputel
ano tbrougb new ecosystems, partnersblps wltb tbe government ano prlvate sector players are llkely requlreo to more
easlly scale ano repllcate.
Partnersblps wltb tbe government tor tbe provlslon ot lntrastructure ano publlc utllltles, llke tbe one belng pursueo
wltb tbe Kenya Power & Llgbtlng Company, woulo allow [8 to scale to new areas more etclently. Prlvate companles
can provloe more scalable employment opportunltles, tbereby allowlng [amll 8ora to otter bomes to a greater number
ot lts members wbo oo not t tbe current entrepreneurlal crlterla. Wltb more occupatlonal opportunltles, more slum
owellers wlll be wllllng to relocate to [amll 8ora's ecosystems. Leveraglng cross sector partnersblps woulo better
allow [8 to tocus lts ettorts on scallng bome oevelopment ano nanclng.
+ a|| 3oa eaos 'ooo a||' |o S.a||||
2 3 ooooeo |o +``` as a sa|| |co-oaoce ooeat|oo o a ooo
o S0 beas
3 3S0 aces o coot|ooos |aoo .ee ooc|aseo
+ |otev|e. .|t| |o|o |ooo, |ooooe aoo |aoa|o Tostee,
a|| 3oa, o| 20+0
S T.o toes o |oes ae oeeo. T|e st, a 2 beooo, s|tt|o
oo, bat|oo aoo '|tc|eo |aoot |s aooo|ate| S+0 so eet |o
s|ze oo a 2000 so eet o|ot. T|e secooo toe o |oe |s + beooo,
+0 so eet, oo oo|| t|e sae s|zeo o|ot.
6 Coostoct|oo beao |o |ate 200 aoo |s ooo|o.
a|| 3oa oeva||eo |o a coot case boo|t oo b |oca| |CCs
a||e|o t|at |aoote| to.os||o b|oc'eo t|e ao|a| |at|oo co|oo
to |a|ob| |at|ooa| |a'.
8 Cve 2S0 a|||es |ao oveo |o at t|e t|e o .|t|o
` |oo|| 2S0 stooeots ae eoo||eo |o t|e o|a sc|oo|. |o 20+0,
t|e oveoeot ecoo|zeo bot| sc|oo|s as oc|a| oob||c sc|oo|s.
+0 |otev|e. .|t| |o|o |ooo, |ooooe aoo |aoa|o Tostee, a||
3oa, o| 20+0
++ |otev|e. .|t| |o|o |ooo, |ooooe aoo |aoa|o Tostee, a||
3oa, o| 20+0
+2 Toaoa, o|ostooe o|e. !"#$%&' )'*&+" ,+- )&'./ 01 2+ !"+$#3' 4+-5
*+/& 6+7/#189 |eboa +S, 20+0. |tto.//....bos|oessoa||a|ca.co/
Cooao20|ooost/-/S3`SS0/86+`0/-/|te/+/-/S++0|z/-/|ooe.
|t|
+3 |otev|e. .|t| |o|o |ooo, |ooooe aoo |aoa|o Tostee, a||
3oa, o| 20+0
++ |otev|e. .|t| |o|o |ooo, |ooooe aoo |aoa|o Tostee, a||
3oa, o| 20+0
+S a|| 3oa Cooao \ebs|te, |tto.//....,a||boa.o/|ooe.
|t
+6 a|| 3oa Cooao \ebs|te, |tto.//....,a||boa.o/|ooe.
|t
+ Yas|oa Za|oao, e|eo | 8 /o|eo Cootoo. :1+-;'38'
,'*'//%"< &+ =''& !+$'"&< >;;'$#%&#+1 ?+%;/@ A7#;3#18 B1&'"."#/' &+
C'%*D 4+-501*+E' =%"F'&/9
+8 |otev|e. .|t| |o|o |ooo, |ooooe aoo |aoa|o Tostee, a||
3oa, o| 20+0
+` a|| 3oa Cooao \ebs|te, |tto.//....,a||boa.o/|ooe.
|t
20 oe|ess |oteoat|ooa| (|tto.//....|oe|ess-|oteoat|ooa|.o/
staooao_+.aso`|o=0.23S08|o=0.268|o=0.262)
2+ |otev|e. .|t| |o|o |ooo, |ooooe aoo |aoa|o Tostee, a||
3oa, o| 20+0
22 a|| 3oa Cooao \ebs|te (|tto.//....,a||boa.o/
|oos|ot|e.
lN5lGHT5: WHAT THE MARKET-BA5ED CA5E5 TELL U5
30
What Market-Based Approaches to AffordabIe
Housing TeII Us
|ntegrate
Flnance
8unole value
Malmlze value
Cut Costs
Moblllze Communlty
Resources
vlable
Market 8aseo
Attoroable Houslng
Solutlons
+ 'Va|oe booo||o' |s oe|veo o t|e .e|| 'oo.o a'et|o state o 'ooooct booo||o.' Va|oe booo||o |ocoooates aoo|t|ooa| e|eeots to
ao estab||s|eo va|oe oooos|t|oo aoo oos|ts t|at |o||st|c o cooe|eos|ve va|oe oooos|t|oos ae c|t|ca| o coosoes .|t| |||teo o|soosab|e
|ocoe- .|ee eve oo||a soeot eoeseots s|o|caot ooootoo|t cost. (|aooez et a|. 20+0, oo 3+6)
From a broao revlew ot buslness mooels oellverlng
bouslng solutlons we selecteo several Market-
8aseo Cases tbat were geograpblcally olverse, not
subslolzeo, ano tbat oellvereo new bomes as well as
bome lmprovements at market prlces to low-lncome
consumers. Tbls sectlon presents tbe key lnslgbts
orawn trom analyzlng tbese Market-8aseo Cases.
We touno tbat vlable market-baseo mooels bave tbe
tollowlng strategles ln common:
Tbey acbleve break even or protablllty tbrougb a
comblnatlon ot strategles tbat:
1. Malmlze value tor cllents tbrougb reouclng
costs ano value bunollng.
4
2. |ntegrate nanclng lnto tbelr solutlons.
3. Moblllze tbe resources ot low-lncome
communltles.
5trategy 1:
Maxinize VaIue for
Low-lncone CIients,
Prots are possibIe in the quaIity deIivery
of new hones
Several lnnovatlve lnltlatlves leo by oltterent types ot
stakeboloers bave manageo to protably create bome
lmprovement ano new bome solutlons tor tbe 8oP.
Dolng so ls otten preolcateo on lnvestlng ln servlng
low-lncome markets, ano crattlng compelllng value
proposltlons tor low-lncome cllents.
5trategies EnpIoyed by
ViabIe Market-Based 5oIutions
New Hones: Reduced 5aIes Margins for
DeveIopers But Not NecessariIy Less
Return On lnvestnent
Tbe Cases ot [amll 8ora ([8) ano Asboka's Houslng
tor All (HFA) lnltlatlve ln |nola oemonstrate tbat new
bomes can be protably oellvereo to low-lncome
communltles.
lN5lGHT5: WHAT THE MARKET-BA5ED CA5E5 TELL U5
31
5trategies EnpIoyed by
ViabIe Market-Based 5oIutions
Maxinizing Returns on lnvestnent,
WhiIe 5inuItaneousIy Reducing Margins
on New Hones 5oId
Desplte relatlvely low marglns per bouslng unlt solo,
real estate oevelopers see tbe potentlal tor souno
nanclal returns because ot a comblnatlon ot tactors.
Projects are snaIIer in size, require snaIIer
capitaI outIays to begin with, and are faster to
turn around than traditionaI projects. All tbese
tactors can leao to casb Now benets tbat make a more
compelllng case tor return on lnvestment tban wbat
lnltlally meets tbe eye.
As a real estate oeveloper assoclateo wltb HFA |nola
put lt, marglns per unlt are balt tbe ones | make on
regular projects, bowever | lnvest balt ot tbe capltal |
woulo normally tle up ln a project. Tbls project gets
nlsbeo ano solo ln balt tbe tlme ot otbers. Tberetore,
wltb casb Now benets, my return on lnvestment ls
actually oouble ot wbat | make on traoltlonal projects."
Cutting Costs Through Process lnnovation
and 5tandardization
8y englneerlng ln-bouse materlal proouctlon, bullolng a
stanoarolzeo manutacturlng process, ano leveraglng tbe
resources ano labor ot lts elstlng cllent base, [8 was
able to slgnlcantly reouce tbe cost ot oellverlng bomes
talloreo to tbe oeslres ot lts customers. Malmlzlng
value requlres more tban sourclng low-cost materlals.
[8 lllustrates bow malmlzlng value requlres criticaIIy
naxinizing nargins where possibIe across
the vaIue and eIininating features that nay
increase costs and are not connensurateIy
vaIued by cIients.
Accorolng to [8's CLO, |ngrlo Munro, Lvery llttle
oetall counts, ano only tbe sum ot all tbese mlnor
savlngs can leao to a solutlon tbat ls truly an attoroable
bome tor tbe poor.
5trategy 2:
lntegrate Financing,
5uccessfuI Market-based Approaches aII
tackIe the issue of nancing for cIients,
though often at inadequate scaIe
Tbe low-lncome populatlons aooresseo by tbe Market-
baseo Cases requlre avenues to nance tbe slgnlcant
lnvestments requlreo to purcbase bome lmprovement
solutlons or new bomes. |n all Cases, tbe leaolng
stakeboloers bave gureo out ways to eteno new
bome loans or creolt tor bome lmprovements tbat are
in Iine with custoners' savings and repaynent
capacities, and that nance integrated offerings.

New Hones: BaIancing risk for Ienders
and borrowers
Compareo to bome lmprovement loans, new bome
loans represent a greater rlsk tor lenoers ano a beavler
buroen to borrowers ln terms ot oown payment
requlrements, ano larger montbly lnstallments over
longer ouratlons. Wblle new bome customers bave
tormal property rlgbts, lenoers stlll neeo to assess tbe
creolt wortblness ot low lncome customers ano tbelr
ablllty to repay long-term loans. Mechanisns for
assessing credit risk of these Iow-incone cIients,
particuIarIy for those without fornaI neans of
incone, are very nascent ano nance provloers ln
tbls space strlve to assess creolt rlsk ot tbese cllents wltb
very llmlteo lntormatlon. Aooltlonally, tbe relatlvely
small tlcket slzes ot low-lncome mortgage loans (as
opposeo to more up-market mortgages) represent
blgb transactlon costs tor nanclng lnstltutlons. Wblle
blgber lnterest rates can counter tbe percelveo rlsk ano
blgb transactlon costs ot low-lncome mortgages, tbey
can also make montbly lnstallments problbltlvely blgb
tor low-lncome cllents.
Leveraging Previous lnvestnents in
CIient Assessnent to Extend New
FinanciaI Products
[amll 8ora ls able to keep transactlon costs oown,
ano also clrcumvent tbe lssue ot llmlteo lntormatlon
on borrowers by Iending excIusiveIy to its own
existing MFl cIient base. |t tbereby leverages lts
prevlous lnvestment ln assesslng tbe creolt wortblness
ot borrowers ot lts mlcroenterprlse loans ano
lN5lGHT5: WHAT THE MARKET-BA5ED CA5E5 TELL U5
32
otber prooucts. However, [8's structure, tbat ot a
mlcronance lnstltutlon
3
accustomeo to lenolng smaller
amounts over sborter terms, ls not loeally equlppeo
to provloe longer term, blgber tlcket loans at scale.
Tbe aIternative to in-house nancing is forning
partnerships with third party providers of
housing nance, as HFA |nola bas starteo oolng.
Extending Financing Through Partnerships
HFA |nola pulls ln varlous types ot nanclng partners,
trom MF|s wltbln large CSOs to nance lnstltutlons
tocuseo ecluslvely on mortgage nance. However
tbe rlgbt partners, wltb tbe wllllngness ano capaclty
to leno to low-lncome groups at tbe scale requlreo,
are baro to no. Apart fron the high transaction
costs and perceptions of risk that Iow-incone
connunities present, existing nancing
institutions have other growing narkets to
tackIe (tor lnstance, tbe tormal bouslng market tor
traoltlonal banks, ano enterprlse mlcroloans tor MF|s).
Tbose nanclal lnstltutlons tbat are enterlng tbese
markets, ln llmlteo numbers, are on a steep Iearning
curve, testing products and services ano pruoently
managlng tbe growtb ot tbelr attoroable bouslng loan
porttollo. Tbe oeartb ot sultable tblro party nance
partners unoerscores tbe neeo tor new entrants
ano new nanclal lnstltutlons capable ot etenolng
consumer nance at tbe scale requlreo. Please reter
tbe sectlon on access to Flnance as a 8arrler to scallng
attoroable bouslng solutlons tor more oetalls.
5trategy 3:
MobiIize Connunity Resources,
5uccessfuI Market-Based approaches Ieverage
and buiId up existing infrastructure and
resources of the connunity
Tbe Market-8aseo Cases teatureo ln tbe tollowlng
pages all tap lnto communlty resources ano elstlng
lntrastructure to eteno new bome ano bome
lmprovement solutlons to low-lncome cllents.
New Hones: Use of Existing 5aIes
channeIs and Connunity Resources
UtiIizing and BuiIding CIient Capacities
Tbe [8 mooel oemonstrates tbat low-lncome
communltles bave resources, labor ano loeas tbat
contrlbute to creatlve solutlons tor tbelr bouslng
neeos wblle also cuttlng costs. Tbrougbout tbe value
cbaln, tbe communlty ls actlvely lnvolveo ln oeslgn ano
constructlon ot tbelr new townsblp. [8 ls also an eample
ot leveraglng an elstlng ano robust MF| lntrastructure
to brancb lnto new, value-aooeo otterlngs tor cllents.
Market-baseo approacbes, wblle barnesslng tbe latent
resources ot tbe communlty, can also contrlbute to
tbem. Ratber tban paylng protesslonals to provloe
tbe nal proouct, [amll 8ora bas palo protesslonals to
transter tbelr epertlse to 8oP consumers. |n oolng so,
[amll 8ora strengtbens tbe capaclty ot tbe communlty
wblle engenoerlng ownersblp ln tbe long-term care ano
plannlng ot tbelr townsblp.
Partnerships with Citizen 5ector
Organizations to Tap Connunity Resources
Slmllarly, HFA |nola projects barness tbe lntrastructure
ano resources ot tbe communlty tbrougb actlve
partnersblps wltb CSOs wbo unoerstano communlty
neeos, aggregate oemano ano provloe a bost ot
complementary servlces tor low-lncome resloents ot
new bome oevelopments. Apart trom lncorporatlng
tbe communlty's lnput on oeslgn, a long term vlew
ot cllents' current ano tuture capaclty to attoro tbese
bomes encourages oevelopers ano CSOs to work
togetber to lncrease tbe llvellbooo opportunltles ano
resources avallable to resloents.
S \|||e |||s stoctoes ae oot |oea|| so|teo to |eoo |ae otae aooots ove |ooe tes, |||'s cao o|a a v|ta| o|e |o |oeot||o c||eots
.|t| a so||o ||sto o eoaeot o o|t|o|e |co-ceo|t |oaos. 3es|oes ooteot|a|| coot|bot|o to cott|o costs aoo |o t|e oocess o oaoc|o
c||eots, t||s |s a c|ea .a o ao ||| to aoo va|oe to t|e| best c||eots aoo eta|o t|e as boo.es o aoo|t|ooa| |oao oooocts.
lN5lGHT5: WHAT THE MARKET-BA5ED CA5E5 TELL U5
33
lN5lGHT5: BARRlER5 TO 5CALE
34
Barriers to 5caIe
Tbe Market-8aseo Cases proleo bere sbow promlslng
approacbes to oellverlng new bome ano bome
lmprovement solutlons. However, tbelr ablllty to scale
tbelr operatlons ano repllcate geograpblcally, apart
trom contet speclc tactors, ls llmlteo by 4 cross
cuttlng 8arrlers to Scale:
Barrier #1: Land Rights - Lack ot access
to lano wltb clear tltle or secureo tenure
Barrier #2: Finance - Lack ot access to
approprlate nance optlons tor low-lncome
cllents
Barrier #3: 5upportive PoIicy - A pollcy
envlronment unsupportlve ot attoroable
bouslng solutlons ano markets
Barrier #4: CoIIaborative Action
LlmlLed collaborauve acuon and cross secLor
collaborauon |n tbe tollowlng pages, we
analyze tbese cross cuttlng 8arrlers to Scale.
Barrier #1: Land Rights
Lack of Access to Land with CIear TitIe or
5ecured Tenure
Tbe lack ot access to clearly tltleo lano ls a slgnlcant
barrler to tbe scallng ot attoroable bouslng solutlons
ano ls a buge constralnt to tbe upwaro moblllty ot low-
lncome tamllles. Wblle occupylng plots wltb amblguous
or no tltle llkely allows low-lncome tamllles to stay close
to sources ot lncome, the threat of eviction and
the Iack of security of tenure is a disincentive
to investing in the hone or pIot. Tbls llmlts tbe
oegree to wblcb bomes wlll be lmproveo regaroless ot
wbetber tamllles can attoro to oo so or not, ano Iinits
the potentiaI positive heaIth, and productivity
benets that can resuIt fron investing in hones.
Aooltlonally, lack ot oocumentatlon provlng
ownersblp ot lano, more otten tban not, Ieaves
connunities perpetuaIIy excIuded fron access
to infrastructure and basic services, ano further
Iinits their access to nance as tbey cannot leverage
tbelr bome or tbe lano tbey occupy as collateral. Tbe
llmlteo ablllty, on tbe part ot low-lncome consumers,
to nance bome lmprovements necessltates tbat tbe
lnltlatlves tbat otter attoroable bouslng solutlons tle up
capltal to nance purcbases, or lnvest ln partnersblps
to eteno nanclng to cllents. Lltber strategy bas
sbort-term lmpllcatlons on growtb (ano bence tbe
protablllty ot commerclal ventures) ano potentlally
long-term lmpllcatlons on scale.
Securlty ot tenure on lano can be accompllsbeo tbrougb
means otber tban outrlgbt ownersblp. Otten tlmes,
fornaIizing a sinpIe Iong-tern Iease aIIows
a faniIy to invest in hone inprovenent and
perhaps secure a Ioan to do so.
Several countrles bave attempteo subslolzeo oellvery
ot lano, or tree lano allocatlon tor low-lncome
populatlons. Tbese lnltlatlves otten result ln subsloles
belng mlsuseo as beIow narket offerings of Iand
wiII invite specuIative interests, crowolng out
target populatlons. Meanwblle, selectlon processes
wblcb allocate lano baseo on lncome quallcatlons ano
otber lnolcators, wbere potentlal customers apply, or
are selecteo tbrougb lottery, are lnetclent at best ano
are otten manlpulateo.
Tbe Lano Rlgbts barrler, ln aooltlon to curblng oemano
tor bome lmprovement solutlons, also bas tbe capaclty
to aoversely lmpact tbe supply ot new bomes tor low-
lncome communltles. |n cases wbere new bomes are
bullt, llke ln HFA |nola ano [amll 8ora, tbe supply ot tbe
bomes tor low-lncome consumers oepenos upon tbe
avallablllty ot lano unoer several conoltlons. VoIune
based new hone construction necessitates
that Iand be contiguous as well as cheap enough
for BoP consuners. DeveIopnents nust aIso
be in reIativeIy cIose proxinity to IiveIihood
opportunities and nust aIso have cIear titIe.
Tbese tactors comblneo make tbe supply ot avallable
lano tor attoroable bouslng solutlons qulte llmlteo ln
most urban ano perl-urban areas.
lN5lGHT5: BARRlER5 TO 5CALE
35
lnpIications for BoP CIient
The Land Right Barrier
lnpIications for the Market
Cllent
Lack ot wllllngness to lnvest ln bome lmprovement
oue to tbreat ot evlctlon ano lack ot clear ownersblp
Llmlts potentlal quallty ot llte ano bealtb relateo
benetlts trom bome lmprovements
Llmlteo access to lntrastructure, utllltles ano baslc
servlces oue to lack ot clear tltle
Unable to leverage lano or bome as collateral,
llmltlng tlnanclal access
Unable to capltallze on appreclatlon ot lano
Llmlts oemano ano curbs tbe market tor
bome lmprovements
Llmlts supply ot lano tor new bome oevelopments
(tbat ls attoroable ano contlguous wltb clear tltle)
Llmlts etenslon ot tlnance tor purcbase ot bome
lmprovement solutlons, oue to lack ot secure lano rlgbts
Lano wltbout clear tltle ls by ano large oeao capltal,
not actlve ln tormal markets
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Flnance
Provloers
Houslng Proouct
Manutacturers
Cllent
Real Lstate
Developers
CSO
Government
lN5lGHT5: BARRlER5 TO 5CALE
36
Barrier #2: Finance
Access to Finance for the purchase
of new hones
Access to nance tor low-lncome, lntormal sector
bousebolos remalns one ot tbe most tormloable barrlers
to scale tor market-baseo approacbes to attoroable
bouslng, be lt tor new bomes or bome lmprovements.
Tbe lack ot approprlate nance mecbanlsms tor
bome lmprovement solutlons ano new bomes bas
an innediate denand danpening effect for
narket-based soIutions. Many woulo-be cllents
ot bome lmprovement solutlons or new bomes,
partlcularly tbose wltb no verlable means ot lncome
(sucb as a pay stub), are ecluoeo trom tbese solutlons,
regaroless ot tbelr actual capaclty to pay tor tbem.
Tbose tbat oo purcbase attoroable bouslng solutlons
eltber tle up savlngs to oo so, borrow at blgb rates, use
lll-sulteo loan prooucts, or slmply llmlt tbemselves to
purcbaslng wbat ls nanceo.
Tbougb tbe Market-8aseo Cases seen ln tbe prevlous
sectlon bave touno ways to provloe nance to tbelr
cllents, eacb lnltlatlve taces lts own llmltatlons, be
lt ln tbelr own capaclty to nance purcbases, or tbe
avallablllty ot capable partner nanclal lnstltutlons to
eteno nanclng to low-lncome cllents:
Ltenolng nance tor attoroable bouslng solutlons
ls typlcally outsloe ot tbe purvlew ot botb MF|s ano
commerclal banks. Tbese lnstltutlons are accustomeo
to servlclng eltber oltterent cllent segments (blgb
lncome groups) or etenolng oltterent types ot loans
(mlcro-enterprlse loans ln tbe case ot most MF|s). For
botb types ot lnstltutlons, tbe etenslon ot bouslng
nance to low-lncome groups ls a comple unoertaklng
outsloe ot tbelr core markets ano prooucts. Lttectlvely
servlng tbe nanclng neeos ot low-lncome communltles
at scale requlres process lnnovatlon, trlal ano error, ano
tbat organlzatlons be wllllng to make tbe commltment
to tap lnto a oltcult, but promlslng market opportunlty.
Housing Finance that works
for Iow-incone
connunities:
Rellably assesses cllents' ablllty to
repay baseo on llmlteo lntormatlon
on creolt wortblness ano llmlteo,
Nuctuatlng (ano ln many cases
unverlable) lncome.
Provloes creolt baseo on llmlteo
collateral, llmlteo securlty ot lano
tenure ano llmlteo, lt any, guarantees.
8ears an attoroable regular
lnstallment, closely matcbeo to tbe
lncome patterns ot tbe borrower.
Attoroablllty ls lmpacteo by total loan
amount, lnterest rate cbargeo ano tbe
term ot tbe loan loeally meolum or
long term.
Worklng wltb low-lncome
groups requlres very customlzeo
servlces ano prooucts tor tbe
unlque ano partlcular neeos ot
our cllents. Scallng up requlres
tbe stanoarolzatlon ano mass
proouctlon ot customlzeo prooucts,
wblcb ls a cballenglng enoeavor.
Anoop Kaul, Natlonal Heao,
Flnanclal |ncluslon, 8AS|X Group
lN5lGHT5: BARRlER5 TO 5CALE
37
lnpIications for BoP CIient
The Finance Barrier
lnpIications for the Market
Cllent
Low-lncome cllents, prlmarlly tbose wltb lntormal means
ot lncome, are unable to secure approprlate tlnanclng
Llmlts 8oP purcbaslng power, lrrespectlve ot a
bousebolo's ablllty to repay
Low-lncome communltles are eltber ecluoeo trom
new bomes/lmprovements, or rely on lll-sulteo
tlnanclal prooucts or local money lenoers
Mlsappllcatlon ot otber types ot loan prooucts
(enterprlse loans, consumer tlnance loans) wltb
blgb lnterest rates, towaros bome lmprovement
Prlvate sector provloers ot bome lmprovement
solutlons ano new bomes otten requlteo to assume
a tlnanclng role, ano tle up capltal ln consumer
tlnanclng actlvltles
Tbwarts oevelopment ot a market tor bome
lmprovements ano new bomes tor low-lncome
communltles
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Masons Dlstrlbutors
Flnance
Provloers
Houslng Proouct
Manutacturers
Cllent
Real Lstate
Developers
CSO
Government
lN5lGHT5: BARRlER5 TO 5CALE
38
Barrier #3: 5upportive PoIicy
A poIicy environnent unsupportive of
affordabIe housing soIutions and narkets
Wbetber lnltlatlves are leo by manutacturers, real estate
oevelopers or cltlzen sector groups, unsupportlve
pollcy envlronments negatlvely lmpact tbe scale ot
attoroable bouslng lnltlatlves.
For lnltlatlves llke [8, tbe absence ot
support trom tbe publlc sector to oevelop
lntrastructure arouno tbe townsblp lncluolng
roaos ano publlc utllltles creates slgnlcant
aooltlonal epense ano llmlts tbelr ablllty to
scale ano repllcate.
|n HFA |nola projects, lengtby ano lnetclent
processes by wblcb attoroable bouslng
projects are approveo by local autborltles, tle
up capltal tor montbs at a tlme, cuttlng lnto
sllm marglns ano tbe speeo at wblcb capltal ls
turneo over by real estate oevelopers.
6 Taosoaeoc |oteoat|ooa| /oooa| |eoot 200`, |tto.//....taosoaeoc.o/oob||cat|oos/oob||cat|oos/aoooa|_eoots/t|_a200`, Taosoaeoc
|oteoat|ooa| 2008 >-'/$ ;(8$-: ?)@$A |tto.//....taosoaeoc.o/cooteot/v|e./o||/+333/(|te)/b.
EnabIing 5upportive PoIicy for DeIivering New Hones
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Flnance Home
Deslgn
Atter
Sales
Procurement
ot Lano
Constructlon
Create quallty constructlon stanoaros
Transparency ln approvals tor constructlon
Supportlve regulatory trameworks
Reouce cost ot capltal Subslolze communlty capaclty bullolng
lnltlatlves, not tbe sales prlces ot bomes
Sales
Provlslon ot lntrastructure
|nconvenlence, oelays ano etra costs are tbe lesser
ettects ot unsupportlve pollcy envlronments. Tbe lack
ot transparent governance ln tbe constructlon sector,
one ot tbe most corrupt sectors ln botb oevelopeo
ano oeveloplng countrles accorolng to Transparency
|nternatlonal,
6
contrlbutes slgnlcantly to slowlng tbe
etclent resolutlon ot bouslng oeclts.
Furtbermore, lll-concelveo publlc sector lnltlatlves can
actlvely olstort markets. Tbe promlse ot tree or beavlly
subslolzeo soclal bouslng bas unoercut market-baseo
bouslng projects ln several countrles wbere people
preter to walt tor a long promlseo subslolzeo bome
ratber tban buy an attoroable one at market prlces.
Sucb programs ols-lncentlvlze tbe prlvate ano soclal
sector actors tbat coulo catalyze more responslve
solutlons wltb llmlteo government epenolture.
Tbe tollowlng lllustrates tbe key areas along tbe new bomes value cbaln wbere market enabllng pollcles can accelerate
tbe oellvery ot new bomes.
lN5lGHT5: BARRlER5 TO 5CALE
39
lnpIications for BoP CIient
The 5upportive PoIicy Barrier
lnpIications for the Market
Cllent
Lack ot secure tenure to lano
Llmlteo access to lntrastructure ano servlces tbat
tbe governments are best posltloneo to provloe, llke
utllltles, roaos etc.
Llmlts lncentlves tor prlvate sector players to
lnnovate low-lncome bouslng solutlons
Lengtby/lnettlclent/corrupt processes can
slow tbe aovance ot attoroable bouslng solutlons
Can result ln lll-concelveo appllcatlons ot subsloles
wblcb lncentlvlze speculatlve lnterest
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Can unoercut tbe prlce ot market-baseo solutlons
ano tbwart emerglng markets
Governments lose out on revenue trom
unregularlzeo settlements
Dlstrlbutors
Flnance
Provloers
Houslng Proouct
Manutacturers
Cllent
Real Lstate
Developers
CSO
Government
lN5lGHT5: BARRlER5 TO 5CALE
40
Barrier #4:
CoIIaborative Action
Linited CoIIaborative Action and
Cross-5ector CoIIaboration
Successtully oellverlng attoroable bouslng solutlons ls
rarely tbe work ot one actor alone. Tbe Market-8aseo
Cases eamlneo ln tbls report all sbow elements ot
collaboratlve partnersblps ano ln partlcular cross-
lnpIications for BoP CIient
The CoIIaborative Action Barrier
lnpIications for the Market
Cllent
Cllent less llkely to be ottereo a new bome or bome
lmprovement proouct responslve to tbelr neeos
wltbout tbelr lnput or tbat ot CSOs
Cllent less llkely to be ottereo a comprebenslve
value- aooeo proouct (sucb as all prooucts to bullo
an entlre room wltb lntegrateo tlnance, as opposeo
to just tbe cement/tlle)
Llmlteo access to lntrastructure ano baslc servlces
wltbout government's lnvolvement ano/or collaboratlon
Narrow ano sector specltlc
Llmlts sources ano opportunltles tor lnnovatlons
Lack ot collaboratlon requlres
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Scale ot lnltlatlves ano lmpact can be llmlteo wben
governments oo not allocate resources tor
lntrastructure ano baslc servlces
Arcbltects ano
Home Deslgners Dlstrlbutors
Flnance
Provloers
Houslng Proouct
Manutacturers
Cllent
Real Lstate
Developers
CSO
Government
sector collaboratlon across tbelr value cbalns (see
value cbalns olagrams on tbe net page tor tbe speclc
areas ot collaboratlon).
|n all cases bowever, tbe ablllty ot tbese ventures to
grow ano reacb scale ls constralneo by tbe avallablllty
ot potentlal partners wltb value aooeo capabllltles, ano
tbe oegree ano oeptb ot tbese collaboratlons.
lN5lGHT5: BARRlER5 TO 5CALE
41
Otterlng conprehensive vaIue-added products
and services, scaIing operations ano repIicating
working nodeIs to new geographies otten requlres
tbe epertlse ano assets ot tbose ln otber sectors.
For eample, tbe Hybrlo value Cbaln oevelopeo by
HFA |nola cannot be repllcateo ln new geograpbles
wltbout tbe avallablllty ot botb llke-mlnoeo real
estate oevelopers ano CSOs ln tbese new locatlons.
Desplte tbe benets tbat Hybrlo value Cbalns can
brlng, buslness, publlc ano cltlzen sectors are not
naturally lncllneo to work togetber ln meanlngtul value
generatlng ways. Tbose tbat oo attempt cross sector
collaboratlons typlcally neeo tlme to aoapt, ano must
otten cbange tbelr operatlonal mooels, ln oroer to
etclently work togetber.
Cross 5ector CoIIaboration and the Fornation of Hybrid VaIue Chains
in DeIivering New Hones
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Lano ls purcbaseo
by Developers
Developers/Arcbltects
ano CSOs collaborate
ln oeslgn process
A ml ot prlvate ano
CSO tlnance provloers
CSOs/Developers play
a role ln communlty
capaclty bullolng
CSOs market
ano sell bomes
to communlty
Lano ls purcbaseo
by [8
Arcbltects lnvolveo ln
lnltlal bome oeslgn
Flnance provloeo
ln-bouse tbrougb [8
Communlty labor
ls employeo
Solo only
to [8 cllents
Prlvate sector solutlons
tor water ano electrlclty
Flnance Home
Deslgn
Atter
Sales
Procurement
ot Lano
Constructlon
CSOs
CSO Mlcrotlnance CSOs Arcbltects
Developers Prlvate Flnance Provloers
Communlty
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Prlvate Sector |nnovators
Communlty
[amll 8ora
Arcbltects/Protesslonals
Real Lstate Developers
Sales
Scale enbanclng partnersblps, partlcularly wltb publlc
sector players, are rare. Notably, all Market-8aseo
Cases proleo, tbougb tbey bave varylng levels ot prlvate
ano soclal sector collaboratlon, oo not collaborate
meanlngtully wltb tbe publlc sector. For eample, [8s'
scale ls constralneo botb ln tbe elstlng townsblp ano
ln envlsloneo new projects by a lack ot government
support. Ratber tban tocus tunos ano ettorts on bome
oevelopment ano nanclng, [8 must also provloe
cllents tbe lntrastructure ano publlc utllltles tbat tbe
government ooes not take care ot. Tbls polnt ls turtber
aooresseo ln tbe Supportlve Pollcy sectlon.
Tbe tollowlng lllustrates tbe cross sector collaboratlons
tbat torm Hybrlo value Cbalns ln tbe HFA |nola ano
[amll 8ora mooels.
|n HFA |nola, prlvate real estate oevelopers work
wltb soclal sector actors to market ano sell resloentlal
unlts. 8otb types ot actors partlclpate ln tbe oeslgn
ot unlts ano ln nanclng constructlon projects. 8otb
soclal (mlcronance lnstltutlons wltbln partner
CSOs) ano prlvate sector nance provloers (HF|s
ano commerclal lenoers) eteno retall nance to low-
lncome customers ot tbe unlts.
[8 ls a Cltlzen Sector mlcronance organlzatlon,
lnvolveo ln all pbases ot oellverlng new bomes, trom
procurement ot tbe lano to sales ot bomes ano
nanclng. |t works wltb prlvate sector lnvestors ano
prlvate sector arcbltects ano otber protesslonals to
nance, oeslgn ano bullo bomes.
)*+,--*./012,.3
42
Reconnendations for 5takehoIders
lnvoIved in AffordabIe Housing
Multlple actors play a role ln bullolng tbe market tor attoroable bouslng: tbe Prlvate Sector (real estate
oevelopers, bullolng materlal manutacturers ano retallers), Publlc Sector, Cltlzen Sector, Flnance Provloers
(mlcronance lnstltutlons, bouslng nance lnstltutlons ano commerclal banks) ano |nvestors. Tbls sectlon
blgbllgbts tbe nolngs ot our lnvestlgatlon lnto eacb ot tbese categorles ot players along tbe attoroable
bouslng value cbaln.
Tbe tollowlng recommenoatlons are tbe proouct ot tbe lnslgbts ot practltloners among eacb type ot
stakeboloer aooresseo ln tbe tollowlng pages. |n partlcular, tbe partlclpants ot tbe Global Summlt ot Houslng
Lntrepreneurs belo ln 8arcelona, 2010, oeserve a tbank you tor tbelr lnput on tbe recommenoatlons
presenteo bere.
General recommenoatlons sucb as tbese requlre aoaptatlon to local market ano lnstltutlonal conoltlons.
Nevertbeless tbese suggestlons, baseo on olscusslons wltb eperlenceo practltloners ano eperts ln
tbe elo, sboulo belp you to tblnk about your organlzatlon's core competencles, tbe assets you brlng to
attoroable bouslng lnltlatlves ano bow tbese strengtbs can be best leverageo.
We start wltb Flnanclal |nstltutlons because tbe lssue ot nanclng ls central to tbe success ot Attoroable
Houslng lnltlatlves ano bas lmpllcatlons tor otber players ln tbe value cbaln.
43
Recommenoatlon
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Deslgn/create a speclc
proouct/servlce tor tbe
low-lncome market

Create/establlsb a
oeolcateo/speclallzeo unlt
to serve tbe attoroable
bouslng market
Otter/encourage tecbnlcal
asslstance servlce to
your attoroable bouslng
customers as a value-
aooeo servlce
Develop a comprebenslve
otterlng tor low-lncome
cllents
Work wltb CSOs ano
communltles to galn a
oeeper unoerstanolng
ano penetratlon ot tbe
attoroable bouslng market
Focus ettorts ln market
enabllng ways
Create or work wltb
governments to create
a tavorable pollcy
envlronment ano/ or to
lnvest ln common gooos,
or aovance lntrastructure
Consloer maklng
equlty lnvestments ln
promlslng attoroable
bouslng enterprlses ano
lntermeolarles
Collaborate wltb otber
stakeboloers on tbe
attoroable bouslng cbaln
to strengtben/oeepen
tbe market ano lncrease
tbe vlablllty ot your
organlzatlon/otterlng
Reconnendations Overview
8elow ls a broao overvlew ot tbe Recommenoatlons contalneo ln tbe pages tbat tollow.
Flnanclal |nstltutlons |nvestors ano Funoers
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FinanciaI lnstitutions:
ConnerciaI Banks, MFls, and HFls
Ltenolng bouslng loans tor bome lmprovements or new bomes requlres new proouct oeslgn, skllls, ano processes tor
players wllllng to enter tbls new market, be lt traoltlonal commerclal banks, mlcro-nance lnstltutlons (MF|s), ano to
a lesser oegree speclallzeo bouslng nance lnstltutlons (HF|s).
Wbetber you are a bank, an MF| or an HF|, worklng wltb 8oP segments requlres tbat your metboos ot repayment
matcb, as closely as posslble, cllents' money management practlces. Relevant lnnovatlons lncluoe qulck loan approval
ano olsbursement, smaller ano more trequent (e.g. weekly) repayments, lenolng to groups (tbat, ln turn, prorate ano
collect payments trom members), requlrlng partlclpatlon ln prlor savlngs programs (eltber lnolvloual or group), olrect
oeouctlon ot loan payments trom paycbecks ano personal vlslts by loan otcers tbe oay atter any tallure to pay on tlme
occurs. Wben attemptlng to roll out successtul nanclal prooucts ln tbese markets, lmplementlng tbese moolcatlons to
buslness processes ls otten more cballenglng ano vltal tban cbanges to prlclng pollcy (lnterest-rate cbargeo per annum).
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ConnerciaI Banks
Tbe core buslness ot commerclal banks ls to provloe loans to up-market cllents (tbe mloole
ano upper class), ano most bave besltateo to leno to low-lncome consumers as tbey are
costly to serve. Tbese bousebolos otten bave oltculty meetlng stanoaro oocumentatlon
requlrements (sucb as tormal proot ot lncome ano collateral tbrougb encumbrance ot property
tltle) ano want creolt tor less stanoarolzeo bouslng prooucts (e.g. bome lmprovement ano
epanslon, constructlon ot a unlt on a lot owneo by tbe tamlly). Aooltlonally, relatlvely blgb
operatlng costs geareo to traoltlonal bome loan unoerwrltlng, lenolng, ano servlclng
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bave
llkely olscourageo commerclal lenoers trom otterlng smaller loans to low-lncome bousebolos
tor a wloe varlety ot bouslng prooucts ano solutlons.
|n tbe past, equlty ano llqulolty constralnts otten lnouceo commerclal banks ln emerglng
economles to ratlon bome lenolng to only tbelr best (l.e., most protable) customers. Tbls
ls cbanglng. Structural global trenos
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bave lncreaseo tbe llqulolty ano equlty base ot most
commerclal banks ano wlll llkely contlnue to oo so tor tbe toreseeable tuture. Meanwblle,
upper lncome ano mloole lncome bouslng loan markets bave become blgbly contesteo ano
saturateo ln many emerglng markets. A raploly growlng urban lower mloole-class, lncreaslngly
ln neeo ot approprlate bouslng nance solutlons, bas become tbe slngle largest lncome group
ln most oynamlc countrles (|nola, Cblna, |noonesla, most ot Soutbeast Asla, mloole lncome
countrles ln Latln Amerlca).
Ltenolng bome nance to tbls buge new market ot lower mloole-class ano creoltwortby low-
T|e cost o ooa|||o |oose|o|os o a otae |oao aoo co||ect|o oo a otae oaeot o |e|co's otae bao's |as aooo|ateo
t|at o |S |oe |eooes- |. 3oce \. |eosoo, Ceoea| |aoae, oos|o ||cooaoce, aoo oe Seo|o oos|o aoo |bao |cooo|st,
\o|o 3ao'.
8 T|e |oba| teoos t|at |ave oooeo ao coec|a| bao's |o ee|o cooot|es .|t| ||oo|o|t aoo oe|t oaat|c |ocease |o t|e| eoo|t
base |oc|ooe. t|e ao|o o.t| o ee|o cooot ecooo|es (.||c| |ave oo. eo|aceo coosoot|oo |o aovaoceo cooot|es as t|e o|ve o
|oba| ecooo|c oeve|ooeot), aoo t|e oete|oat|oo o t|e |eoea| |eseve o t|e |o|teo States to avo|o oeat|oo |o t|e cooot at a|| costs
t|oo| o|ot|o ooe, ooaot|tat|ve eas|o, aoo oeva|oat|oo o t|e |S coeoc (,ost|eo as oat o t|e oecessa eba|aoc|o o t|e |oba|
ecooo to eooce taoe |ba|aoces). T|ese stoctoa| teoos oo|se to eoot ||oo|o|t aoo |oat|oo to t|e est o t|e .o|o o t|e oeseeab|e
otoe. 3az|||ao aoo C||oese bao's ae oo tac' to becoe t|e b|est |oba| oaoc|a| |ost|tot|oos. - |. 3oce \. |eosoo, Ceoea| |aoae,
oos|o ||cooaoce, aoo oe Seo|o oos|o aoo |bao |cooo|st, \o|o 3ao'.
45
lncome bousebolos, now represents a key cballenge tor survlval ano growtb ot commerclal
banks. Fortunately, commerclal banks bave key assets tor successtully overcomlng tbls
cballenge: access to cbeaper, longer-term nance tban most MF|s, sopblstlcateo creolt,
llqulolty, ano term-rlsk management tools aoaptable to attoroable bouslng nance markets,
ano operatlonal systems (|T networks) ano brancb networks capable ot scale. Tbus we
recommeno tbat you:
1. Create a dedicated unit to serve the AffordabIe Housing
Finance narket
A oeolcateo, separate Attoroable Houslng Flnance/Houslng Mlcronance
Unlt wlll enable you to lmplement talloreo buslness processes ano
tbus acbleve lower operatlng costs tban your traoltlonal actlvltles. For
eample, repayment terms tor bome lmprovement loans to low-lncome
segments wlll neeo to be allgneo to tbe elstlng money management
practlces ot cllents. You can leverage elstlng savlngs groups (as oone by
Patrlmonlo Hoy), or jolnt llablllty groups uslng tbe same soclal collateral
oynamlcs tor bome lmprovement loans as oo MF|s. A oeolcateo unlt
wlll also ensure you can keep tlgbt control over costs ano protablllty
Key Pertormance |nolcators (KP|s) ano bolo your management more
accountable to tbem. A separate unlt also allows you more latltuoe to
potentlally lnvlte otber lnvestors.
2. Create a Ioan product that nances sequentiaI and graduaI
hone inprovenents so that custoners are not driven to
iII-suited and expensive consuner nance
Low-lncome cllents consume wbat ls nanceo ano tberetore otten take
on blgber cost, sborter term loans tbat are not oeslgneo tor bome
lmprovement. Desplte tbe tact tbat tbls voluntary use ot lll-sulteo
loans can be a popular blgb-prot actlvlty tor some commerclal banks
ln tbe sbort run, blgb-cost consumer lenolng tor bouslng (sometlmes
over 60 all-ln lnterest-rate per year, typlcally etenoeo tbrougb otber
lnstltutlons) aoos llttle value tor low-lncome bousebolos, rlsks generatlng
a bousebolo oebt crlsls ln tbe long-term ano can be oetrlmental to your
bank's prots ano reputatlon. |nsteao, otter a proouct tbat ls responslve
to tbe graoual bome lmprovement neeos ot low-lncome consumers, ano
protable over tbe long-term.
3. Partner with C5Os and MFls for greater access to and
deeper understanding of this narket
Many commerclal banks oo not bave a sollo unoerstanolng ot tbe neeos
ano cbaracterlstlcs ot low-lncome bouslng consumers, or lntormatlon on
tbelr creoltwortblness. Partnerlng wltb MF|s ano CSOs wbo bave years
ot eperlence worklng wltb tbese customers can allow you to enter tbls
market pruoently. For eample, once a loan proouct tor sequentlal bome
lmprovements bas been lntroouceo, partnersblps wltb MF|s can cbannel
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cllents to your loan prooucts. Aooltlonally, strateglc collaboratlons
wltb attoroable bouslng oevelopers ano bullolng manutacturers/retallers
can also reap benets. Tbese strateglc partnersblps wltb MF|s, bome
oevelopers, ano bullolng manutacturers/retallers can belp you quallty
sultable bousebolos tor nance, provloe packages ot creolt tor bullolng
materlals, provloe constructlon relateo tecbnlcal asslstance ano oellvery
ot materlals to sltes/storage.
Micronance lnstitutions {MFls}
MF|s no tbemselves ln a oltcult posltlon vls-a-vls bouslng loans. MF| cllents llkely alreaoy
oemano bome lmprovement loans (or alreaoy use otber types ot loans tor tbls purpose),
wblcb your lnstltutlon probably provloes on a small scale as a rewaro to taltbtul customers.
However, bouslng nanclng tor eltber new bomes or bome lmprovement ls a new buslness,
one tbat ls slgnlcantly oltterent trom nanclng ot mlcro-entrepreneurs. Servlng 8oP bouslng
nance neeos as an MF|, at more tban mlnute scale, requlres tbe capaclty ano nanclal backlng
to provloe larger, longer terms loans at lower lnterest rates. Speclcally, sustalnable ano
attoroable bome lenolng/bouslng mlcronance requlres competltlvely prlceo tunolng ln local
currency tor terms ot ve to ten years. Sucb terms are stlll rare ln tbe MF| lnoustry, wblcb
oepenos upon qulck turnover (average loan ouratlon ot less tban a year) ot somewbat blgber-
prlceo worklng capltal ano mlcro buslness loans.
MF|s may not see bouslng loans as a key oevelopment opportunlty as most operate ln markets
wbere consloerable unmet oemano elsts tor tbelr blgber lnterest rate/sborter term core
prooucts worklng capltal ano mlcro-buslness loans. MF|s oo bowever bave a competltlve
eoge over traoltlonal bouslng nance lnstltutlons as tbey know low-lncome cllents lntlmately.
Aooltlonally, low overbeao ano transactlon costs constltute meanlngtul aovantages lt MF|s
oevelop tbe new competencles requlreo to aoo bouslng loans to tbelr porttollo.
Attoroable bouslng lenolng ls a new ano speclallzeo buslness requlrlng consloerable lnvestment
ln upgraolng skllls ano systems. Tbus, a central questlon tor MF|s becomes: 345 /#%,6 - 4"#$%&'
,"-& /#$%&0$$ /05"&6 .40 7%&%7-, $8-,0 &080$$-*5 ." 700. .40 607-&6 9*"7 0:%$.%&' 8#$."70*$?
Tbe answer to tbls questlon ls contet speclc. However, we belleve tbat tbe tollowlng are
compelllng reasons tor MF|s to olverslty lnto bouslng nance at scale:
Serve your customers better ano tbus galn tbelr loyalty, as you rlsk loslng your best
customers to otber MF|s or commerclal banks lt you oo not provloe tbem wltb a
talloreo servlce tbat ls lncreaslngly ln oemano.
Galn a new protable market tbat ls mucb larger tban tbat tor mlcro-enterprlse lenolng.
Cross-sell savlngs, lnsurance, ano remlttance prooucts wltb along wltb bouslng nance.
Tbe larger tbe MF| ano tbe more contesteo tbe creolt market, tbe more compelllng tbe
case tor scallng up bouslng nance. Tbat salo, MF|s' top management must make an epllclt
strateglc commltment to attoroable bouslng lenolng tor tbls actlvlty to galn tractlon wltbln
tbe organlzatlon.
|noeeo, bullolng a quallty bouslng loan proouct means more tban slmply maklng small
aojustments to mlcro-enterprlse creolt ano calllng lt a bouslng loan. MF|s serlous about
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bouslng sboulo create a new buslness olvlslon able to provloe new servlces (sucb as tecbnlcal
asslstance to ensure tbat tbe bome lmprovement project ls tecbnlcally teaslble ano tbat tbe
work ls well oone), oltterent processes (blgber tlcket slze ano longer ouratlon tban current
average loans wlll requlre oltterent assessment ot ablllty to repay), new tunolng sources, ano
more sopblstlcateo operatlonal systems (tor eample, managlng asset/llablllty rlsk, wblcb ls
generally lnslgnlcant tor mlcro-enterprlse lenolng).
MF|s commltteo to oeveloplng a bouslng proouct at slgnlcant scale sboulo consloer tbe
tollowlng strategles:
1. Create a dedicated unit to serve the AffordabIe Housing
Finance narket
A new olvlslon allows lnstllllng ot new values, establlsblng new buslness
processes ano tbe roll out ot new prooucts unoer a oltterent cost
structure. Lstabllsblng a oeolcateo unlt wlll ensure tlgbter controls
over costs ano protablllty/rlsks KP|s, ano you can more easlly bolo tbe
management ot tbe new olvlslon accountable tor tbem. |t wlll also allow
you to keep tlgbt control over posslble lnnovatlons sucb as etenolng
loans not only tor bullolng materlals tor tbe bouse but also tor speclallzeo
labor ano alternatlve lntrastructure, partlcularly low-cost oecentrallzeo
tecbnologles tor water, sanltatlon ano energy.
2. Offer a technicaI assistance service to your housing nance
custoners and provide incentives for quaIity construction
Otterlng tecbnlcal asslstance can be accompllsbeo tbrougb a buslness
partner (materlals retaller tor eample) or a CSO partner. |t coulo
lncluoe oeveloplng a set ot mooular or stanoarolzeo bome epanslon
ano bome constructlon blueprlnts/buogets. Your MF| coulo eteno
creolt otterlngs ecluslvely, or otter better terms to bousebolos tbat
bullo wltb tbe asslstance/labor ot constructlon contractors trom a llst
provloeo by tbe MF|.
3. Partner with connerciaI banks or second-tier housing
nance institutions to access Ionger-tern debt funding
Glven tbe lower tlcket slze ot bome lmprovement loans ano reaoy
knowleoge ot cllents' creolt blstory, you are llkely to start by otterlng
bome lmprovement loans. Tbe repayment terms tor bome lmprovement
wlll be close to your traoltlonal mlcronance actlvltles. As a secono step
you wlll consloer otterlng loans tor new bomes, wblcb requlre tylng up
capltal tor longer ouratlons ano lenolng at lower rates ot lnterest. Tbls
wlll requlre tbat you work wltb secono-tler nanclal lnstltutlons
9
ano/or
create a new entlty, l.e. a Houslng Flnance |nstltutlon (see net sectlon).
You may also be able to no soclal lnvestors wblcb wlll allow you access
to longer-term tunos on more tavorable terms tor bouslng loans as ls
tbe case wltb [amll 8ora.
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` Secooo-t|e oaoc|a| |ost|tot|oos ae .|o|esa|e oaoc|a| |ost|tot|oos t|at c|aooe| ooos o oooos aoo/o oveoeot to |oo|v|ooa| eta||
oaoc|a| |ost|tot|oos at a coocess|ooa| ates.
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4. Work with governnent to Ieverage pubIic subsidies for the
Iowest incone househoIds
Purely market baseo programs are not able to ettectlvely reacb tbe
lowest lncome bousebolos. To reacb sucb customers, MF|s can leverage
publlc subsloles, wblcb can take many torms lncluolng partlal loan
guarantees, subslolzeo capltal ano complementary grants concurrently
aomlnlstereo wltb bouslng mlcro-loans.
5. Partner with diverse pIayers {nateriaIs nanufacturers and
retaiIers, reaI estate deveIopers} interested in growing this narket
Strateglc collaboratlons wltb olverse players (constructlon materlal
provloers ano retallers, real estate oevelopers) can belp you access tbe
capltal neeoeo to provloe attractlve bouslng loans, as you leverage oeep
knowleoge ot ano access to low-lncome markets. For eample, operate
brancbes lnsloe baroware/bullolng materlals retaller store partners
ano on projects sltes ot attoroable bome oevelopers wltb wbom you
collaborate. As an MF|, you bave epertlse ln allgnlng repayment
terms to tbe elstlng money management practlces ot cllents. You
can also leverage elstlng jolnt llablllty groups uslng tbe same soclal
collateral oynamlcs tor bome lmprovement loans as tor your traoltlonal
mlcronance actlvltles. Tbese competencles can be ot great value ln tbe
rlgbt partnersblps.
Creatlng tbe new processes requlreo to otter bouslng loans requlres slgnlcant lnvestment
trom an MF| as well as a long-term strateglc commltment to bouslng. Tbls comple unoertaklng
sults tbose MF|s wltb an establlsbeo, slzable, protable ano stable mlcro-enterprlse lenolng
buslness. Tbe larger your customer porttollo, tbe more attractlve to tbe otber partners you
wlll be, ano tbe easler lt wlll be tor you to make lt a new, protable buslness llne.
Housing Finance lnstitutions {HFls}
Commerclal banks usually make bome loans above USD 15,000 wltb a ouratlon longer
tban 5 years, tor tormal customers tor tbe purcbase ot oeveloper-bullt unlts ln subolvlslons.
MF|s typlcally otter loans below USD 1,000 wltb ouratlons ot less tban 2 years tor lntormal
customers. |n most countrles wltb substantlal urban poor populatlons, tbls leaves a large
vacuum tor nanclal lnstltutlons servlng meolum slzeo loans, over a mlo range tenure. Some
countrles sucb as |nola, are wltnesslng tbe creatlon ot speclallzeo Houslng Flnance |nstltutlons,
capable ot leveraglng lnoepenoent cost structures, access to subsloles ano tbe benets tbat
come wltb servlng a nlcbe market. Along tbese llnes, we recommeno tbat you:
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1. Create speciaIized Housing Finance lnstitutions, capabIe of
offering both new hone and hone inprovenent nance
Typlcally unencumbereo by tbe large overbeaos ot commerclal banks
ano wltbout tbe same constralnts on access to capltal taceo by MF|s,
nanclal lnstltutlons speclallzeo ln bouslng (HF|s) are tbe mlsslng mloole,
49
wblcb can potentlally make buge strloes ln aooresslng tbe nanclng neeos
ot tbe 8oP tor new bomes, otterlng loans between USD 1,000 ano USD
15,000 tor ouratlons ot 2 to 10 years. Tbese types ot lnstltutlons lncluoe
bouslng cooperatlves, mutual savlngs ano loans, ano mortgage banks.
2. Partner with MFls and C5Os to gain to custoners
Glven your nlcbe tocus on bouslng nance, success oepenos on lntlmate
knowleoge ot your customer base. MF|s ano CSOs bave long establlsbeo
relatlonsblps wltb your target market. You coulo partner wltb tbem to
qulckly source a crltlcal mass ot cllents, ano/or lmplement MF| trleo ano
testeo backeno processes ano metboos ot customer acqulsltlon ano servlclng.
3. Focus on seIected custoner segnents to standardize credit
assessnent processes
Work wltb organlzatlons tbat provloe access to volumes ot cllents wltb
slmllar proles. 8y learnlng bow best to serve tbe neeos ot nlcbe groups
baseo on tbelr vocatlon/casb Now patterns or otber cbaracterlstlcs,
tor lnstance, tbrougb worklng wltb traoe unlons or member-baseo
vocatlonal organlzatlons llke teoeratlons ot entrepreneurs or auto
rlcksbaw orlvers, tor lnstance, HF|s are better able to leverage llmlteo
resources ln servlce ot a greater numbers ot loans. Speclallzlng ln a tew
cllent proles wlll enable stanoarolzeo processes tor unoerwrltlng ano
creolt assessment.
4. Partner with diverse pIayers {nateriaIs nanufacturers and
retaiIers, reaI estate deveIopers} interested in growing this narket
Wblle tbe above recommenoatlons belp aggregate oemano tor HF|
loans, partnersblps wltb real estate oevelopers tbat tocus on bouslng
programs tor tbe lntormal sector, or partnersblps wltb bullolng materlals
manutacturers or olstrlbutors wlll enable you to amass a steaoy supply
ot new bomes, or bome lmprovement solutlons to nance.
5. Offer a technicaI assistance service to your hone inprovenent
nance custoners and provide incentives for quaIity construction
Otterlng tecbnlcal asslstance can be accompllsbeo tbrougb a buslness
partner (materlal retaller tor eample) or a CSO partner. |t coulo
lncluoe oeveloplng a set ot mooular or stanoarolzeo bome epanslon
ano bome constructlon blueprlnts/buogets. Your HF| coulo eteno
creolt otterlngs ecluslvely, or otter better terms to bousebolos tbat
bullo wltb tbe asslstance/labor ot constructlon contractors trom a llst
provloeo by tbe HF|.
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Citizen 5ector Organizations
CSOs span tbe spectrum from local non-prots to speclal lnterest-baseo organlzatlons to cooperatlves, aovocacy
groups ano MF|s. Most serve a broao range ot neeos tor low-lncome communltles, lncluolng bouslng, eoucatlon, bealtb
care ano aovocacy tor baslc rlgbts. CSOs tocuslng on attoroable bouslng otten take tbe approacb ot tunoralslng tor
bullolng bomes or lmplementlng bome lmprovements tbemselves. Tbls approacb ls well sulteo tor communltles wltb
tbe lowest lncome levels.
However, tor constltuents wltb blgber levels ot lncome, a new market-baseo approacb ls posslble. Wltb oeep access
to ano knowleoge ot low-lncome communltles, CSOs are well posltloneo to provloe gooos ano servlces at market
rates to tbe top ot tbe 8oP. CSOs tbat want to otter attoroable bouslng solutlons can oo so by leveraglng tbelr
strengtbs ln key tunctlons relateo to tbe provlslon ot attoroable bouslng, ln partnersblp wltb prlvate sector actors
oellverlng new bomes ano bome lmprovement solutlons. Tbese engagements can bappen at mlnlmal cost to tbe CSO,
ano ln certaln cases even earnlng revenues trom tbese partnersblps, as lllustrateo ln tbe table below:
PARTNLRSH|P FUNCT|ON OF A CSO
|NvOLvLD |N AFFORDA8LL HOUS|NG
TYPLS OF CSOS TYP|CALLY |NvOLvLD
Sales ano marketlng/ Actlvatlng oemano
Local CSOs or MF|s supportlng lncome generatlng
actlvltles
8ulk sales ano processlng/ Demano aggregatlon Local CSOs or MF|s wltb a network ot potentlal cllents
Tralnlng ano moblllzlng communlty baseo sales torces
tor bome lmprovement solutlons
Local CSOs, communlty groups wltb establlsbeo trust ln
tbe communlty
Flnanclng (lncluolng moblllzlng savlngs) MF|s, local savlngs groups, communlty groups
Provloers ot complementary servlces sucb as property
rlgbts aovocacy or access to utllltles
Aovocacy groups, communlty groups, provloers ot low
cost legal servlces
value aooeo servlces llke tecbnlcal asslstance or
constructlon tralnlng
Local CSOs, communlty groups
For CSOs lnteresteo ln servlng attoroable bouslng neeos, our recommenoatlons are as tollows:
1. BuiId networks of saIes forces to seII hone inprovenent
products and services
Assess tbe assets you brlng to tbese new engagements (number ot
beneclarles/ members, geograpblcal reacb, etc) ano make strateglc
cbolces about your role. For eample, to source communlty-baseo
sales people, a mlnlmum level ot lnvolvement woulo be to provloe
your buslness sector partners access to your network ot beneclarles.
Alternatlvely, you coulo recrult ano traln tbem yourselt. Flnally, you coulo
take a leaoersblp role ln tbls lnltlatlve, creatlng tbe network ot sales
torces, presentlng aggregateo oemano ano a sales torce to olstrlbutors
ano retallers.
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2. Provide services {for a fee} to business partners {e.g. reaI
estate deveIopers, nateriaIs nanufacturers}
As you engage wltb buslness sector players, tocus on tbe servlces
tbat you are unlquely posltloneo to provloe at scale wltbout relylng
on subsloles. 8uslness sector actors sboulo be wllllng to compensate
you tor servlces tbat tbey cannot provloe better tban you can (oemano
aggregatlon, 8oP sales torce tralnlng, loan provlslon, etc).
Tbls ls an economlc opportunlty tor you, ano llkely to brlng protouno
cbanges ln tbe way you operate as you wlll bave to work closely wltb
tbe buslness sector. Tberetore, ensure you bave tbe rlgbt partners ano
tbat your lnterests are allgneo. Tben make tbe commltment requlreo
tor tbe success o tbe partnersblp. Tbls enterprlse mlgbt requlre a new
organlzatlonal structure wltb separate governance, new statt ano a new
etbos altogetber. Sucb a move may olsentrancblse some ot your most
loyal constltuents. Do not unoerestlmate tbe tlme ano ettorts requlreo
to lncluoe tbem. Tbe payback may well be more sustalnable ano larger
scale soclal lmpact.
3. lf you are unabIe to aggregate denand, work to activate it
|t your organlzatlon ls not ln a posltlon to, or ls olslnteresteo ln
collaboratlng wltb tbe buslness sector to aooress attoroable bouslng
solutlons tor upper 8oP populatlons, you can stlll play a relevant role
ln tbls space: bullolng tbe capaclty ot your constltuent base as ln tbe
eamples ot SPARC ano COD|. |nltlatlves wblcb lncrease tbe lncome
potentlal ot cllents, bullo tbelr capaclty ano tbelr access to nanclal
servlces wlll, over tbe long term, allow tbelr economlc lncluslon ln tbe
bouslng market as eventual consumers ratber tban beneclarles.
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ReaI Estate DeveIopers {New Hones}
Few real estate oevelopers consloer tbe 8oP as an ecltlng market. Tbey llkely enjoy growtb potentlal ln more
lucratlve ano traoltlonal markets. Furtbermore, tbey see low-lncome markets as small, comple, wltb tbln marglns
ano blgb barrlers to entry ln terms ot accesslng customers. Aomltteoly, tbe cballenges tbey toresee ln worklng ln 8oP
segments oo elst, ano tberetore success ln tbese markets requlres new competencles.
As tbe HFA |nola case lllustrates, tbls market represents an ecltlng opportunlty tor entrepreneurlal real estate oevelopers:
Returns on lnvestment are potentlally substantlal, as tbln marglns per unlt are ottset by tbe smaller
lnvestment requlreo ano qulcker capltal rotatlon compareo to traoltlonal projects.
Complelty can be turneo lnto a source ot competltlve aovantage tor tbose wllllng to go oown tbe learnlng
curve ano oevelop tbe new competencles requlreo.
8oP markets wlll present opportunltles tor growtb tor oevelopers ourlng tlmes ot low oemano ln blgber-
eno markets. Tbe 8oP ls tbe new blg wave ot growtb ln tbe bouslng lnoustry as tbe overall supply ot
blgber-eno propertles outpaces oemano. |ncreaslngly, mloole lncome ano upper lncome bouslng markets
bave become contesteo ano saturateo ln emerglng economles.
Tberetore, we recommeno tbat to enter tbls market you oo tbe tollowlng:
1. DeveIop a conprehensive offering {nancing, sociaI
services} for Iow-incone cIients
|oentlty new ways to oevelop, capture ano oellver value along tbe
attoroable bouslng value cbaln. Tbls lmplles consloerlng all ot tbe
pleces tbat comprlse a value proposltlon tor your cllents, not just tbe
bullolng, but also aoequate nanclng tor your consumers, as well as an
approprlate level ot lntrastructure to sustaln tbe types ot servlces tbat
tbese communltles wlll requlre. |n some lnstances, tbls may even lmply
tocuslng on ways to create aoequate economlc opportunltles tor target
communltles. As new bomes, more otten tban not, requlre relocatlon
to new sectlons ot a clty, people wlll not move lt tbese elements are not
ln place.
Consloer bow you can boost tbe capaclty ot tbe communlty ln tbe
process ot your engagement. For lnstance, arranglng space tor vocatlonal
tralnlng, or lncluolng tbe communlty ln constructlon empowers your
tuture cllent base to purcbase bomes you oevelop tbrougb lncreaseo
lncome or sweat equlty. |t also bas tbe aooeo benet ot creatlng loyalty
among your new cllent base.
2. Partner with C5Os for greater access to and deeper
understanding of this narket
Tbls market ls a oeparture tor you, tberetore lt ls lmportant to work wltb
players wbo know your market well. CSOs bave lntlmate knowleoge ot
tbese cllent segments ano unoerstanolng ot tbelr motlvatlons, preterences
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ano llvlng conoltlons. Tbey can tberetore belp you create bomes tbat are
responslve to mlcro level oemano by gatberlng cllents' lnputs. CSOs can
play an ettectlve role ln tbe marketlng ano sale ot bomes. 8ecause tbey
are a trusteo ano long term presence ln tbe communlty, ano are llkely to
be tbe best sales torce you can no tor your project (provloeo ot course
tbat tbey are convlnceo tbat your otter ls approprlate to tbe neeos ot
tbe communltles tbey serve).
3. Partner with MFls and HFls to provide adequate
nancing soIutions
|n tbls target market, attoroablllty bas as mucb to oo wltb tbe elstence
ot nanclng optlons tbat are responslve to tbe neeos ot cllents ano tbelr
lncome patterns, as lt bas to oo wltb tbe prlce ot tbe bome. Mlcronance
lnstltutlons are potentlally gooo partners because tbey bave etenslve
eperlence ln tbls market ano bave tewer requlrements ot borrowers
tban traoltlonal mortgage lenoers. However, mlcronance lnstltutlons
bave access to sborter term capltal tban traoltlonal banks ano llmlteo
sources ot tunos. Tberetore, also consloer bullolng alllances wltb more
traoltlonal bouslng nance lnstltutlons to be able to oellver attractlve
nanclng optlons to cllents.
4. Coordinate with governnents to provide
sustainabIe infrastructure
Glven tbat new bome oevelopments are more llkely ln newly oevelopeo
areas, lt ls crltlcal to engage wltb tbe publlc sector tor access roaos,
electrlclty, water, sanltatlon ano all baslc lntrastructure requlreo by tbe
new communlty. Managlng tbe costs ot malntalnlng sucb lntrastructure
over tlme may lnvolve lntroouclng malntenance payment scbemes ano
requlre tbat oevelopers tblnk tbrougb tbe upkeep ot lntrastructure
lnvestments at tbe outset ot projects.
As a real estate oeveloper, creatlng a successtul proouct tor 8oP/low-lncome markets, wlll be a long, otten
trustratlng roao wltb mucb trlal ano error. Large scale operatlons ano access to capltal are not tbe prlmary
assets requlreo ln tbls market. Ratber, strong local tles coupleo wltb commltment to a speclc area are cruclal
to real estate oevelopers seeklng galns ln tbls market. Tbe benets ot engaglng ln tbls sector are more tanglble
at local levels, tbus tbose local players wbo bave tles to tbe communlty, are ln a posltlon to leao, ano can
leverage tbls soclal capltal wlll succeeo.
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PubIic 5ector Actors: NationaI Governnent, LocaI
Governnent, MunicipaIities and PubIic Housing
Finance Agencies
Tbe publlc sector aooresseo by tbese recommenoatlons lncluoes varlous types ot entltles: local government,
natlonal government, publlc secono-tler bouslng nance lnstltutlons, lntrastructure servlce agencles, etc. We leave lt
to tbe reaoers to map tbe publlc sector ln tbelr speclc contets.
As a publlc sector actor, you are llkely alreaoy lnvolveo ln tbe space ot attoroable bouslng. You llkely lntervene by
olsburslng subsloles, bullolng baslc lntrastructure, oeslgnlng ano enactlng regulatlons ano branolng soclal bouslng
programs oeslgneo to grant or oeeply subslolze new bomes tor low-lncome populatlons. Sucb government lnterventlons
are necessary to provloe bouslng solutlons tor tbe most marglnallzeo populatlons tor wbom market-baseo approacbes
are unteaslble. Yet most governments cannot clalm etclent or scaleo up provlslon ot attoroable bouslng solutlons to
tbese populatlons.
Tbe great bulk ot tormal bouslng proouctlon usually above 90 ls unattoroable to tbe bottom two tblros. Publlc-
sector support tor mortgage nance ot oeveloper-bullt unlts contrlbute strongly to tbe oramatlc mlsmatcb between
bouslng supply ano oemano ln emerglng economles. Housebolo surveys conslstently oemonstrate tbat low-lncome
bousebolos woulo mucb ratber upgraoe tbelr elstlng unlt ano tbe communlty tban relocate to a olstant subolvlslon
(on lnepenslve lano tbat meets tbe cost parameters ot bouslng programs) tar trom jobs ano servlces.
How tben, can publlc sector agencles better serve tbe attoroable bouslng neeos ot low-lncome populatlons?
Local governments can eerclse control over many ot tbe tactors tbat oetermlne tbe prlce ano avallablllty ot secure
tenure to servlceo urban lano tbe slngle most lmportant lnput ot tbe publlc sector lnto attoroable bouslng. Typlcally,
bowever, local governments pay llttle attentlon to tbe supply ot sultable parcels tor attoroable bouslng oevelopment.
Publlc sector actors sboulo tocus on roles tbat neltber buslness nor cltlzen sector players can play. Tbe buslness ano
cltlzen sector players aooresslng low-lncome markets wlll tell you tbat you coulo belp tbem scale up to meet tbls un-
serveo oemano ln tbe tollowlng ways:
1. Create a favorabIe poIicy environnent for access to
property rights
Property rlgbts are loentleo as a key barrler to scale by all cases
proleo. Ploneerlng publlc sector actors bave been able to:
Listen to practitioners in the eId and C5Os to create
tbe best tramework ano plattorm tor varlous stakeboloers
to aooress tbe property rlgbts barrler. Tbe CSOs wbo are
worklng among tbese communltles bave llkely lnnovateo
approacbes tbe publlc sector coulo take to scale. COD| ls
an eample ot a CSO gurlng out tbat access to a slgnlcant
base ot tunos at one tlme, coupleo wltb speclc resources, glves
communltles tbe bargalnlng power to negotlate tor property
rlgbts. Tbls approacb bas been scaleo up by tbe Tbal government.
Encourage and incentivize "negotiated and
transparent approaches" to enable access to property
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rlgbts. Negotlateo approacbes (wbere lano owners ano
lano occuplers agree to traoe tltleo plots ln ecbange tor part
ot tbe lano value as ln tbe case ot Terra Nova, or ln ecbange
tor treelng up more valuable portlons ot tbe lano, as ln tbe
case ot COD|) bave been proven to work ln varlous locatlons.
2. Use infrastructure budgets strategicaIIy to achieve
nuItipIier effects
As eperlenceo by tbe slums rebabllltateo by Terra Nova ano
oemonstrateo by numerous stuoles, low-lncome tamllles are more
llkely to lnvest ln tbelr bomes atter lnvestments ln lntrastructure
are maoe wltb publlc money.
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Aooltlonally, strateglc cbolces ln
lntrastructure oevelopment (bullolng access roaos ln areas planneo tor
tuture oevelopment, ano provlslon ot baslc servlces ano utllltles to new
bome oevelopments) can lnNuence oevelopers to enter a new locatlon,
motlvate lanoowners to agree to sell, ano encourage constructlon
materlals manutacturers to consloer servlng low-lncome markets.
3. lnvest in connon goods {e.g. Iand registries} needed to
enabIe narket deveIopnent
Support tbe creatlon ot lano reglstrles, lntrastructure oevelopments ano
resources tbat buslness sector, ano cltlzen sector players are unable to
tuno ano/or eecute tbemselves.
4. Address the constraints faced by IocaI nance providers
attenpting to address Iow-incone AffordabIe Housing
nance needs {through Ioan guarantees, weII targeted
subsidies and other incentives}
Ploneerlng publlc sector actors partlcularly secono-tler llqulolty
tacllltles tor bouslng -- can convene ano llsten to tbe neeos ot MF|s ano
banks attemptlng to serve low-lncome segments. Publlc sector actors
bave varlous means to aooress tbe constralnts taceo by nance provloers
attemptlng to nance bouslng solutlons tor low-lncome communltles,
tor eample:
Provide funds for partiaI guarantees of Ioan repaynent
to allevlate tears tbat bouslng loans to tbe lntormal sector
are rlsky, ano belp lenoers ralse money trom capltal markets
wblle stlll keeplng some ot tbelr skln ln tbe game. Partlal
guarantees bave tbe aooeo benet ot llmltlng negllgent lenolng
practlces sucb as tbose tbat resulteo ln tbe US subprlme
bome lenolng crlsls.
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+0 |sto|ca||, ||| |ooost e. oot o a e,ect|oo o sobs|o|zeo oob||c ceo|t o sa|| aoo eo|o-s|zeo aes. |o |oos|o, |o.eve,
oveoeot oat|c|oat|oo |s esseot|a| |o ooe to. +) ac||eve secoe teooe to sev|ce |aoo o |o. aoo ooeate |ocoe |oose|o|os, aoo 2) to
eac| t|e oooest |oose|o|os .|t| ao aooab|e |oos|o so|ot|oo. |o eao|e see 200S stoo b |eao C|a, Seo|o Soec|a||st |o |bao|s \o|o 3ao'.
8 T|e |S sobo|e |oe |eoo|o |o|os e. |essoos o ee|o cooot|es, .|ee |oos|o oaoce |ost|tot|oos o a|| toes |ave coot|ooeo
aoooo|ate| coosevat|ve oooe.|t|o aoo |eoo|o. T|e ooe eceot|oo |s t|at t|e oat|ooa| ooeta aot|o|t ost oot oo| oa atteot|oo to
||oo|o|t aoo |oat|oo, bot a|so .atc| caeo|| asset o|ces o ea| estate to avo|o bobb|es (oo. ao acceoteo oo||c oa| |o C||oa, oo |oo, aoo
oc| o Soot|east /s|a).
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EnabIe credit Iines at subsidized rates tor a glven amount
ot tlme, or alternatlvely, subslolze cost ot capltal tor nance
provloers wltb a one-tlme grant, to belp seconoary market
llqulolty tacllltles ano new entrants lnto tbe lntormal or low-
lncome bouslng nance space get starteo.
lntroduce other incentives, lncluolng ta breaks,
preterentlal status or otber benets tor nance lnstltutlons
servlng tbese markets.
Renove current IegaI barriers to tbe epanslon ot
nance lnstltutlons, lncluolng restrlctlons on tbe acceptance
ot oeposlts, ano barrlers to acqulrlng aooltlonal tunos to loan.
5. 5treanIine your processes for approvaI of housing for Iow-
incone narket segnents
Regulatlons attectlng attoroable constructlon can greatly olscourage real
estate oevelopers trom aooresslng tbese markets. Long ano corrupt
approvals processes tle up capltal ln projects ano create uncertalnty.
A streamllneo process tor approval ot bouslng tor low-lncome
market segments, lncluolng tast-track optlons tbat avolo oelays ano
cumbersome reo tape woulo greatly encourage tbe oevelopment ot
attoroable bouslng solutlons.
6. Create easy-to-inpIenent quaIity buiIding standards and
enforce then
Lnsure tbat your attoroable bouslng relateo regulatlons aooress quallty
ot constructlon (tor eample, reslstance to re) ratber tban tbe speclc
solutlon (tor eample, plasterboaro). Regulatlons pertalnlng to tbe use
ot certaln types ot materlals or processes, otten tbe proouct ot lobbylng
ettorts on tbe part ot manutacturers, can aoo slgnlcant etra costs to
attoroable bouslng oevelopments partlcularly ln places wbere lano values
are very epenslve sucb as ln major urban centers arouno tbe worlo.
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As you take on tbese recommenoatlons, you wlll llkely tace lnternal opposltlon trom wltbln
your publlc sector agency. To avolo tbls, loentlty, celebrate ano promote tbe lnternal cbamplons
you unooubteoly bave ln your organlzatlon, creatlng tbe rlgbt lncentlves tor tbem to act.
Tbe powertul lobby ot tbe tormal constructlon lnoustry largely orlves tbe blas ln tavor ot publlc
subsloy ot large oeveloper bullt unlts. |n aooltlon, bouslng mlnlsters ano bouslng bureaucrats rarely
unoerstano tbe lmportance ot lncremental bullolng ano nance ot attoroable bouslng.
Tbese key publlc managers as well as electeo otclals otten tblnk ot bouslng malnly ln terms ot
meetlng quantltatlve goals tor mortgage nance ot oeveloper-bullt unlts tbe blgbest cost, least
attoroable, ano usually most unappeallng bouslng solutlon tor tbe low/mooerate lncome majorlty.
Dr. 8ruce W. Ferguson,
General Manager, Houslng Mlcronance, ano
tormer Senlor Houslng ano Urban Lconomlst, Worlo 8ank
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lnvestors and Funders: MuItiIateraI and BiIateraI
lnternationaI DeveIopnent Agencies, PhiIanthropists,
Foundations, 5ociaI lnvestors and Private lnvestors
Currently oonors ano multllateral agencles provloe large loans ano grants to governments ano CSOs arouno
varylng soclal bouslng programs. Tbese tunolng streams can be maoe mucb more etclent by lncorporatlng tbe
recommenoatlons tbat tollow ln tbls sectlon.
1. Encourage and support governnents to invest in connon
goods and Iow/noderate incone housing soIutions
Multllateral ano bllateral agencles are otten tbe only actors ln a posltlon
ot lnNuence wltb natlonal governments to encourage a reorlentatlon
ot prlorltles away trom subslolzlng mortgage nance ano oeveloper-
bullt bouslng tor upper-lncome bousebolos. Multllateral ano bllateral
agencles can encourage ano tuno natlonal envlronments tbat are more
conouclve to low-lncome bouslng solutlons by supportlng varlous types
ot common gooos ano lntrastructure lnvestments, tbe oevelopment ot
varlous creolt lnstruments ano avenues tor provlolng secure tenure to
servlceo urban lano.
2. EvoIve a Ieading internediary nuItiIateraI agency, or a
series of Ieading regionaI agencies for affordabIe housing nance
At present tbere ls no central or leaolng multllateral agency or
lntermeolary ln tbe sector tbat provloes pollcy cobeslon or cbannels
oebt ano equlty to testeo ano proven mooels (a role playeo by Acclon,
tor lnstance, ln tbe mlcronance sector). An organlzatlon taklng on
a leao lntermeolary role woulo allow tbe market to organlze more
etclently ano coulo serve several vltal tunctlons llke cbannellng longer
term nanclng to attoroable bouslng solutlons ano creatlng common
access oatabases ot lnvestment opportunltles ano market oata. A oebt
ano equlty cbannellng tunctlon pertormeo by a leaolng multllateral woulo
open up avenues ot capltal yet unoerutlllzeo tor attoroable bouslng
lnltlatlves, provlolng lncentlves tor new oonor agencles ano lnvestors
to partlclpate ln tbe sector tbrougb equlty lnvestment opportunltles,
partlal loan guarantees, etc.
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MuItiIateraI and biIateraI internationaI deveIopnent
agencies and deveIopnent nance institutions
Multllateral ano bllateral lnternatlonal oevelopment agencles bave a vltal role to play ln aovanclng
attoroable bouslng, cbannellng tunolng ano sbaplng natlonal pollcy towaros more responslve
solutlons. We recommeno tbat bllateral ano multllateral agencles consloer tbe tollowlng:
)*+,--*./012,.3
58
PhiIanthropists and Foundations
Donatlon baseo attoroable bouslng programs wlll always be llmlteo ln scale by tbe amount ot
pbllantbroplc tunos avallable. To tbe etent tbat pbllantbroplsts ano tounoatlons take a long
term vlew towaros lnvestlng ln catalyzlng markets ano seeolng sustalnablllty, tbey wlll acbleve
larger, longer term lmpact. To oo so, we recommeno tbat Founoatlons ano Pbllantbroplsts
consloer tbe tollowlng:
1. lnvest in narket enabIing ways
Sucb a sbltt ln tocus requlres a oeparture trom output- ano volume-
baseo lnterventlons, wbere tbe projects tbat recelve tunolng are tbose
wbere tbe greatest numbers are toucbeo. |nsteao, more strateglc ano
long-term lnterventlons tbat unlock markets wlll bave a lastlng ettect ano
allow aooltlonal low-lncome tamllles partlcularly ln tbe upper lncome
segments ot tbe 8oP -- to lmprove tbelr bouslng tbrougb market baseo
approacbes.
2. Focus on a few projects untiI they have achieved inpact
|nvest ln a tew projects tor tbe longer term. Make sure tbat tbe project
leaoers ano entrepreneurs you sponsor go as tar as tbey can ln gettlng
tbelr mooels rlgbt, ano oo not get olverteo wltb new lnltlatlves. Projects
wlll only be plckeo up ano repllcateo by otbers (ano tbus potentlally bave
slgnlcant, lastlng lmpact) once tbey bave proveo to work on a certaln
scale, wblcb wlll requlre tlme ano commltment trom your lnvestees.
Requlre, nance ano olssemlnate evaluatlons ot lmpact ano lessons learneo.
3. 5ubsidize narket based soIutions to reach deeper into the BoP
Free bomes ano prlce subsloy ls rarely tbe best use ot pbllantbroplst
or tounoatlon tunos. Wbere market baseo solutlons are aooresslng tbe
neeos ot upper 8oP populatlons, your lnvolvement coulo stretcb tbe
lower llmlts ot tbe program. You can plggyback on elstlng market-
baseo programs, provlolng tbe rlgbt lncentlves tor tbose lnvolveo to
serve tbe neeos ot tbe poorest. Mecbanlsms to oo so lncluoe loan
guarantees, subslolzeo loans or, or grants to market baseo lnltlatlves to
aooress tbe neeos ot lower lncome segments. Alternatlvely, subslolze
tbe capaclty bullolng ot lower lncome segments to allow tbelr later
economlc lncluslon. 8e mlnotul ot not lntervenlng ln ways wbere your
tunos olstort markets tbat can serve low-lncome populatlons more
sustalnably over a longer term.
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4. PIay a supportive roIe to other pubIic and civiI sector
initiatives and agencies
Founoatlons ano Pbllantbroplsts can play a slgnlcant supportlve ano ln
some cases a correctlve role, augmentlng ano supplementlng tbe work
ot publlc sector, clvll sector ano multllateral agencles. For lnstance,
Founoatlons can lnvest ln solutlons tbat provloe tecbnlcal asslstance ano
know-bow to local governments ano beneclarles, or ln lnltlatlves tbat
lncrease transparency, monltorlng, eoucatlon or bullo tbe capaclty ot
publlc sector or clvll sector organlzatlons ano lnltlatlves.
5. PIay a convening roIe for nuIti-sector initiatives and broker
strategic partnerships
Promote tbe emergence ot a coalltlon ot players wbo can serve tbe neeos
ot low-lncome markets. |llustrate tbe ways ln wblcb tbey complement
one anotber ano provloe a plattorm ano potentlally seeo tunolng to
lncentlvlze tbelr partlclpatlon.
6. Fund and support debt/equity and technicaI assistance
channeIing internediaries in affordabIe housing
|ntermeolary organlzatlons establlsbeo tor a long term presence ln tbe
sector, supporteo by multlple tounoatlons ano oonors can catalyze tbe
attoroable bouslng market ano brlng pollcy cobeslon to tbe sector.
7. lnvest in risky for-prot ventures
Donors accustomeo to vettlng solutlons ano not requlrlng recovery ot
capltal are ln a unlque posltlon to catalyze market growtb by lnvestlng ln
rlskler tor-prot ventures tbat bave tbe potentlal to greatly lmpact tbe
attoroable bouslng market. Unoer-utlllzeo tools llke Program Relateo
|nvestments (PR|)
12
can be useo to tuno tbese types ot lnltlatlves. Look
tor protable projects ano take rlsks tbat lnvestors requlrlng target
rates ot returns wlll not take.
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+2 |o t|e |S/, ||| |ovesteots ee to t|e ose o |ooooat|oo's eooo.eot ooos (.||c| .oo|o ot|e.|se be |ovesteo |o t|e stoc' a'et o
ot|e o o o-oot |ovesteots) |o o-oot |ovesteots .|t| bot| a soc|a| aoo a oaoc|a| etoo
)*+,--*./012,.3
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5ociaI lnvestors
Soclal lnvestors wbo are more acceptlng ot uncertalnty ln terms ot nanclal returns, wltb
greater value placeo on tbe creatlon ot soclal returns, are well posltloneo to lnvest ln
attoroable bouslng. Tbese lnvestors sboulo take a patlent approacb to recoverlng tbelr capltal,
tor eample tbrougb tbe tollowlng:
1. 5eed fund pronising ventures that are not yet ready to
offer narket returns
Tbls ls preclsely wbat many soclal lnvestors olo wben tbey starteo
lnvestment ln tbe early stages ot MF|s ourlng tbe 90's. Many ot tbese
lnvestments bave not only proveo protable but bave oemonstrateo
tbe vlablllty ot mlcro lenolng approacbes arouno tbe worlo. Slmllarly,
promlslng attoroable bouslng lnltlatlves otten bave a nlte non-
recoverable establlsbment cost, wblcb wben tunoeo can unlock growtb
ano lnnovatlon.
2. 5trategicaIIy support MFls and HFls
Otter long term creolt llnes at below market rates ot return, or
guarantee tunos, to MF|s ano HF|s wllllng to otter bome loan prooucts
to tbelr cllent base.
3. CoupIe investnent with appropriate technicaI assistance
|ncreaslngly soclal lnvestors are reallzlng tbat tecbnlcal asslstance ano
guloance ls mucb neeoeo ln tbls market ano greatly enbances tbe cbances
ot success ot tbelr lnvestment. Partner wltb approprlate tecbnlcal
asslstance provloers or tuno tbe provlslon tbereot.
4. Make equity investnents in pronising affordabIe housing
enterprises and internediaries
Support tbe creatlon ano on-golng costs ot lntermeolarles tor reglons
ano large countrles (e.g., Sub-Sabaran Atrlca, |nola, Laln Amerlca, tbe
Mloole Last ano Nortb Atrlca) tbat cbannel equlty, oebt, ano tecbnlcal
asslstance to promlslng players ln attoroable bouslng. Slmllarly, make
equlty lnvestments ln attoroable bouslng enterprlses sucb as lenolng
lnstltutlons, bomebulloers ano subslolarles ot materlals manutacturers
tocuseo on tbe 8oP market.
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1. Consider this a high-risk/high-return narket
Take tbe tlme to look at tbe opportunltles lt provloes, as oevelopers as
well as materlal retallers may be looklng tor tunos to scale up tast.
2. Partner with sociaI investors
Soclal lnvestors are well posltloneo to lncubate projects untll tbey are
large enougb tor you to lnvest ln a secono rouno ot lnvestment.
Private lnvestors
|t you are a prlvate lnvestor accustomeo to a level ot returns, tbe bouslng market tor low-
lncome populatlons may appear blgb rlsk, wltb llmlteo returns. |t ls lnoeeo blgb rlsk, as tbese
lnltlatlves grapple wltb tbe learnlng curve ot a new target market. However, wltb souno
lnvestments, tbose tbat manage to move oown tbese learnlng curves rst wlll protably serve
tbls market, wltb tbe potentlal to benet trom buge market sbares ln tbe tuture as barrlers to
entry tor secono comers are blgb. Tberetore:
Tbe economlc oynamlsm ot many emerglng countrles, comblneo wltb aovances ln our
unoerstanolng ot creatlng prooucts tor tbe low/mooerate lncome majorlty, ano tbe sbltt ot tbe
mass-market to tbe lower mloole class bave now maoe bouslng tor all an attractlve altbougb
stlll cballenglng proposltlon tor tbe prlvate-sector.
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Attoroable bouslng ln emerglng economles ls one ot tbe major markets ot our tlme. ;-*10 6%072
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