Tag Archives: Housing finance

The Mongolian urban challenge: A matter of growth, land management and the race against winter in the slums of Ulaanbaatar

By: Noel Sampson, Nicaragua Regional Analyst


“There are so many new rich people and there is no place for them to spend their money” said Rob, a French- American investor I met on the flight from Moscow to Ulaanbaatar (UB). He told me he was building a new club and Irish pub – “the biggest in UB” he promised. I gave a dry smile.  The thought of yet another Irish pub is hard for me to get excited about because they all look the same to me. 


Hours later I discovered the city is already full of Irish pubs, crammed in amongst the office towers under a skyline cluttered with cranes. Up in the surrounding hills, beyond the cranes and city lights, the slums are populated by gers (traditional Mongolian tents) exhaling thick coal smoke. The khashaas (individual fenced plots) highlight the organic pattern of the informal urban fabric.



Overview of Ulaanbaatar and its slums far in the back


More than 50% of Ulaanbaatar’s population lives in ger-areas and around 47% of ger residents live in poverty. Ger-areas have limited infrastructure and services such as heating, water and sanitation. Residents use coal-fired stoves to survive extremely harsh winters with temperatures below -40°C. Domestic coal fires are the main cause for air pollution in Ulaanbaatar where individual households cannot afford to connect to the city’s power grid. Improving access to services would help to upgrade these areas. Creating service hubs and promoting increased population density whilst simultaneously making services more affordable will improve the quality of life.


Ger-areas in district-subcenter of Byankhoshu


In order to address these issues the Municipality of Ulaanbaatar (MUB) has requested the Asian Development Bank (ADB) to plan and finance a service and infrastructure provision strategy. This strategy is intended to increase population density and provide public utilities for the two ger district sub-centers of Byankhoshuu and Selbe.  It is hoped that a flow-on effect will be seen on service provision to the surrounding slums that continue to grow.



Lack of access to infrastructure and services are remarkable in Ger-areas in Selbe sub-district


A major cause of the growth of slums in Ulaanbaatar is immigration to the city related to dzud – a concurrent natural disaster characterized by summer drought followed by particularly harsh winter with extremely low temperatures and heavy snow. The 2010 dzud affected an estimated 769,106 people (28% of total population) and has resulted in 8.4 million livestock deaths. Many were forced to move to the capital. Other factors include high poverty levels in rural areas, the inexperience of local institutions in dealing with urban issues, natural population growth and the Free Mobility Law. This law, approved by the Supreme Court in 2003, grants every Mongolian the right to freely own a plot of land in the capital.


Formation of slums in the peri-urban areas of the city


However, there is reason to be optimistic about the potential success of the program. The political will exists, Ger-residents have expressed interest and there are business opportunities for the private sector at a time when the country is experiencing strong economic growth.

The challenges lie in how to implement the program, in particular how slum dwellers will participate in the development strategies. A balance needs to be sought between any benefits and costs of such a program.


Despite construction industry is booming, building season is just five months in a year due to the harsh winter


One option is for residents to pay directly for their connections. This way they need only sacrifice a section of land for road and infrastructure developments of their individual sub-district. However, the monetary cost of such a method would be high, and it would be unlikely to be financially viable for residents. Each heating technical room costs between 15 to 25 Million MNT ($17K USD). A variant of this option is for neighborhood residents to group together to build townhouses and share the costs of connections, but this adds the challenge of financing the construction of the buildings.



View of one family Khashaa in Selbe


An alternative is a land trading process, whereby residents trade a portion of their land to the private sector in exchange for financing of connection costs. The private sector will therefore redevelop the land – building residential or mix-use buildings to be sold on the open market.  However, implementation would be a complicated, long process, and might prove unattractive to the private sector and residents. Success would depend on how much land needs to be sacrificed for low to middle density residential construction.

A third option is community land pooling, where neighborhoods from 10 to 20 Khashaas give up the land owned in its entirety to be redeveloped into multi-use compounds including residential, commercial and social service facilities. The private sector would compensate landowners with a “purchasing credit” that can be used to buy an apartment in the new redeveloped area. This alternative is risky because it puts residents at a disadvantage by making them dependent on the private sector. The main advantage lies in the provision of more land for complete service hubs.



Many Ger-areas have consolidated to more permanent houses but still lack of access to services


In any of the alternatives there are several questions that need to be addressed, such as how to work out the compensation system, and how to prevent land speculation and a rise in land prices after infrastructure provision. Gentrification of these areas could further marginalise the city’s poorest residents.

To address all these concerns a Sub-Center Redevelopment Agency (SRA) will be established to implement the investment program  in a fair, stable and efficient manner for both citizens and private sector interests. The SRA will have a key role in the implementation of the program along with MUB and ADB’s partners such as UN-HABITAT, which is currently working on community mapping and consultation to address citizens’ preferences.


Community consultation in Byankhoshu sub-district


In Ulaanbaatar the private sector is ready to push forward with urban development, the national economy is booming due to rich mining resources, and the Mayor, Bat-Uul, has outlined a vision of creating urban corridors on the model of Los Angeles’ Wilshire Boulevard in the middle of the slums. Citizens need to be empowered to participate in the city’s upgrading and redevelopment strategy. Residents stand to gain through improved housing and quality of life, and lives will be saved from the harsh Mongolian winter. Perhaps Rob, my co-passenger from the flight in, would stand to benefit also by making a wiser choice and investing in the community.

Mortgage emulators: pro-poor housing finance innovations (Part 1)

by Matt Nohn, AHI Senior Advisor

Last summer I came back to India to revisit the Mahila SEWA Housing Trust (MHT; see
www.sewahousing.org). I know MHT well, as I worked with them in Ahmedabad, one of India’s fastest growing cities, for three years. Still today I serve as an advisor to MHT, too. AHI and MHT are closely collaborating since around 2007, as AHI supports the larger SEWA network, to which MHT belongs, in launching a market-driven housing microfinance company that is co-governed by the urban poor.


MHT is a Mission-Entrepreneurial Entity (MEEs) founded by the Self-Employed Women Association (SEWA; see www.sewa.org). The support of poor, informally and self-employed women (and their families) to access improved housing and neighborhoods is its mission. MHT’s poor members are usually self- or informally employed—such as street vending day laborers and home-based piece-rate artisans and industrial outworkers. Particularly for the later group, rarely leaving their settlements and producing at home, housing improvements are of the highest relevance and closely related to income improvements (e.g. through access to electricity, subsequent use of more productive machines) and expenditure reductions (e.g. through better health but also reduced fees for access to subsidized or fairly priced public services).


In this regard, through slum upgrading in the scope of Ahmedabad’s Parivartan Slum Networking Program, MHT became a big player in low-income housing in India MHT implements various schemes for improving service delivery and basic infrastructure in low-income areas, especially informal ones; see e.g. https://www.box.com/s/6ui7j8zvfr8lc4lp5co8. Since inception in Ahmedabad, these poverty reduction programs have been replicated across multiple Indian states, often with the participation of MHT. For example, at present MHT works with DFID in order to replicate sanitation and solid waste service projects in Bihar, one of India’s poorest states. Since 2007 MHT, SEWA Bank and AHI collaborate in launching SEWA Grih Rin, an emerging housing finance company. To bridge the time until Grih Rin’s launch MHT works with two credit and savings cooperatives that also deliver housing finance. This work allows MHT to test new products and to innovate the housing finance space. One of these innovative products is what we call Home Asset Loan Finance at AHI: or, simply, HALF as it squares half way in-between typical microcredit and traditional mortgage finance.


No margin, no mission

Launching HALF for semi-formal properties is challenging because it requires to do all of multiple things right: failure to do so may even lead to extermination of the lender—as housing is a capital intensive product, and the lender is “nothing but” a group of poor women:


1.      To screen the loanee’s probability of repayment,
as in case of any typical microfinance product


These proceedings are basically identical to any microenterprise or consumer loan.


2.      To screen the security of the collateral (part 1),
proofing tenure of the land (and home), as in case of a mortgage.


However, unlike in case of a mortgage this can be hard in case of HALF, as the underlying asset’s title is neither illegal/informal nor fully legal/formal but is placed somewhere in-between. On this regard, UN-Habitat speaks of the continuum of land rights, which also reflects in the latest Report of the Special Rapporteur on adequate housing Raquel Rolnik to the UN Human Rights Council. Thus, how to establish the likelihood of eviction and loss of collateral?



The continuum of land rights (Source: UN-Habitat (2012). Handling Land, Innovative Tools for Land Governance and Secure Tenure. Accessible online at: http://www.unhabitat.org/pmss/getElectronicVersion.aspx?nr=3318&alt=1)


3.      To screen the security of the collateral (part 2),
eliminating potential conflict with the urban planning regime


Even if land tenure is safe, the house may still be destroyed if it was in conflict with future development—such as this road in Wenling, Zhejiang province, China.



Would you give them a loan? Will they hold out? (Source: Reuters)



Well, they did not—even though they thought the compensation wasn’t worth it. (Source: Reuters)


4.      To establish contractual proceedings that, in case of default, allow the lender to take possession of the collateral—even without mortgage.


 Thus, how do you make sure you get the house in case you need to take the defaulting borrower to court (in absence of mortgage foreclosure, which would allow you to just take the house even without the court.)


5.      To screen the security of the collateral (part 3),
proofing the physical qualities of the collateral

Even if land tenure and construction site are safe, the lender still needs to ensure that the structural quality of the house is safe enough to e.g. withstand a disaster. Also the lender needs to ensure that the money is really invested in the construction of the tangible collateral.


demo_1 demo_2

Are you sure it is strong enough? (Gujarat Earthquake 2001; picture credit: CASA)


[To be continued in next week’s Part 2.]

Part II: How to build affordable, quality and sustainable housing?

Author: Delphine Sangodeyi, AHI Senior Urban Planning Associate

[Continued from Part 1]

The equation is not simple, and demands a new approach. Expertise, research and knowledge should be invested and there should be high social and environmental impacts as well as an economical gain. Housing quality is not only dependent on construction costs, but also related to the quality of housing conception, to social responsibility and to a new business ethic and mindset. A new business model is required.

      Reaching affordability

The term “affordability” applies not only to building costs but to maintenance costs as well. The recommended percentage of income to be paid for housing is generally capped at 30% of income. Higher mortgage payments impact a family’s ability to afford food, medicine and other necessities of life. Even if a family can afford mortgage payments on a house there may be other impediments to home ownership. These include difficulty in finding appropriate land, cash for a down payment and closing costs in order to keep expenses affordable.

In each country, region and city, the affordable housing market needs to be studied, since it covers various socio-economical categories. In many locations, the population living in poverty and working in the informal sector is still excluded from accessing mortgages through the formal banking system.

      Qualitative architecture, in coherence to local identity

Evans Essienyi in his AHI blog highlighted well the problem of quality of affordable housing in Africa, and that cultural and identity factor were insufficiently taken into account.

Affordable housing is most of the time treated in its most basic form, by constructing standardized block houses or apartments of 45 m² with 2 bedrooms. Compared to the degraded situation of dwellers, these types of constructions could look a fortiori as a situation of progress, but it can’t be seen as a correct solution, in a sustainable vision.

      Promoting mixed neighborhoods

Social and architectural diversity is very important in the construction of cities and neighborhoods. For instance, each affordable housing project can include different types of housing, and affordable for different social categories: from low income households to the middle class.  Less benefit can be made to build very economic housing since the global project is at a financial equilibrium.

      Access to the City

Due to the rising price of land, the tendency is to build affordable housing projects in the far periphery of cities. It implies problems of social exclusion, problem of access to transportation, services, education and employment.

For this reason, any affordable housing project has to be conceived in partnership with local authorities. A good option would be to determine available lands at a discounted price compared to the market, to avoid territorial inequalities. Taking into account the costs for local authorities for trunk infrastructures to cover the growing periphery of cities and megalopolis, road constructions and services, as well as the negative effects of segregated urbanization and high environmental impacts of urban sprawl; instead, participating to develop affordable housing through urban renewal and discounted land price closer to the city centers and employments poles should be regarded as a more sustainable urban strategy.

The international and multidisciplinary perspectives of the Affordable Housing Institute help in developing alternative and concrete solutions for a more sustainable vision of affordable housing.