Government of India, World Bank Sign Agreements to Increase Access to Affordable Housing for Urban Poor in Tamil Nadu

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New Delhi: The Government of India, Government of Tamil Nadu and the World Bank today signed an agreement to help low-income groups in the state of Tamil Nadu get access to affordable housing.

The agreement was signed for two projects – $200 million First Tamil Nadu Housing Sector Strengthening Program and $50 million Tamil Nadu Housing and Habitat Development Project – to strengthen the state’s housing sector policies, institutions, and regulations.

The $200 million First Tamil Nadu Housing Sector Strengthening Program is the first of a series of two single-tranche operations. The first operation supports the government’s ongoing efforts to increase the availability of affordable housing by gradually shifting the role of the state from being the main provider to an enabler. It will also aim to unlock regulatory barriers and incentivize private sector participation in affordable housing for low-income families. The second operation will look to deepen these measures to make the affordable housing sector more efficient and inclusive.

The agreement was signed by Sameer Kumar Khare, Additional Secretary, Department of Economic Affairs, Ministry of Finance on behalf of the Government of India; Hitesh Kumar S. Makwana, Principal Resident Commissioner, on behalf of the Government of Tamil Nadu; and Sumila Gulyani, Acting Country Director, India on behalf of the World Bank.

“Providing safe and affordable housing is a key priority for the state of Tamil Nadu as identified in its vision document,” said Sameer Kumar Khare, Additional Secretary, Department of Economic Affairs, Ministry of Finance. “With the allocation provided under the Pradhan Mantri Awas Yojana (Urban) and the two projects from the World Bank, a large number of the urban poor in the state are expected to get access to better housing and, in the process, improve their living conditions.”

Nearly half of Tamil Nadu’s population is urban, and this is expected to increase to 63 percent by 2030. An estimated 6 million people are currently living in slums (representing 16.6 percent of the state’s urban population).

“The ongoing COVID-19 pandemic has put urban households at an unprecedented risk of increased poverty, loss of human capital, assets and livelihoods. The impact will be most acute among the poor, particularly those living in overcrowded slums with limited access to basic services,” said Sumila Gulyani, Acting World Bank Country Director in India. “The projects will support the state’s vision of providing safe affordable housing with improved living conditions for the poor and vulnerable.

Concurrently, the Board also approved a $50 million Tamil Nadu Housing and Habitat Development Project to support innovations in housing finance and strengthen housing sector institutions in the state. It will finance the newly created Tamil Nadu Shelter Fund (TNSF) – an innovation in housing finance in India – by providing an equity contribution of $35 million.

This initial support to TNSF will enable cross-subsidization opportunities where higher returns from commercial and high-income developments will compensate for lower returns from affordable housing. This will make affordable housing commercially viable for potential investors. The project will also strengthen the capacity of key housing institutions including the Tamil Nadu Slum Clearance Board, the state’s main provider of affordable housing; Chennai Metropolitan Development Authority, the land use planning authority for the Chennai Metropolitan Area; and Tamil Nadu Infrastructure Fund Management Corporation Limited, the asset management company of TNSF.

“Global experience shows that the public sector alone cannot address a growing housing demand, especially as countries undergo rapid urbanization,” said Yoonhee Kim, Senior Urban Economist, World Bank and Task Team Leader for the Housing Sector Strengthening Program. “The public sector can play an important role in providing regulatory and market incentives to make affordable housing more attractive for the private sector.”

Abhijit Sankar Ray, Senior Urban Specialist, World Bank and Task Team Leader for the Tamil Nadu Housing and Habitat Development Project added: “Both projects will complement each other and strengthen key institutions to transform the housing sector in Tamil Nadu.”

The $200 million and $50 million loans from the International Bank for Reconstruction and Development (IBRD), have a maturity of 20 years including a grace period of 3.5 years.

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