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Loans to build a roof over one’s head under proper guidance
National housing policy presented
The Construction, Engineering Services, Housing and Common Amenities Ministry on Friday presented the draft of the National Housing Policy for the people to voice their views. The people will be able to send in their views on the policy before the Ministry finalises the draft and puts it forward to the Cabinet for approval.
Minister Rajapaksa launching a website at the event. Pic by Hasitha Kulasekera
Addressing the ceremony Economic Affairs Development Minister Basil Rajapaksa said the policy on national housing will help resolve the problems of those who do not have any shelter and will enable persons without housing to obtain housing facilities under a proper plan.
Mr. Rajapaksa said there are an estimated 245,000 without proper shelter and a similar number who do not have toilet facilities which require urgent attention. ‘Under the Mahinda Chinthanaya the President has also promised to provide shelter to the homeless,” he added.Housing Minister Wimal Weerawansa said the national policy will help persons to obtain loans and construct their houses under proper guidance.
“This will benefit all segments of society as the housing issues will be solved according to a national policy. Even the private construction industry too will have to follow the national policy regarding housing,” he added.Mr. Weerawansa said that in Colombo there were about 60,000 families living in shanties and they require to be settled in flats. ‘In the whole of South Asia it is in Sri Lanka that there are the most number of successful housing projects,’ he said.Among the objective of the national housing policy complied to serve as a guidance to various organisations, institutions and individuals of the housing sector while utilizing national resources more productively and effectively is to “ensure the right to live in a adequate, stable, qualitative, affordable, sustainable, environment friendly and secure house with services for creating a high living standard meting the timely needs of the people.”
Increasing the national housing stock qualitatively and quantitatively as well as directing State and private sector institutions to meet the annually increasing housing demand, securing the right to live in a house and introducing attractive methodologies that will inspire local and foreign investors to involve in housing construction and promoting public/private partnership projects.
Introducing tax concessions and credit components to encourage private sector investments in fulfilling housing needs of the middle class.
The strengthening of the rental housing market which will help in enhancing productivity in the construction sector and service sector while minimising the number of people commuting daily to their work places in urban areas is another goal.Establishing a legal framework with clear-cut responsibilities on maintenance and management of rental housing and introducing advanced financial and administrative tools to inspire joint programs with the leadership of tenants, house owners, property developers and public sector institutions is yet another area for attention.
(Draft of the National Housing Policy)
Ministry of Construction, Engineering Services, Housing and Common Amenities
Preamble
1.0 Issues and challenges in the housing sector
2.0 Rationale for a housing policy
3.0 National Housing Policy
3.1 Goals
3.2 Objectives
3.3 Thrust areas
3.4 Strategic policy guidelines
Annexure
i. Evolution of Housing in Sri Lanka
ii. References
Contents
National Housing Policy
i
Housing in Sri Lanka has evolved around policies and decisions of the successive governments in the past. These policies and decisions are reflected in policy documents, legislations, institutions established and housing programmes implemented during such period.
As in many other countries in the world, there is a compelling need for a retrospective look at the housing development sector in relation to the socio-economic, cultural and environmental as well as technological challenges confronted by Sri Lanka. Social objectives within them together with strategic approaches for their realisation have to be revisited. In particular, the plan of actions and strategies based on the Mahinda Chintana Vision for the future needs to be repositioned. The unveiling of the national housing policy is an outcome of this process.
State Intervention in Housing
During the past 65 years of the post-independent era of Sri Lanka, diverse policies, programmes and targeted projects concerning the housing sector have been implemented by the government with emphasis being laid on the requirements of that specific period of time. With the country’s liberation from the colonial rulers, successive governments have focused more on the housing needs of the urban middle class and working class. The establishment of a separate ministry for the subject of housing in 1953 consequent to the recommendations of the first sub-committee on housing appointed in 1952 and the establishment of the National Housing Department through the National Housing Act No. 34 of 1954 have marked a watershed in the development of the housing sector of Sri Lanka.
Thereafter in 1961, the recommendations of the committee appointed by the then government to look into the rural and urban housing needs of the country seem to have been the basic foundation on which the various subsequent legislations introduced by the housing sector agencies and programmes implemented during that decade.
The period that commenced with 1970 was significant owing to the interventions through various legislations to ensure housing entitlement, ownership and supply. During that period, the improvement of housing stock and fulfilling the demand for housing was deemed a responsibility of the government and measures had also been taken to popularise aided self -help housing schemes.
Preamble National Housing Policy
01
Enabling Housing
A marked shift towards the private sector involvement for the housing sector was a notable feature consequent to government being compelled to limit State funding in the ensuring decade. The housing legislations and regulations that restricted this emerging trend were amended and tax concessions were granted while creating new institutions for housing and urban development, research and training in the sector and encouraging local and foreign construction entities to be involved more in housing development.
The government’s role in the housing sector was transformed into that of an enabler to the enhanced demand for housing in the 1980s and in accordance with the resolution adopted at the Habitant I conference of the United Nations held in Vancouver, Canada in 1976 and gave due consideration to the emerging trends in the housing and human settlement sector. This enabling process developed later to public/private partnership in housing development.
Taking into account the concept of adequate shelter for all and sustainable human settlement development in an urbanising world adopted at the Habitat II conference of the United Nations held in Istanbul, Turkey in 1996 and the Millennium Development Goals declared in 2000, the Government of Sri Lanka has given priority to housing programs for vulnerable community groups within a framework of sustainable housing and human settlement development. Special housing programs and projects targeting urban slum dwellers, estate worker communities, fisher communities and people displaced by the armed conflict are being implemented by State sector institutions, non-governmental organizations as well as community based organizations.
A Sustainable Human Settlement Development
Mahinda Chintana, the Government vision for the future, recognising the need to develop Sri Lanka as a system of competitive, environmentally sustainable and well linked cities parallel to the Western Province centered in the Colombo urban area has already started. At the same time, it has been emphasised to provide every family with affordable and adequate shelter. The responsibility of realising this housing goal of the Government lies with the Ministry of Construction, Engineering Services, Housing and Common Amenities. Accordingly, concurrent to the regional, urban and rural development programs launched by the Government, the Ministry has initiated and is implementing the “Jana Sevana” one million national housing and settlement development drive to upgrade informal housing in those areas with basic services to ensure sustainable human settlement development.
National Housing Policy
02
Need for a Strategic Approach
The primary factors of housing such as the capital, lands, labour and raw materials are being controlled by state and private sector entities and they are operated as per various traditions and values. Thus, there is a need for a specific housing policy with a mechanism for guidance and assisting the institutions, organisations, communities and individuals at various levels of the housing sector and the need for a new strategic approach for its smooth operation too has emerged.
As envisioned in the ‘Mahinda Chinthana- Vision for the future’ policy framework, this national housing policy is based on the principle that the Government enables the people in need of housing and directly fulfill the housing requirements of marginalized communities due to poverty.
It is commonly accepted that diverting funds for housing construction gives a boost to economic activities in the rural and semi-urban areas. Hence this policy statement recognises that housing development is an essential component in the general economic development strategy. Therefore, the direct intervention of the Government to bring the supply of housing construction project loans and the provisions of housing loans to an effective level is acknowledged as a fundamental strategic approach.
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There are many issues and challenges in the housing sector. The basic issues and challenges listed for special attention are listed below.
• Lack of a housing policy based on a distinct and well defined strategic approach.
• Relatively low level of investments by both the Government and the private sector in the field of housing which is a fundamental factor in social and economic development.
• Limited funds for housing by financial institutions, traditional guarantees, securities and high interest rates as well as housing loans and financial facilities being targeted for medium and high income earners.
• ‘Provision of housing loans’ not being adequately considered as criteria for measuring effectiveness of State and private sector financial institutions.
• Structural inefficiencies in the property market.
• Land prices and supply, legal and administrative as well as cultural issues in land utilisation and title clearance.
• Need for sustainable settlements, based on plans for land utilisation and management not being emphasised in society.
• Issues associated with social and physical infrastructure.
• Insufficient attention to appropriate technology, low cost techniques and research.
• Dearth of skilled workers and shortcomings in the building materials sector.
• Problems and issued related to financial and administrative regulations faced by investors and property developers of the housing development sector.
• Issues in planning and managing condominium property.
• Insufficiency of the availability of rental housing at affordable prices and housing issues of public sector employees.
• Need for clear-cut and well-defined alternative housing development methods for housing development activities of those displaced by natural disasters, weather and climatic changes and armed conflicts are not assimilated by society.
• Less focus on an integrated approach among the State sector and private sector institutions in housing planning and development.
Issues and challenges in the housing sector
1.0
National Housing Policy
04
• Less attention on the need for the proper methodologies that promote the participation of community organization, communities and the other stakeholders and attitudinal changes on community based, settlement oriented and partnership in housing.• Lack of emphasis on the approach to participatory methodologies, capacity building and empowerment in low income housing development.
Considering the importance of a well-developed housing and construction sector as a major indicator that reflects the strength of the economy and people’s wellbeing, Sri Lanka should accord the highest priority to the housing development sector within its development framework.
Taking the population growth of the country and basic need of providing permanent shelter to the homeless and those living in semi-permanent and temporary houses into account, the Government target its plans of action and housing strategies with the intention of providing a standard house for every family in the country. In this scenario special attention to be paid to develop specific approaches for the vulnerable communities in society.
Housing Development Sectors
Though the existing conditions in rural and estate housing have seen a quantitative and gradual improvement, they still are at a relatively lower level as regards quality and inadequate sanitation facilities. The housing need of the majority of the ruraland estate communities is to upgrade or renovate their existing housing units.
A significant portion of the urban low income communities live in underserved living environments without adequate facilities. Though urban people are somewhat better able to pay for housing in comparison to rural people, due to the shortage of housing supply, they have been distanced from the housing market. The inadequate supply of houses for renting too can be identified as a major issue.
Without paying due consideration and attention to infrastructure facilities, capacities of service networks and environmental conditions in the semi urban areas, an irregular residential development is taking place for the upper middle class through private investors with profit being the sole objective.
While emphasizing the genuine desire and need for commitment of one should earn to own a house which is considered as a human right, the direction of state housing policies been changed to a certain extent. Accordingly, there is a policy shift towards the supporting the formal and informal housing construction processes and investments based on participatory methodologies inherent to Sri Lanka while shifting the government direct intervention in constructing housing.
Rationale for a housing policy
2.0
National Housing Policy
05
Participatory and partnership in housing
What has caused the governments to lean towards these participatory approaches was that they have taken into consideration the potential for more product and effective deployment of national resources in decision making process of housing and settlement development well as the management of actions taken at the grass root level. It is therefore essential to assign the responsibilities and empowering the private sector, communities as well as individual families who are involved in this house building process Thus, enabling policies should not be construed as government withdrawing itself from the housing development process. Here the government should be more concern about strengthening the intervention and coordination of relevant activities more effectively. However the government intervention to monetary supply for the effective the housing market is also essential.
Strategic Approaches
An overwhelming majority of houses in Sri Lanka are constructed by the people themselves. The remaining houses are built by the state sector and private sector institutions. It is therefore crucial to improve the mechanisms for clear guidance and facilitation for institutions, organizations, communities and individuals at various levels of housing development process. A strategic approach for this purpose is to be introduced through a national housing policy.
Hence it is acknowledged by the government that the national housing policy to assist and guide all those involved in the housing sector including state, private and incorporated institutions and those in need of housing in all categories of low, middle and high income earners as well as that it has been accepted the government intervention in providing financial supply in housing finance market. Similarly, it has also been recognized that the government should make a direct intervention to fulfill the housing needs of marginalized families and vulnerable communities and those excluded from the housing market due to poverty.
By emphasizing all these facts in the national housing policy, the government will be able to increase the housing construction and to facilitate the up liftmen of housing stock of the country. Further, it will eventually ensure the accomplishment of social responsibility of fulfilling the housing needs of the entire population of the country. The increase of funding available for housing development will in turn enable the strengthening of the national economy.
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3.1 Goals
The prime objective of the national housing policy complied to serve as a guidance to various organizations, institutions and individuals of the housing sector while utilizing national resources more productively and effectively is to, “ensure the right to live in a adequate, stable, qualitative, affordable, sustainable, environment friendly and secure house with services for creating a high living standard on the timely needs of the people.”
3.2 Objectives
The followings are the basic objectives connected with the final goal of the National
Housing Policy.
3.2.1 Increasing the national housing stock qualitatively and quantitatively as well as directing state and private sector institutions to meet the annually increasing housing demand.
3.2.2 Securing the right to live in a house.
3.2.3 Strengthening the asset base of the people through housing development processes and alleviating poverty.
3.2.4 Contributing to make the grass –root level economic development process more efficient through adequately improving financial supply for housing.
3.2.5 Introducing attractive methodologies that will inspire local and foreign investors to involve in housing and promoting public private partnership projects.
3.2.6 Providing equal and equitable opportunities to all stakeholders of the housing construction sector and in particular encouraging the private sector.
3.2.7 Introducing efficient financial tools by public and private sector financial institutions and maintaining the financial supply for housing at optimal level.
3.2.8 Encouraging the utilization of environmental – friendly, energy saving and appropriate housing technologies.
National Housing Policy
3.0
National Housing Policy
07
3.2.9 Promoting adequate and affordable infrastructure facilities for housing in sustainable way.
3.2.10 Propagating the people centered partnerships housing development approaches.
3.2.11 Strengthening the network of institutions contributing to housing development and introducing a coordinating mechanism for the integrated actions.
3.2.12 Adopting community based participatory methodologies to the maximum level at housing development.
3.2.13 Identifying lands for housing that can withstand climatic changes and natural disasters and utilizing them at optimally at national level.
3.2.14 Minimizing restrictions and legal constrains within the land market for residential use.
3.2.15 Encouraging vertical housing development in urban areas with adequate common amenities.
3.2.16 Revising housing standers, planning and building regulations to suit the existing housing needs and energy savings etc.
3.2.17 Expansion of condominium property market systematically and promoting participatory condominium management methodologies.
3.2.18 Increasing the supply of houses in rental market.
3.2.19 Introducing new legislations and tax systems for the supply of building materials at affordable prices and discouraging the use of hazardous building materials.
3.2.20 Encouraging public private partnership for continuous improvement of knowledge and skills of all craftsmen in the housing construction sector.
3.2.21 Promoting all researches and training activities in the housing sector.
3.2.22 Stressing the fact in the society that a house is something that one should earn through his own efforts.
National Housing Policy
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3.3 Priority Areas
These priority areas have been lined up laying the emphasis on issues for which solutions should be found collectively as a close-knit society for the development of housing within the existing wide range of housing issues to be addressed and to help understand the range of meeting points between the different sectors involved.
Accordingly, the strategic policy guidelines have been lined up along the following housing sector priority areas within the national housing policy.
1. poverty groups
2. Non-traditional sundry income earners
3. Middle class
4. High income earners
5. Rental housing
6. Urban land development, private investments and condominium property planning and management.
7. Provision of infrastructure facilities and management
8. Housing technology, standardisation, supply of building materials, labour and training
9. Institutional co-ordination.
10. Housing development monetary supply.
National Housing Policy
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3.3.1 Poverty Groups
Primary reasons such as poverty and lack of resources have kept these groups which are an integral part of the society away from mainstream housing. Slum and shanty dwellers, underserved communities, squatters, poor families at rural level as well as the disabled, women-headed households, estate community, fisher folks and other vulnerable groups are belong to this category.
Slums and shanty dwellers and understand communities live in ill-equipped environments located in highly congested urban areas with substandard housing and these lands carry a very high development value. As a result they are gripped by a host of social problems and the estate and fishing communities too live in similar environs.
The government should directly intervene for fulfilling their housing needs and build up their asset base enabling the housing financing institutions to have trust on them and also the economic and social up liftmen of these communities.
Strategic Policy Guidelines
3.3.1.1 The government to allocate specific funds annually for housing requirements of these communities in order to guarantee the right to live in a habitable house.
3.3.1.2 The families who are able to build their own houses to be directly assisted by way of regularizing the land, providing basis amenities and releasing housing assistance on concessionary interest rates with necessary technical guidance.
3.3.1.3 Coordinating with all relevant institutions and introduce the processes for fulfilling their housing needs for uplifting and securing the livelihood of poor communities in order to empower them socially and economically.
3.3.1.4 Within a wider framework that guarantees medium and long-term sustainability of the housing sector, allocating state lands and funding for the housing needs of poor communities also encourage the government and private sector financing agencies jointly introducing additional alternative housing funds as well as concessionary financial supply methodology.
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3.3.1.5 Strengthening community based organizations to promote community participation in housing development and guiding poor communities on decision making processes at grass roof level and also to establish the housing fund in order to build capacitie towards this end.
3.3.1.6 Encouraging charity organizations and individuals for providing housing facilities to these communities as a social welfare measure.
3.3.1.7 Introducing tax concessions to encourage financially viable private sector institutions to invest a part of their profit share in the development of housing and settlement for these underprivileged communities.
3.3.1.8 Encouraging local government bodies to charge a levy on a percentage for the additional area than the specified square area of the private house to be constructed in the process of granting planning approvals and credit it to a revolving fund and invest it in housing for poor communities.
3.3.2. Nontraditional sundry income earners
A significant segment of Sri Lanka’s housing needs is for upgrading, extending or renovating of their existing houses. The Non-traditional sundry income earners have been marginalized from the formal housing market owing to their inability to declare a fixed income and obstacles they face in offering guarantees. Migrant workers who contribute to a higher percentage of the national economy are a leading group in this category.
Strategic Policy Guidelines
3.3.2.1. Adopting a common policy of providing financial and technical assistance in national level for this social layer under the patronage of the government through the institutions such as the National Housing Development Authority.
3.3.2.2. Introducing a specific community based housing programme that ensures capacity and recognition of the households and strengthening existing micro financing groups and assisting to establish new once. Networking those community base micro finance groups and coordinate them with the relevant state & private sector agencies in order to make them financially viable entities for housing and other community activities.
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3.3.2.3. Strengthening the capacity building of the people based organizations such as co-operative societies in national regional and grass toot levels in order to get their co-operation for housing development and releasing government land in concessionary rates.
3.3.2.4. Creation& promotion of monetary supply, administrative mechanisms and technical procedures for supporting community based housing development at national level.
3.3.2.5. Introducing innovative credit systems for extending financial assistance to promote the construction of houses using affordable and cost affective appropriate technology and enhancing the financial strength of the National Housing Development Authority for this purpose.
3.3.2.6. Central government to intervene and ensuring the release of commercial and State bank bulk loans to housing agencies such as the NHDA to grant housing loans to needy families who are considered as non-bankable.
3.3.2.7. Disposing of Government lands at a reasonable and affordable price for the construction of houses with priority to be given to special groups such as migrant workers.
3.3.2.8. Releasing Government lands on a priority basis for the establishment of planned human settlements with proper infrastructure facilities encouraging the private sector to invest in affordable housing projects in strategic locations.
3.3.2.9. Making the existing procedures for transferring the private ownership of state lands given on lease more efficient and if necessary formulating a new legal framework in order to encourage the constructions.
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3.3.3. Middle Class
Sri Lanka which is deemed a middle income country now has witnessed a gradual increase in the middle class. Though middle income groups are able to obtain a loan from the open financial market for the construction or purchase of a house, the majority of them want to fulfill their housing loan requirements either from a State or private bank through a simple procedure. However the absence of financial capacity adequate enough to meet this demand is a problem faced by such financial institutions at present.
The majority of housing units added to the middle class housing stock are the constructions carried out with family savings and other financial resources with the families usually having them constructed by small scale contractors. Among the major problems in this housing process are the limited number of lands with clear title to offer collateral to secure a housing loan easily and the deficiencies in the land registration process.
In constructing houses targeting the upper stratum of this middle class category, private investors and property developers construct housing projects especially in the urban and semi urban areas for this group without adequate supervision and monitoring leading to a slew of problematic situations including insufficient service delivery, exorbitant profit margins and non- compliance with accepted standards. However another disadvantage in this sector is the lack of attention by the private sector for the housing needs of the middle class. Middle income households also face financial, resources and technology difficulties in the house building process due to the poor selection of affordable and suitable designs.
Strategic Policy Guidelines
3.3.3.1. Introducing management and financial systems in order to increase the housing loan issuing capacity of the housing banks trusted more by the middle class.
3.3.3.2. Prevailing upon the financial institutions to adopt more relaxed procedures as regards clear deeds and security guarantees required in obtaining loans for constructing and purchasing houses.
3.3.3.3. Introducing mechanisms required for executing land transfers within a short period and at a minimum cost and launching a programme for their implementation.
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3.3.3.4. Introducing tax concessions and credit components to encourage private sector investment in fulfilling housing needs of the middle class.
3.3.3.5. Strengthening the regulatory processes applicable to the quality control of housing development by the private sector and follow up activities and introducing methodologies to build people’ s trust towards them.
3.3.4. High Income groups
The housing demand of the high income group is met to a greater extent by the formal private sector housing market. This group consists mainly of residents of urban areas and their outskirts and they expect proper infrastructure facilities, services and amenities. It is important to take into consideration the housing and land requirements of this income group.
Though the housing requirements of the lower segment of this income group are covered by the housing market, there is a greater tendency among them for mortgage loans. However, the threshold on the provision of medium and short term mortgage loans in both the State and private banks offering housing loans has a negative impact on the demand for such loans.
Despite the capacity of these people to build large houses, it is important to consider the size of the house to be constructed, since more attention should be paid to the use of national resources more effectively and efficiently.
Strategic Policy Guidelines
3.3.4.1. Intervention of the Government to have the housing loan finance capacity increased in commercial banks
3.3.4.2. Ensuring State owned urban lands required for housing development of this category be released through a systematic urban development plan and introducing tax concessions to encourage private land owners to offer their lands for such developments.
3.3.4.3. Strengthening the legal framework and procedures of condominium property management to ensure the trust of the house buyers.
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3.3.5 Rental housing
The demand for rental housing has gone up in recent times due to increasing urbanisation, income and population growth and migration to urban areas. Especially, the new generations who do not intend to have permanent ownership of a property in an urban area or are not willing to invest for that purpose are more inclined towards rental housing.