WASHINGTON DC, May 18, 2020 — The World Bank’s Board of Executive Directors today approved two projects to support Tamil Nadu increase its access to affordable housing. The projects will address the needs of the lower-income groups in the state.
The two projects – $200 million First Tamil Nadu Housing Sector Strengthening Program and the $50 million Tamil Nadu Housing and Habitat Development Project – will 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 reform program responds to the growing need for housing in Tamil Nadu – a key priority identified in the state’s Vision Tamil Nadu 2023 document. 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 Junaid Ahmad, 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 final maturity of 20 years including a grace period of 3.5 years.