STRATEGIZING SLUM IMPROVEMENT IN INDIA: A METHOD TO

MONITOR AND REFOCUS SLUM DEVELOPMENT PROGRAMS

Robert M. Buckley,  Mahavir Singh, and Jerry Kalarickal
Introduction
India’s 10th Five Year Plan noted that the urban slum population is growing despite sharp
reductions in poverty and rising incomes.  The central and several state governments
recognized the need for intervention by initiating, or enlarging existing urban housing and
other slum subsidy programs.  With this in mind, the Government of India (GOI) has
requested a loan from the World Bank to implement a more effective strategy and delivery
mechanism for the financing of urban slum improvement and sanitation provision in
underserved areas. 
In order to support the GOI to achieve the goals delineated in 10th Five-year Development
Plan concerning slum improvement and poverty alleviation in urban areas, the Bank has
agreed to consider a program that will focus on (a) refining the national policy framework for
the upgrading of urban slums and sanitation in underserved areas in India; (b) working with
the states and various beneficiaries to establish a methodology which measures program
performance of both the GOI and the states, and identifies concrete monitorable steps that
can be taken to improve this performance; (c) developing appropriate monitoring mechanisms
to enable the evaluation and modification or redesign of the programs which would improve
the transparency, efficiency, administrative simplicity, and targeting of the assistance; and (d)
developing funding schemes for slum improvement and sanitation that could provide
incentives so that resources are used more effectively and the program reach expanded.   In
doing so, the program will: (i) contribute to poverty alleviation in the poorest urban areas in
India; (ii) strengthen human capital in poor neighborhoods by increasing community
participation in planning, delivery and maintenance of public works and services; (iii) improve
the efficacy of the use of more than $400 million of annual government expenditures on these
programs. 
This paper is the first joint GOI-World Bank attempt to examine the existing housing and
sanitation programs with a view to developing a framework for evaluating them.  Data was
collected for four Housing Subsidy programs and two Sanitation programs from a series of
conversations with government officials in concerned ministries at both the federal and the
state government levels and from Government of India documents. 
The structure of the paper is as follows.  First, the caveats to the analysis are spelled out. 
The next section presents the necessary background.  Then section III briefly describes the
five programs evaluated.  Section IV examines how each of these programs measures up
against the evaluative criteria.  Section V presents the conclusions while section VI outlines
the way forward. 
I Caveats to the Analysis
Among the existing housing programs, three federal programs and two state level programs
were examined.  Two of the national programs – the Valmiki Ambedkar Awaaz Yojana
(VAMBAY) and the National Slum Dwellers Program (NSDP) – are run in conjunction with the
states and are primarily urban programs. [1]  The third national program, the Indira Awaas
Yojana, is a rural housing program.  The state level programs are Karnataka’s Urban Ashraya
Housing Program and Kerala’s Mythri Housing Scheme.  Finally, a new program that the
Kerala government is considering- the Bhavanashree program- is also appraised.  This last
program was included because its’ program design addresses some of the concerns that the
paper shares about existing programs.  However, since this program is still in its design
phase, the analysis of this program in this paper should only be considered as an appraisal
and should not be read as an evaluation.
Apart from the housing programs, a couple of slum sanitation initiatives – the Pune Sanitation
Project and the national level Nirmal Bharat Abhiyan – are also examined.  These sanitation
programs were included because they are integral to any slum upgrading program. 
Furthermore, there are design elements in this program that are worthy of emulation in all
slum upgrading programs.
Since this is an informal study of a few selected programs, a necessary caveat that there
might be inaccuracies in the specific details of the programs also has to be added.  The paper
has tried to minimize these errors but a major part of it has focused on ensuring that the
general characteristics of these programs are as accurate as can be.  The inaccuracies that
might have crept in also point to the need for better data about the urban poor in India as well
as the housing subsidy programs, a case that the paper makes during the course of this
paper.
II Background
GOI’s policies on slums have undergone a paradigm shift in recent years.  In the 1970s and
early 1980s, the government emphasized the notion of ‘slum free cities’.  What this often
meant was forced or voluntary resettlement of slums in central cities.  However, over time, the
weaknesses of such a program became evident. Firstly, the slum dwellers who were being
resettled were fully integrated in the economies of the cities.  They were economic agents
adding to crucial economic output.  Resettling them would have adverse economic
consequences.  Secondly, removing slums from central cities and transportation nodes often
meant that the new settlements on the outskirts of the city were far from jobs, thus further
worsening the welfare of slum dwellers.  With this realization, the government started focusing
on slum upgrading and slum rehabilitation programs.  In the initial years of slum upgrading,
the focus was on providing infrastructure to the slums through the NSDP.  Now there is
increased stress on provision of shelter to urban slum dwellers through VAMBAY.
India’s new focus on economic liberalization and on decentralization has posed significant
additional challenges to urban development in the country over the last decade.  In particular,
the country’s thrust on decentralization under the 74th Constitutional Amendment Act has led
to a new emphasis on improved urban governance and management with a view to
increasing cities’ efficiency and reducing urban poverty.  This is a major challenge for a
country with some 433 million people living on less than US$1 a day, 36% of the total number
of poor in the world. India also has some 20% of the world's out-of-school children.  Out of the
290 million (28% of the population) that live in urban areas, 62 million live in slums.  This
represents over 21% of the urban population in India.  These urban poor suffer
disproportionately from adverse health impacts linked to lack of proper shelter and basic
services, in particular sanitation.  Conditions are particularly adverse in India's largest cities,
as the top mega-cities in India (Mumbai, Delhi, Kolkata, Chennai, Bangalore, and Hyderabad)
house 18% of the total slum population in the country. 
This emphasis on improved urban governance takes a new dimension, as the urban sector
increasingly becomes an important driver of economic growth. Urban centers contribute more
than 60% of the country’s Gross Domestic Product (GDP), which highlights their role in
achieving national economic growth targets.  In this context, urban infrastructure has a
prominent role in the GOI’s Tenth Five-Year Development Plan (2002-07).  It aims to improve
urban infrastructure as critical to growth and poverty alleviation through decentralized urban
local governments with strengthened capacity to deliver services.  The GOI has estimated
that the country needs to reach an economic growth rate of at least 8% in order to
significantly reduce the incidence of poverty. For the first time, the Ministry of Urban
Development and Poverty Alleviation (MUDPA) has designed a comprehensive Urban
Development Strategy focusing on fiscal, financial, and institutional changes.  As a
cornerstone of the urban strategy, the MUDPA has introduced the Urban Reform Incentive
Fund (URIF) in 2002. Through financial incentives from this centrally funded scheme, GOI
encourages systemic reforms at the State level.  Simultaneously, GOI has set up the City
Challenge Fund (CCF) to promote reforms in citywide governance and service delivery.
Despite this progress, the sheer volume of resources required to address the needs of the
urban poor threatens the sustainability of current efforts.  Unless a sustainable framework for
financing urban slum improvement is implemented, successful scaling up of these initiatives
would be difficult to undertake; and without successful large-scale poverty reduction in India, it
would be impossible to achieve the Millennium Development Goals. This program is well
suited to support the GOI in the pursuit of large-scale poverty reduction in a sustainable
manner. 
III Current Subsidy Programs
There is a general perception that the government should help to improve the housing
conditions of the poor, but the programs actually sponsored appear poorly positioned to
deliver on that result.  Table 1 shows that the selected urban programs allocate approximately
$130 million of GOI assistance per year.[2]  Ideally, the Government of India would target the
40 million poor urban slum dwellers (of an estimated total slum population of 60 million) with
these funds.  However, even if those resources went only to the intended beneficiaries, every
slum dweller would receive no more than $3 of assistance per year. [3]  Given the unit costs of
even very modest housing, this amount is obviously not enough to have a substantial effect.  
On the other hand, providing more assistance to a fewer beneficiaries leaves out others who
are equally deserving.  The relative paucity of resources allocated to housing the urban poor
underlines the importance of using those resources more effectively and leveraging them
better. 
In this context, for example, a program that provides $75 per year of assistance (and which
could correspondingly serve less than 4 percent of poor urban slum dwellers) would have no
discernible impact on the overall number of slum dwellers.  For this result to occur all that
would be necessary is that the slum population increases by 4 percent or more, as it often
has in the past 20 years.  With this increase in the number of households in need, there would
be no reduction in the slum population.  Although such a program helps a non-trivial number
of slum-dwellers, there would be no effective difference in number of slum dwellers.  Thus,
given the large and growing numbers of slum dwellers, and the limited availability of public
resources to assist them, designing programs that most effectively use the resources and that
make them go the farthest is of particular importance.
Table 1:  Selected Government of India Programs for the Urban and
Rural Poor Plan allocations for 2001-02 in Rupees millions
Urban Programs Rural programs
Program Description  Allocations Program Description Allocations
       
Housing and Slum Improvement  
Programs  
Valmiki Ambedkar Awas 736.0 Indira Awas Yojana (IAY), 15270.0
Yojana (VAMBAY), introduced in launched in 1985 as sub-
2001, focuses on shelter for the scheme of JRY, was made
urban poor, with 20 percent of into an independent scheme in
total allocation for community 1996.  It provides full grants to
sanitation facilities under the the rural poor for construction
Nirmal Bharat Abhiyan (NBA) of their houses. 
program
National Slum Development 3850.0    
Program (NSDP), launched in
1996, provides funds for physical
and community infrastructure as
well as shelter upgrading to.  It
uses the community structures
developed first under UBSP, and
later under SJSRY.
Water Supply and Sanitation      
Accelerated Urban Water   950.0 Accelerated Rural Water 20100.0
Supply Project (AUWSP) is not Supply Program (ARWSP)
strictly for the poor, but provides provides finance for RWS
funding for water related schemes on a need basis. 
infrastructure in small towns with Within ARWSP, 20 percent of
less than 20,000 in population.  the funds are reserved under
GOI started this program in the Sector Reform Program
1993-94. (SRP) for those States that are
willing to adopt key sector
reforms related to cost
recovery and community
 Urban Programs Rural programs
Program Description  Allocations Program Description Allocations
management. 
Urban Low Cost Sanitation   398.0 Total Sanitation 1500.0
(LCS).  GOI initiated this Campaign (TSC), introduced
program in 1980 and it aims at in 1999, restructures the
liberation of scavengers through previous supply-driven
subsidies for conversions of dry Community Rural sanitation
latrines into low cost pour flush program (CRSP).  It puts
latrines. greater emphasis on demand
generation and awareness
with a significant reduction in
the subsidy.
Total Urban 5934.0 Total Rural 36870.0
              
Sources: Annual Report MUDPA, 2001-02, Annual Plan, Planning Commission, 2001-02 and Annual Report MRD 2001-
02.  Adapted from World Bank Urban Strategy for India, 2002.

Table 1 shows that rural housing-related subsidy programs receive more than six times the
public resources devoted to similar urban programs even though the rural poor outnumber
their urban counterparts by less than three to one, 197 versus 67 million respectively.  
Consequently, on a per capita basis, the rural poor receive almost twice as much housing
assistance as the urban poor.[4]  This difference in allocation does raise questions about how
public expenditures are determined. 
Table 2 lays out the essential characteristics of the five housing programs considered here. 
For a detailed description of each program, please refer to Appendix 1. 
Table 2:  Comparison of Housing and Slum Dweller Programs
Program To State To Beneficiaries
NSDP ·      70% Loan ·      Selection and development of one slum in each
·      30% Grant city as a “model slum” in the case of Karnataka
For special ·      10% of NSDP funds can be used for housing
category states, construction and/or upgradation (the rest should be
the amount is given used for physical and social infrastructure).
as 90% grant and ·      Housing provided on loan (Rs. 50,000);
10% loan. amenities free of cost
VAMBAY ·      50% Central ·         80% of total amount received from GOI spent
subsidy on housing of which:
·      50% matching ·      50% given as subsidy
funds from State ·      50% as loan.
·      From GOI ·         20% to be invested in the provision of water
routed through supply and sanitation (toilets) within the assisted
HUDCO slums
IAY ·      80% federal ·         Rs. 20000 in housing grants (Rs. 22000 in hilly
grant and difficult areas) for housing construction.
·      20% state ·         The amount to be used for construction of
grant sanitation facilities and ‘clean’ cooking facilities.
·         Infrastructure to be provided by the
implementing agency.
Urban ·      GOK takes ·         Housing loans ranging from Rs. 25,000 to
Ashraya loans from 40,000 provided per the size of city, excluding Rs.
HUDCO 5,000 upfront deposit
  ·         100% loan
Mythri ·      Gov. of Kerala ·         Total subsidy Rs. 28000 of which 19000 in
Program takes loans from loans at 5.5 % interest rates (HUDCO interest
HUDCO rates of 13.5%) and cash grant of Rs. 9000. 
·         Beneficiary contribution of Rs. 2000
Program To State To Beneficiaries
Bhavanashree ·      From various ·         Loans between Rs. 30000/- to Rs. 40000/-
Programs financial ·         No subsidy in loan interest rates (between 7%
institutions to 8% interest rates). 
Sources: KSCB and RGRHCL, Bangalore, March 2003 and KSHB and Kudumbhashree, Trivandrum, January 2004. 
Ministry of Rural Development website.

 
IV Evaluation of Subsidy Programs
Five criteria were used in the analysis of these programs: Targeting, Efficiency,
Transparency, Administrative Simplicity and Sustainability. [5]  In the absence of highly specific
data, the paper undertakes a discursive analysis of the components of these programs. 
Rather than viewing this discursive analysis as a weakness, it is in many respects a strength. 
It is fully in the spirit of the way the World Bank undertakes ex-post evaluations of its projects
– assigning a level of performance based as much as possible on quantitative measures. [6]  It
is also consistent with the approach taken by, for instance, the European Bank for
Reconstruction and Development in its evaluation of the many dimensions of reform in the
former socialist economies.[7]  Moreover, this approach not only sheds light on the strengths
and weaknesses of these programs, but it also requires policy-makers to consider explicitly
how and why they believe a program performs against a specific standard. 
Each of the programs are rated on the five criteria on a scale of 1 to 4 in increasing order of
excellence.  A program that rates poorly gets a score of 1 while a program that satisfies all the
concerns under a specific criteria gets a score of four.  While some of these programs can be
vastly improved by some small changes in the program structure, other programs need
wholesale reform in the way they are designed.  A detailed discussion on each of these
measures is presented in Appendix 2.
Table 3 shows that the four housing programs have an average rating between poor and fair
(an aggregate score of less than 10).  In contrast, both the sanitation programs examined are
rated higher with scores of 12.5 and 13.5.  For a full analysis of each rating given, please
refer to Appendix 3.
Table 3  Rating of Housing and Sanitation Programs
Targetin Transparen Efficienc Administrati Sustainabili
  g* cy y ve Simplicity ty Total Rating
VAMBAY 1.67 2 1 1 1 6.67
NSDP 1.33 2 1 1 1 6.33
IAY 2 3 3 1 1 10
Urban Ashraya 1.5 2 2 2 1 8.5
Mythri 3 1 2 2 1 9
Bhavanashree 3.5 2 3 3 2 13.5
Pune program 3 3.5 2 3 2 13.5
NBA 3 2 2.5 2 2 11.5
*The targeting rating is the average of the ratings each program got for each of the three targeting components.  See Table
2.
  (Key: 4 – Excellent, 3 – Good, 2 – Fair, 1 – Poor)
The twin sanitation programs rate better than the low-income housing programs.  The most
notable improvement of these sanitation programs are better targeting through greater
community participation and better efficiency through the institution of user fees.  However,
there is much room for improvement in the sanitation programs.  The capital costs in both
programs are either fully or very heavily subsidized.  Given the demand for sanitation facilities
in India, it might be more sustainable and more efficient to include a beneficiary contribution
element to the funding of capital costs.  This will necessitate that the local government work
with CBOs in designing and building these programs.  Such collaboration will not only ensure
that these programs are more sustainable but also improve consumption efficiency. 
V Conclusion
On the positive side, most of the programs studied appear to favor cash grants and loans to
in-kind subsidies.  This is a big improvement from the days when most developing countries
(and even some developed countries) had large and expensive public housing programs.  
Cash grants increase consumption efficiency because they are more likely than in-kind grants
to be valued at the cost of the subsidy. 
However, the overall picture that emerges when these program are examined is not an
optimistic one.  Figure 1 provides a visual perspective on how these programs rate and how
far they will have to travel if they are to become ‘excellent’ programs.  The five housing
programs that are underway have an average rating between poor and fair.  Each of the five
Indian housing programs that were evaluated got an aggregate score of 10 or less than 10. 
In contrast, both the sanitation programs examined here are rated higher with scores of 12.5
and 13.5 because they had better targeting mechanisms and greater community participation.
 
Figure 1: Rating of Various Subsidy Programs

(Key: 4 – Excellent, 3 – Good, 2 – Fair, 1 – Poor)

 
Each of the programs show room for better design and implementation in each of the criteria
that is used.  In order to continue developing a housing policy framework it is important that
existing programs are reassessed to understand the scope for better targeting and more
efficient, transparent, and “user friendly” programs that the government can then scale up. 
Several points have emerged for consideration and further validation:
Insufficient Resources:  Current government allocations for urban slum programs cannot
achieve a significant reduction in the numbers living in sub-standard housing unless further
contributions from beneficiaries, local governments or the private sector can be mobilized. 
According to the Government of India, current programs result in less than 100,000 new units
a year.  Since there are approximately 12 million households dwelling in slums, this funding
covers less than 1 percent of the need for better shelter.  Leverage is essential if conditions in
slums are to be measurably improved.  Given the relatively high cost of housing even for the
poor, there is ample evidence that contributions from beneficiaries can be a part of this
leverage.  For example, in the Sanitation Program in Pune and in the Nirmal Bharat Abhiyan,
by moving the responsibility of maintenance to the beneficiaries and by levying user charges,
the fiscal burden on the state is reduced drastically.  In the long run, the capital costs are only
a small percentage of the total cost building and maintaining better sanitation facilities. 
Beneficiary participation makes such programs feasible and allows increasing the coverage of
the programs.  Such a move will also have beneficiary effects on targeting by reducing the
probability of manipulation by interested parties as well as increase efficiency by reducing the
per-unit subsidies.
High per-unit subsidy rates: Subsidy rates ranging between 80 to 90 percent of total cost of
housing (see Annex 4) are very high.  It is very probable that the government can achieve the
same housing objectives with far less direct outlay.  By eliminating the unbudgeted subsidies
embodied in free land and loan defaults, the scope of slum programs might be increased
three to four-fold. 
Increase Administrative Simplicity: Reducing the subsidy element in central schemes
offers scope for administrative simplification, thus improving effective targeting to poorer
states with weak capacity to make use of these programs.
Reducing reliance on supply-driven design:  Such a move increases beneficiary
satisfaction and increases efficiency.   This means that using the kind of self-help groups
used by the Kudumbhashree program in Kerala might be useful not only in furthering the
shelter solutions but also in other aspects of poverty eradication.
Mobilize alternative mechanisms for beneficiary contributions: Many of the current
programs try to increase beneficiary contributions by having a loan component as part of a
housing subsidy program.  Even when these loans are not heavily subsidized through lower
than market interest rates, the very poor repayment performance functions as a hidden
subsidy.  This has undesirable side effects on the viability of state finances and central
funding agencies.  Therefore, alternatives for mobilizing beneficiary contributions are urgently
needed.
Prioritised and Demand-driven Programs:  In all slum related schemes, specific projects
will have to be identified by municipalities in consultation with slum dwellers and given
priority.  This will ensure that only viable projects are taken up and that community
participation is forthcoming.  As argued earlier, community participation often optimizes
resource use.  Furthermore, it might be important to prioritize various projects on set criteria
due to the constraint on resources.
Land Monitoring and Control: Very often, slums develop on public land. The governmental
regulatory/enforcement mechanism that governs these lands has to be strengthened. For
instance, as a policy, the concerned department (on whose land the slum has come up)
should have to take stock of the land afresh and take care of rehabilitation of the slum
dwellers on their own because it was the poor enforcement mechanisms of the department
that resulted in the slum. This would trigger a debate on the issues such as land
management, land-holdings as per requirements, inventory costs and more importantly,
exploring the possibilities for allocating some land for rehabilitation of slum dwellers. 
Moreover, it might force the department to retrieve parts of the unused land which could then
be commercially exploited to finance the slum rehabilitation programs.
The paper recommends further exploration of these issues, re-examination of state and
central programs in light of these tentative findings, and consideration of alternative
approaches being used in India and in other developing countries.  Governments can
increase the number of urban poor substantially helped by these programs at the current level
of expenditure—if reforms of these programs are undertaken. 
IV The Way Forward
This paper provides a basis for discussions between the World Bank and the Government of
India regarding future World Bank assistance and policy work in this sector, and
demonstrates the losses likely to be sustained by the sector in the absence of reforms.   The
Bank stands ready to support the GOI’s efforts to improve the lives of the poor and proposes
to immediately start the studies above in preparation of the World Bank funded Urban
Upgrading and National Sanitation Program. 
In particular, in order to design a more effective strategy and delivery mechanism for the
financing of urban slum improvement and sanitation provision in underserved areas, the
proposed steps below should be followed:
1.   Undertake a series of studies and preparatory activities for slum improvement strategies. 
To do this, a methodology similar to the one described in this paper should be agreed
upon in consultation with the MoUDPA and the state government to evaluate the various
slum upgrading programs.  Furthermore, concrete monitorable steps should also be
agreed upon to improve the performance of these projects. 
2.   Develop appropriate monitoring mechanisms that allow concerned parties to evaluate,
modify and/or redesign these programs to improve efficiency, transparency, targeting and
administrative simplicity. 
3.   Develop funding schemes for slum improvement and sanitation that provide incentives to
use resources more effectively as well as to expand the reach and coverage of these
programs. 
4.   Strengthen the national resource Cell at the MoUDPA so that it can assume its role as
repository of information for policy making.  This cell should be supported by a research
cells at the national and state levels.
5.   Implement GIS based urban planning systems for slum identification and management as
well as develop a database of slum dwellers, squatting areas, land policy regulating the
area, and ownership status in order to prioritize projects.  A mechanism for developing
and updating this database will have to be worked out with state and local government
bodies.
6.   Explore mechanisms for involving public or private sector financial institutions to enlarge
the resource base for taking up various slum development programs. 
 
Appendix 1
The National Slum Development Program (NSDP) was launched in 1996.  Annually, the
program provides about Rs. 400 crores (Rs $ 4 billion) in assistance.  The objective of the
program is slum upgrading through the provision of physical amenities, community
infrastructure, health care and social amenities.  Up to 10% of the funds can be used for
housing construction/upgradation.  The Planning Commission allocates funds annually, in
proportion to the share of the national slum population in each State or Union Territories
(UT).  Then the Ministry of Finance releases the funds to the States or the UT.  MOUD&PA is
the Nodal Ministry responsible for monitoring and for the implementation guidelines. 
Neighborhood Committees and Community Development Societies should implement the
NSDP at the local level. [8]  Slum Development Committees, including elected representatives
from ULBs, NGOs and community-based organizations, should oversee them.  The program
has both loan and subsidy components.  For the larger States, loans constitute 70% and
subsidies 30% of total allocated funds.  For the smaller States, the loan component is only
10% and the subsidy 90%.  All construction is undertaken by contractors.
Valmiki Ambedkar Awas Yojana (VAMBAY), initiated in 2001, was designed to address
housing deficits for the urban poor.  It provides about Rs. 300 crores (Rs 3 billion) of annual
assistance to designated state agencies who then determine beneficiaries and monitor the
implementation.  The state government must provide the beneficiaries with a title and/or land
as a pre-condition for the loan or subsidy.  Its goal is to achieve ‘Cities without Slums’ by
providing or upgrading shelter for people living below the poverty line in urban slums including
members of Economically Weaker Sections (EWS) who do not possess adequate shelter. 
The scheme also addresses the lack of rudimentary toilet facilities with a National City
Sanitation Project, “Nirmal Bharat Abhiyan”.  GOI mandates State governments to use twenty
percent of the total allocation under VAMBAY for the National Sanitation Project.   The rest of
the scheme funding provides matching subsidies and HUDCO loans to title holding
beneficiaries to build or upgrade a house.  Funds from VAMBAY can only be used in notified
slums[9].  In addition, GOI does not release the funds to the state government until they
receive the States’ 50% matching fund.  Very often, the state government provides land on
which to build the house. All construction is undertaken by contractors.
Indira Awaas Yojana (IAY) was initiated in 1986 as a part of the Rural Landless Employment
Guarantee Program after which it became part of the Jawahar Rozgar Yojana in 1989.   In
1996, it took effect as an independent scheme to provide grants for housing construction to
rural residents who are below the poverty line.  A minimum of sixty percent of funds are
reserved for Scheduled Caste/Tribe (SC/ST) households.  The beneficiaries are selected by
the Village Panchayats based on the list of those households in the target area who are below
the poverty line.  Rs. 20000 is provided to selected beneficiaries to build a new home or Rs.
10000 is provided for upgrading existing houses.  Selection of construction technology,
design of houses, and purchase of construction material is left to the beneficiaries.   The
dwelling units are required to be in the name of the female member of beneficiary household. 
The beneficiaries are strongly encouraged to build sanitation facilities as part of the dwelling
unit.  Cooking facilities (chimneys) that are fuel-efficient and smoke-free are also required in
the dwelling facilities.  For the purpose of guidance and monitoring of construction, voluntary
agencies with a good track record are encouraged to be active in the implementation of the
IAY.   The Center allocates funds to the states on the basis of the proportion of rural poor in
the state to the total rural poor in the country.   Within the states, the same formula is used to
distribute funds between districts.  Eighty percent of the total funds come from the central
government and twenty percent from the states. 
Urban Ashraya Housing Program is part of a Government of Karnataka scheme that
provides housing to those who are homeless.  The scheme aims to provide 300,000 urban
units and 800,000 rural units to households living below the poverty line.  The state grants 15-
year loans of Rs. 40,000 to beneficiaries in larger cities and Rs. 25,000 for those in smaller
cities.  In addition, beneficiaries must make a minimum contribution of Rs. 5,000.  Since the
inception of this scheme, 80,879 houses have been built in urban areas under the supervision
of the Rajiv Gandhi Rural Housing Corporation Limited (RGRHCL).  The program does not
specify the design or construction of the house and beneficiaries are given the option of
building the houses themselves. The Government of Karnataka selects beneficiaries based
on a 1995 survey of “siteless/houseless persons” and “those who has their own site but were
houseless” which is periodically updated by the municipality. [10]  Here again, the state
government provides land on which to build the house.  
Mythri Housing Scheme was the primary Government of Kerala housing scheme from 1996
to 2002.  In this period, the Kerala State Housing Board implemented the scheme and
financed over 270,000 homes under this scheme.  Beneficiaries who qualified for the program
could get Rs 9000/- in capital subsidies (cash grants) and Rs 19000/- in loans at 5.5% interest
rates.  The beneficiaries had to own 1.6 cents  (approximately 64 square meters) and had to
make a minimum contribution of Rs 2500/- to use the program.  The program does not specify
the design or construction of the house.  The Government of Kerala selected the beneficiaries
based on whether they fit four of the nine criteria that identifies Below Poverty Line
households.  Kudumbhashree[11], a poverty eradication program implemented by the Kerala
government, undertook the targeting for this program.
Bhavanashree Housing Program, a new program that is designed to be subsidy
free, comes under the highly successful Kudumbhashree program undertaken by the Kerala
state government.  Under this program, ten to fifteen years loans ranging between Rs 30000/-
and Rs 40000/- are allocated to needy households.  For this purpose, the Community
Development Societies have negotiated bulk loans from financial institutions.  The program
gives the beneficiaries a choice in the duration and the amount of the loan.  The interest rates
range between 7% and 7.5%.  The Kerala Government calls the program a subsidy free
program because of the absence of explicit subsidies and subsidy-free interest rates (the
negotiated interest rates with Housing Financial Institutions are 7% or less).  The beneficiaries
are those identified to be below the poverty line and who are members of the CDS.   Like the
Mythri program, the beneficiaries have to own 1.6 cents  (approximately 64 square meters) of
land to qualify for the program. 
Pune Municipality Sanitation Project:  Over the last fifty years, the Government of India
has funded various sanitation initiatives around the country.  Most of these were haphazard
efforts at constructing public use toilets that over time became dysfunctional due to poor
mechanisms that oversaw maintenance and design.  Nevertheless, more recently, there have
been some signs of success.  In Pune, a major sanitation initiative resulted in the construction
of 475 sanitation units, with each unit ranging between 10 to 60 seats.  In total 10,000 toilet
seats were provided.  For a city with a slum population of 600,000, this is a major initiative. 
What makes this initiative worth closer study is the fact that while the capital costs of Rs 40
crores (Rs 400 million) were covered by the Pune Municipal Corporation, community based
organizations (CBOs) have agreed to be responsible for the maintenance.  This addresses
one of the main causes of the failures of earlier programs.  Furthermore, under this program,
a slum family is required to contribute a nominal monthly amount for the use of the facilities. 
This contributes to making this program more efficient and sustainable. 
Nirmal Bharat Abhiyan: A new National City Sanitation Project under the title of “Nirmal
Bharat Abhiyan” is an integral sub component of VAMBAY.  Twenty percent of the total
allocation under VAMBAY is dedicated to the construction of community sanitation facilities. 
Of this 20%, fifty percent will be in the form of a subsidy and fifty percent as an HUDCO loan. 
The State Governments/Local Bodies will be free to supplement this amount with their own
grant or subsidy as the case may be. [12] Each toilet block will be maintained by a group from
among the slum dwellers who will make a monthly contribution of about Rs.20 or so per family
and obtain a monthly pass or family card.[13]
Appendix 2: Criteria for Evaluating Subsidy Programs 
Targeting:  Targeting is traditionally measured in three ways:  
(1)  how much of a transfer actually goes to beneficiaries, in this case poor urban slum
dwellers, as opposed to those for whom the subsidies were not intended?  In other
words, how much of the expenditure can be viewed as “leakage” from its intended
target.  The higher the leakage of resources to, for instance, higher income families,
the lower is the effectiveness of targeting on this scale;
(2)   how much of the intended audience, in this case all poor urban slum dwellers,
receives a transfer?  That is, how much “coverage” of the intended audience is
allowable with the resources available; and
(3)   how much of the resources given to the intended beneficiaries actually goes to
housing improvements?  When a subsidy is for a specific and expensive good, such
as housing, the subsidy per beneficiary must be sufficient to achieve a reasonable
improvement in their housing conditions or at least enough to leverage other
resources, which together bring about a significant change in housing consumption.
Moreover, there are many levels at which targeting can be examined.  At the national level,
how are the funds disbursed to the various states?  At the state level, what criteria are used
for disbursing funds to the local governments?  And finally, at the local government level, how
are the beneficiaries identified and how much of their needs are addressed by the programs? 
Hence, the paper measures how each program fares on the three levels: national, state and
local.  Then it gets an average score for targeting based on the scores for each level of
targeting.  Though there is a degree of subjectivity in the scores given to the programs, the
paper argues that such an ordinal rating of programs is possible based on program design
and implementation and that such a rating sheds light on program strengths and deficiencies. 
Efficiency: All subsidy programs should be evaluated on how well they improve the welfare of
the beneficiaries.  For instance, there are four possible outcomes from a housing subsidy
program: they could increase or decrease the quantity of housing consumed by the
beneficiary; and they could increase or decrease the cost of housing services as experienced
by the beneficiary.[14] 
When economists talk about efficiency of subsidies, they have in mind two kinds of
efficiencies.  Consumption efficiency measures whether the valuation the beneficiary places
on the subsidy is equal to the cost of providing the subsidy.  Production efficiency measures
how the market value of the subsidy compares to the cost of providing the efficiency.  Taking
both these efficiencies in aggregate gives us the program efficiency.  Needless to say, to
even get a summary measure of these inefficiencies one needs data on the real cost of the
subsidy as well as the market price of the subsidy and the valuation that the beneficiary
places on the subsidy.  It is therefore, very hard to pin down the program efficiency in
developing country subsidy programs.  However, it is relatively straightforward to make some
preliminary judgments about the efficiency of these programs.
The paper does this by looking at the per unit subsidy: the percentage of the total cost of
housing that is provided by the subsidy.  This approach is a useful first approximation
because what is known as the deadweight loss of a subsidy is directly linked to the size of the
per unit subsidy.  The deadweight loss represents the loss in resources involved with the
distribution of a subsidy or imposition of a tax.  In general, it is equal to half the subsidy rate
times the responsiveness of the market participants.  The paper assumes that the price
elasticity of demand for housing services is equal to one, as found in the literature.    
Furthermore, it can be assumed that the greater the participation of the beneficiaries in the
design and the implementation of the subsidy program, the higher the probability that the
beneficiary values the subsidy closer to its real cost and lower the efficiency loss.   Hence, for
this measure the paper has an imperfect but directly quantifiable measure by which these
programs can be compared. 
Transparency:  Transparency in this case refers to the visibility of all costs of the subsidy in
the budget.  Transparency is only possible if the actual costs of subsidies are known. 
Therefore, in order to measure transparency, the real cost of a subsidy must be first
determined and how these costs are listed in the government’s budget must be examined. 
The higher the share of the subsidy budgeted, the more transparent it is.  Improving the
transparency of these programs would have significant benefits, among them better
understanding of the full economic cost  of providing housing assistance, better targeting in
practice and eventually less corruption.  Again, there is a direct quantitative measure of this
standard: when all subsidy costs are on public budgets, transparency equals 100 percent and
when none are, it equals zero.  Of course, the paper often has to estimate how large the
unbudgeted costs are so that the measure remains imperfect.  Nevertheless, the use of such
a measure allows us to ordinally rate programs and allows for the possibility of discussing the
precise sources of these measures.
Administrative Simplicity:  All other things being equal, subsidy design should minimize the
government’s administrative cost.  For instance, targeting subsidies carefully can reduce the
need for a complicated administrative rationing system.  Similarly, incentives that align
participants’ and private sector partners’ behavior with policy objectives can reduce the need
for monitoring and enforcement costs.  For instance, when subsidies are not as deep, there
are fewer payoffs for those wishing to make improper use of the program.  When programs
reach a larger share of the intended beneficiaries, there is less competition for the subsidies;
and since competition often excludes those most in need, this would be a positive outcome. 
When beneficiaries are involved in the project design and execution, they can often take a
role in supervision and management of resources, as well as proper maintenance once the
project is completed.  Here this measure is based on project design.  If the programs
minimizes the opportunity for interpretation and hence, manipulation by various interested
parties then it gets a lower rating than if it is clear and succinct and provides little incentive for
manipulation and encourages beneficiary participation.  Once again, the programs are scored
based on an interpretation of the strengths and weaknesses of the program but when exact
measures are impossible, such ordinal ratings are a good starting point in program
comparison and evaluation.
Sustainability:  Any definition of sustainability runs the risk of being taking out of context.  Thus
in defining sustainability, it must be clear what the objective of the definition is, and conclude
what it means in a particular context.  In this particular context, sustainability refers to whether
the government can scale up the housing subsidy program (and continued) to effectively
address all the intended beneficiaries.  In addition, more often than not, sustainability will
mean financial sustainability.  There might be programs that make a real difference in the
housing consumption patterns of the beneficiaries.  However, if these programs provide per
unit subsidies far in excess of the financial wherewithal of the state, then such programs
would rank low on this sustainability index. 
Appendix 3: Rating of Housing and Sanitation Programs 
Targeting
Targeting refers to the extent to which the programs reach the intended beneficiary as well as
to scope and scale of such benefits.  Here the paper examines the success of each program
at three levels: national, state and local targeting.
National Targeting: For national targeting, the paper rated national programs (VAMBAY,
NSDP and IAY) on their ability to target the right state according to need.  GOI program
funding is based on a perceived measure of need in each state.  For both the urban
programs, GOI allocated funds based on the number of slum dwellers in a particular state. 
The IAY allocates funds based on the proportion of the rural poor in each state.  The design
of the programs, therefore, appears to be well targeted in terms of avoiding leakage of
benefits.  However, until the latest census, the measurement of the number of slum dwellers
was often left to the state governments who therefore had an incentive to manipulate their
numbers.  Moreover, given the total number of slum dwellers/rural poor relative to the level of
resources, this targeting spreads funds very thinly, and only a relatively small portion of those
in need can be served effectively.  In effect, the targeting goal of maximum coverage conflicts
with the targeting goal of meaningful assistance to beneficiaries.
Perhaps the best illustration of this conflict is a comparison between the use of VAMBAY
resources by Kerala, with 45,000 urban slum dwellers, and Bihar, with more than 500,000
urban slum dwellers.  In 2002, Bihar received no assistance under this program whereas
Kerala gets $113 (Rs. 5,672) per slum dweller—the highest transfer per capita in the country. 
If the State, ULBs or slum dwellers in Kerala were required to contribute to demonstrate their
commitment and to leverage GOI resources, this distribution might be appropriate.   That,
however, is not the case.  What has occurred is that the administration in Bihar is so weak or
uninterested that it does not take advantage of available assistance.
A straightforward means of addressing this conflict is to take into account the willingness of
the state and local governments as well as beneficiaries to contribute by channeling
resources to those who are prepared to shoulder a larger share of the costs.  VAMBAY does
this to an extent by only disbursing funds after GOI receives the states’ 50% matching funds
and this is why the paper rates VAMBAY higher than NSDP in national targeting.  Such an
approach allows the targeting system to discriminate more effectively between those who
place a high value on assistance and those who do not.  It would allow the subsidies to
leverage the resources of those who want to address their housing concerns and were willing
to share the costs.  It would also help counter the pressures to target assistance to “vote
banks” rather than to those who are most willing to sacrifice in order to receive assistance,
see the Ramanathan Foundation Report (2002).  In short, both programs could benefit from
involving a wider range of contributors from the beginning. 
Realistically speaking, public resources by themselves, and particularly at the national level,
cannot hope to address the problem directly.  Consequently, their best use is as leverage for
other resources.  Thus, while GOI targets both national programs in such a way that leakage
to the non-poor is minimized, the small amounts of resources involved and the lack of
incentives given to other contributors, their score on scale and coverage is relatively weak. 
The VAMBAY program and the IAY rates marginally better than the NSDP program because
of the aforementioned ‘matching funds’ requirement.  (See Table 2 for the rating of the
programs.)
State Targeting: For state targeting, the paper rates all the programs on their ability to target
the most needy local bodies.  It needs to mentioned here that the authors would need more
specific case studies on how exactly fund-disbursements work in practice before a more
accurate assessment can be made.  However, based on the program design some tentative
conclusions can be made.  The five housing programs each have different criteria for
allocating funds at the State level.  The Urban Ashraya program attempts to target the most
needy households by using a fixed poverty line from a 1995 survey, while VAMBAY targets
only “notified slums” in Class I cities.  While both approaches again score well in attempting to
avoid leakage, they do not appear to be specific enough to allocate funds in an effective
manner.  The NSDP appears to have a more targeted method.  It selects only one slum from
each city as a “model slum.”  The slum is selected because it has the highest proportion of
homeless residents.  This approach may ignore a majority of slum dwellers, but it provides
sufficient resources for those in the selected area.  IAY disburses funds to the districts based
on the proportion of the rural poor in the district to the rural poor in the state.  The various
Kerala programs also disburse funds to the districts based on the number of urban poor in
each of the districts.
The Kerala programs rate well on this criterion because the implementing agency allocates
funds to households assessed as being below the poverty line.  Since the assessment takes
place through the aforementioned Kudumbhashree program, there is little opportunity for
political interference.  However, the Kudumbhashree does not cover all needy households in
urban areas.  There are unofficial slums in some urban areas that have no organized self-help
groups or community development societies.  Therefore, these programs might ignore a
certain section of intended beneficiaries.
Based on the above discussion, the paper ranks the programs on the ordinal scale described
earlier.  The twin Kerala programs are designed better than the other programs because it
takes advantage of local self-help groups in identifying needing neighborhoods and local
government agencies.  These self-help groups have a proven record on targeting the most
needy in other poverty eradication programs of the Kerala government.
Local Targeting: For local targeting, the paper examined the mechanism by which the
beneficiaries are selected (is it free from political interference), the scope of the program
(what percentage of the needy are covered), and the scale (what percentage of the housing
needs are accounted for by the program).   In terms of implementation, it appears that NSDP,
VAMBAY and Urban Ashraya programs are rife with political interference, which results in
programs that neither reach the most needy residents nor provide what beneficiaries want
most.  In guidelines for both NSDP and VAMBAY, there are specific procedures for targeting
the most needy, but in practice, they do not achieve the desired targeting.  For instance, the
NSDP’s official criterion for ‘a model slum’ in a Class-I city is the proportion of households
without a home, yet in practice the terms are inadequate to clearly determine the
beneficiaries.  When the Karnataka Slum Clearance Board (KSCB) divisional offices attempt
to select ‘a model slum’, they must use other criteria because 100 percent of the residents
have no home in several slums.  Thus, in the end, guidelines based on need alone are
inadequate to the task of allocating such scarce resources, and ultimately the pressure to
revert to political allocation criteria is great.  
Similarly, under VAMBAY, notified slums are selected based on a survey conducted by the
Assistant Executive Engineer in each of the KSCB divisions within the cities.  The objective of
the survey is to assess the willingness of a beneficiary to agree to (1) construct the house if
selected, and (2) repay the loan.  Although, the government of Karnataka conducts a survey,
its credibility is problematic because there appears to be political pressure in the selection of
beneficiaries.[15] 
The selection of beneficiaries for the IAY is undertaken by the village panchayat based on the
list of households below the poverty line.  Given that the number of households below the
poverty line exceeds the number of households which can benefit from the program, a clear
criterion for selection of households has been laid out. [16]  As is clear from the criteria listed,
there is still room for political influence and corruption in the selection of particular
beneficiaries.  However, to some extent this influence is minimized by the stringent
transparency requirements of the IAY.   At the village level, information including the list of
households below the poverty line, the list of beneficiaries for the current and past year,
allocations made to the village under IAY, the guidelines for selection are made public. 
Similar transparency requirements are made at the block and the district level, thus
minimizing the scope for corruption. 
The state-level Urban Ashraya scheme also appears to have a coherent procedure for
targeting, but not a great deal of follow-through in practice.  There are, for instance, Urban
Shelter Committees for all cities/towns in Karnataka headed by the locally elected Member of
(the State-level) Legislative Assembly (MLA).  In addition, the ULBs prepared lists of eligible
households (i.e. those living below the poverty line), which they then update from time to
time.  In principle, these Committees select beneficiaries from the ULB’s lists.  However, the
membership of elected representatives on these Committees leaves considerable scope for
political considerations in the selection process. 
The two programs in Kerala appear much more successful at the local level because they
take advantage of an existing and well-established woman-run micro-enterprise/thrift network
to target individual households.  This mechanism effectively rules out political interference
from this important level of targeting.  The Bhavanashree program is rated higher because
(potentially, since this program is just in project design phase) it allows the beneficiary to
borrow an amount between Rs 30000/- and Rs 40000/- according the needs of the
household.  This provides a degree of flexibility and a potentially greater scale in covering the
housing expenditures.  However, the land requirement for qualifying for both the Kerala
programs also effectively make these programs discriminate against the landless poor. 
However, though the Kerala Government does not tie these programs explicitly to land grants,
there are other Kerala government programs do grant land to NGOs, which then distribute
them to the poor.  Furthermore, there are also cooperative banks that help the poor save
specifically for acquiring land.  As shown in Table 2, the paper ranks the Bhavanashree
program very highly due to its flexibility and its ability to leverage beneficiary participation
(through the land requirement).  The Mythri program is not far behind because it used the
same targeting mechanism that the Bhavanashree program intends to use. 
Among the sanitation programs, the Pune Sanitation program got three out of a maximum 4 in
the targeting criteria.  Unlike the housing programs, this was primarily a local initiative.  In
many senses, the nature of the sanitation program ensures that targeting is done accurately. 
Unlike a housing subsidy program wherein there are incentives for manipulation to take
advantage of cash grants, a community toilet is hardly an attractive good for the urban non-
poor.  Furthermore, the closer the local government works with CBOs the better the targeting
is going to be.  The Pune municipality, in working with the CBOs and NGOs ensured that the
spatial distribution of the community toilets was done equitably.  Dense urban slums tended to
have larger units with higher seat capacities.  However, 10,000 toilets for five hundred
thousand slum dwellers meant that on average 60 slum dwellers had to share a single toilet
seat.  This is still a high average and there is room for further improvement in sanitation
facilities for Pune’s urban poor.
The Nirmal Bharat Abhiyan borrows its design from the Pune program and it is also
implemented at the local level though funds are disbursed from the center at the national level
through the VAMBAY program.  States that take advantage of the federal funds for the
sanitation project may work with NGOs and CBOs in the construction and design phase.  This
means that from the perspective of targeting, it is likely that the most in need will benefit from
such programs.  It is however not clear what the scale of these programs are and what part of
the target population will be served by the program.  This might, in fact, vary from state to
state.  However, tentatively, the paper gives the national program the same rating as the
Pune program.
Table 4 provides the ratings for the different programs under the different levels of targeting. 
The last column provides the average targeting rating. 
 Table 4:  Targeting Ratings for Housing Subsidy Programs
National State Average
  Targeting Targeting Local Targeting Targeting
VAMBAY 2 2 1 1.67
NSDP 1 2 1 1.33
IAY 2 2 2 2
Urban
Ashraya   2 1 1.5
Mythri   3 3 3
Bhavanashr
ee   3 4 3.5
Pune
Sanitation
Project     3 3
Nirmal
Bharat
Abhiyan     3 3
 
Transparency
For rating the transparency of the programs the paper looked at how much of the costs of the
program the Government accounts for in the budget.  If most of the subsidies are implicit and
absent in the budgeting then the program gets a poor rating.  If however, most of the
subsidies are explicit, then the program is rated higher on this ordinal rating system.  For
example, if the government provides land for a low-cost housing development, as it does in
three of the programs in Karnataka (VAMBAY, NSDP, Urban Ashraya), the cost of the
subsidy should include the current market value of the land.  In fact, this is not the case. 
(Annex 5 for the results of a partial survey in Karnataka that the Bank undertook to get a
sense of these unaccounted for cost components.)  In the Kerala programs, the beneficiary
had to provide proof that they owned at least 1.6 cents (approximately 64 square meters) of
land to qualify for the loans, thus ensuring that the land component was not a subsidy.
The IAY program was relatively more transparent than the others because of the
aforementioned transparency requirements at the village, the block and the district level.  The
mandatory publication of fund allocation information ensures appropriate usage of funds while
improving targeting.  Secondly, since IAY is completely grant oriented, the direct expenses
are budgeted for clearly.
Similarly, all these programs have implicit guarantees for HUDCO loans, the opportunity costs
and risks of the subsidy should be made explicit e.g., cost of non-payment of government
loans and the impact this has on state government finances in both the short and the long
term.  Furthermore, in the case of the Mythri program, the loans were heavily subsidized. 
HUDCO had lent the money to the State government at interest rates of 13.5 percent while
the State lent it to the beneficiaries at interest rates of 5.5 percent. 
Finally, the administrative costs of the programs are rarely budgeted for.  Even though, the
Bhavanashree program is a program that is designed to be ‘subsidy’ free, to the extent that
there are unaccounted-for administrative costs for the program, it can never really be subsidy
free.  The rating of the housing programs reflects the paper’s valuation that all the programs
fare poorly on these criteria.  (See Table 3).
The Pune program is relatively transparent because the costs are budgeted for by the
municipality.  The capital cost of the community toilets in Pune was Rs 40 crores (Rs 400
million) and this was fully accounted for.  The maintenance costs are the responsibility of the
CBOs and slum communities.  The Pune program gets a high score of 3.5.  However, in the
case of the Nirmal Bharat Abhiyan, transparency is reduced by the fact that 50% of the
funding comes via subsidized loans.  Furthermore, the funds are disbursed by the central
government to the state governments that then disburse it to local governments and CBOs.  
In each of these transfers, unless stringent accounting standards are kept, the flow of funds
can be opaque.  Without a specific case study, it is therefore hard to rate the Nirmal Bharat
Abhiyan on this criterion.  The paper gives this program a score of 2.
Efficiency
Efficiency is a measure of net benefits relative to effective costs.  The closer costs are to
benefits, the more efficient a program is.  There are several steps to analyzing efficiency.  
 First, the real cost of the subsidy must be determined by including the stated cost,
any indirect costs, and the administrative costs of implementing and monitoring the
intervention.  The indirect costs can be very substantial, including losses on any loans
insured by the State and losses due to distortions introduced in the housing or land
markets.
 Second, beneficiary valuation of benefits achieved need to be assessed in relation to
the determined real cost.  For example, publicly provided housing often results in
providing more housing than the beneficiary wants to consume.  In these cases, the
state could have met their housing needs with fewer resources.
 Third, the programs should be assessed to determine the extent to which they
subsidize investments or expenditures the recipient would have made without
assistance.
 At this point, the paper cannot provide a conclusive analysis of program efficiency. 
However, none of the housing programs is purely in-kind transfers.  Most of them are made
up of cash grants and loans.  To this extent, these programs, at least in design, are more
efficient than public housing programs that were the primary means of providing low-income
housing in many developing countries in previous decades.  Nevertheless, this preliminary
analysis indicates that all programs are highly inefficient.  They confer subsidies far in excess
of intended benefits for a number of reasons.  These mismatch may be, in turn, a cause of
the low rate of loan repayment. [17]  It is also possible to calculate the dead weight loss from
the programs based on the per unit subsidy rate.  Furthermore, the extent of beneficiary
involvement is a good measure of how much the beneficiary might value the subsidy.  The
greater the beneficiary involvement, the closer the beneficiary valuation is to the subsidy. 
Subsidy Rates:   In Karnataka, for instance, the large overall per unit subsidy rate of the IAY
(100%) NSDP (90%) and VAMBAY (80%) – see Annex 4 for calculations - is roughly three
times the subsidy rate used in market economies. [18]  For developing countries, Mayo and
Gross show the housing subsidy rates in seven countries averaged about 50 percent,
considerably below the rates in both NSDP and VAMBAY. [19]  These rates are clearly
excessive given the scarcity of GOI resources for these programs and the lack of attention
given to leveraging beneficiary resources.  As a result, the “deadweight losses” are
multiplicatively higher for these programs than for housing subsidy programs in market
economies where subsidy rates are 25 to 35 percent. 
For example, when the subsidy rate increases from 25 percent of the cost of a good to the 80
percent or more that characterizes the Government of India programs, the loss in resources
due to the size of the subsidy – that is, the complete wastage of resources per rupee of
transfer -- increases from about 12 paisa per rupee of transfer to about 40 paisa per rupee.
[20]
  Therefore, instead of wasting about one-eighth of the transfer on the incentives created by
the transfer, the loss increases to almost half of the amount of the transfer.  Consequently, in
India, even if program implementation were completely effective, the transfers provided would
be considerably less effective than the smaller subsidy rate either in market economies or in
developing economies.  These very high subsidy rates create little accountability for the
program beneficiaries and reduce the number the program assists.  Certainly, investment in
housing by the community is minimal so that very few sustainable changes are implemented.
To the extent that Urban Ashraya and the Mythri Programs have significant loan components
to their subsidies, they are potentially more efficient.  These two programs, at least at first
sight, appear to have lower per unit subsidies than the national programs.  However, the loan
guarantees to HUDCO and low repayment rates increase the per-unit subsidy for the Urban
Ashraya and the Mythri Programs.  The land grant element of the Urban Ashraya programs
makes the per-unit subsidy rates even higher.  The Mythri Program has a 70% loan
component but these loans are highly subsidized.  This also increases the per unit subsidy.
Therefore, the paper rates both these programs poorly, though they appear marginally better
than the nationally run programs.
The Bhavanashree program is 100% loan at unsubsidized rates.  Therefore, this program is
most efficient from this perspective.  This programs also has a built in beneficiary contribution
in the form of the land pre-requisite that makes the per unit subsidy lower than the other
programs.  Finally, administrative costs of this program are lower than other programs
because the Government of Kerala implements this program through the existing network of
Kudumbhashree self-help groups.  This program therefore appears the most efficient of the
five programs.
Both the sanitation programs rate poorly under the efficiency scale.  The capital costs of the
Pune program are completely subsidized by the Pune Municipality and to this extent, the
program is inefficient.  However, by putting the responsibility of maintenance on CBOs and by
levying a monthly fee, the project builds an ownership stake in the community toilets.  This
design element ensures some degree of consumption efficiency. 
The Nirmal Bharat Abhiyan program, on the other hand, proposes to fund only 50% of the
capital costs as subsidy.  The rest of the funding comes from HUDCO loans.  But very often,
these HUDCO loans are heavily subsidized by the central government.  Furthermore, though
the states borrow from HUDCO on subsidized interest rates, very often the funds are provided
to beneficiaries as 100% subsidy with no expectation of repayment.   This program, therefore,
performs only marginally better than the Pune program.
Beneficiary Involvement: The lack of beneficiary involvement is a significant source of
inefficiency in most of these programs.  For instance, although the NSDP guidelines say that
Community-based organizations, NGOs and other civil society organizations should be
involved in implementation, there is no evidence of their involvement.  In fact, only the Urban
Ashraya Program appears to involve the beneficiaries in any way, because it provides an
option for beneficiaries to construct the house themselves.  This option increases the
probable welfare gains because the beneficiaries themselves are more interested in getting
the most for their resources.
Under the two national programs, since contractors do all construction under the
management of the government-implementing agency, there is little scope for beneficiaries to
be involved in design and supervision of works.  Although the VAMBAY Program guidelines
say that there is no predetermined design, in reality the houses are constructed not to the
preferences and needs of individual beneficiaries but are standardized by contracted
construction companies.  This supply-oriented approach tends to result in houses that are
more costly than need be, and the quality of work, often poorly supervised, is low.  This adds
up to poor value for money when money is very scarce.  The IAY on the other hand explicitly
rejects the option of contractors.  The construction is undertaken by the beneficiaries
themselves who are encouraged to choose the production technology, purchase the materials
for construction and design the house.  This intensive beneficiary participation does ensure
that the house constructed is close to meeting the needs of the beneficiary.   Hence, the IAY
gets a rating of 3.
The programs in Kerala do involve considerable beneficiary involvement since the targeting
and the government disbursal of funds take place through the Kudumbhashree program.  The
beneficiary undertakes the construction according to his or her needs.  As a result, the
Bhavanashree program gets a rating of 3.  The 2 state level programs get scores of 2 and the
two national programs get scores of 1.
The Pune sanitation program also involves considerable beneficiary participation. 
Furthermore, by requiring community maintenance, it increases the probability of
sustainability.  The paper rates the Pune program 2 on a scale of 4.  The Nirmal Bharat
Abhiyan shares many of these characteristics with the Pune program.  However, because it
has a loan element in its capital costs, it scores marginally higher.
In sum, when subsidy rates are so high and beneficiary inputs so low, it is very difficult for a
program to be efficient.  Despite recent improvements, the efficiency of the national level slum
programs appears to be less considerably lower than that of housing subsidy programs in
many other countries.  The state level programs appear more efficient.  In addition, the design
of Bhavanashree appears to make it the best among all the three programs. 
Administrative Simplicity
The programs reviewed here are not administratively simple.  This is underlined by the fact
that in recent years both the NSDP and VAMBAY programs are only able to disburse about
70 percent of their allocated funds. [21]  Each year the funds budgeted for the programs are not
fully drawn down.  Alhough comparable figures for the IAY were not available, it is not clear
that this program is simpler in implementation than the other national programs.   In addition,
there are significant delays in the release of funds to implementing authorities.  The state
level programs of Urban Ashraya and Mythri appear marginally simpler, if only because they
are at the state level.  The Bhavanashree program appears administratively the least complex
in comparison because it takes advantage of the existing network of self-help groups to target
and select beneficiaries.  The success of the Kudumbhashree program in other areas like
thrift and micro enterprise programs allow potential beneficiaries to use existing channels of
information distribution to take advantage of these programs. 
The Nirmal Bharat Abhiyan rates poorly on administrative simplicity.  As its parent program,
VAMBAY, some states often do not take advantage of central government funds available for
housing construction or sanitation projects.  This under usage of funds earmarked for a
crucial developmental objective is a symptom of administrative complexity. The paper gives
this program a score of 2.
The Pune Sanitation Project was, in comparison, simpler from an administrative perspective. 
Since it was a local initiative, it was easier to disperse program information and to invite
interested community organizations to take advantage of the program.  Furthermore, by
decentralizing maintenance responsibility of individual toilet units, the municipality saves on
the complex maintenance costs that have condemned similar projects in the past.  This
program gets a score of 3 under administrative simplicity.
Sustainability
All the six housing programs rate very poorly on this front.  For the national level programs,
the fact that these programs have very high per unit subsidies (through  both cash grants and
subsidized loans) make them unsustainable if they are to be scaled up to meet the enormous
problem of housing all the urban poor.  The ‘free’ land grant elements to the national
programs as well as to the Urban Ashraya program make them more unsustainable.  The fact
that the Kerala programs had a land pre-requisite made them slightly better designed from
this perspective.  However, the Mythri program had large loan subsidies as part of the
program.  By effectively subsidizing the loan component and by further having Rs 9000 cash
subsidy, the program most dramatically proved itself unsustainable.  The Kerala Government
suspended the program in 2002 in the face of serious fiscal troubles for the State budget. 
The Bhavanashree program created in response to the failure of the Mythri program, at first
examination, looks the most sustainable among the five programs.  The Government of
Kerala designed it as a 'subsidy free' program.  However, the government makes an implicit
loan guarantee to the participating financial institutions.  However, to the extent that these
loans are disbursed through self-help groups, the repayment rates are expected to be higher. 
Nevertheless, there is a more subtle danger to these programs.  Current economic conditions
in India allow the government to borrow at 7% interest rates from financial institutions. 
However, there is no guarantee that such rates will last.  If the rates go higher, the
Bhavanashree program will have to either suspend the program or have to effectively
subsidize the loans.
Both the sanitation programs also rate poorly on sustainability.  The Pune project subsidized
100% of the capital costs of the community sanitation units.  Most cities will not be able to
afford such a large outlay of funds.  Therefore, from the perspective of scaling up, the
financing of the capital costs in the Pune project is a poor model to emulate.  The National
program, similarly, has high unit subsidy costs.  Such large-scale subsidies might be
untenable to provide for India’s large slum population especially when there are equally
compelling development needs across the country.  Both programs get a score of 2, which
might have been lower but for the user-fee instituted under both the programs.    This user fee
is a welcome change from previous programs.  This means that once the capital costs are
accounted for, these units have a better probability of sustenance due to community
participation in maintenance.  By building an ownership stake in the unit through the user-fee,
the projects ensure that the users will contribute to upkeep and maintenance.  The problem of
the commons can be, thus, minimized.
Appendix 4: Illustration of the Impact of Loan Repayment
Performance on the Effective Subsidy Element  in Slum [22]

Programs: A Comparison of the NSDP and VAMBAY Programs

in Karnataka
The following calculation illustrates some important points:
(1) Given the high rate of default on the loan component of these programs, the loan element
may mask a substantial additional subsidy, and even distort the comparison of two different
programs.  In the case of the NSDP program, the “default” subsidy is about double the grant
component of the program, thus making it more heavily subsidized than the nominally less
concessional NSDP program.  A program that is 100 percent loan, but with only an 80%
default rate appears to have no direct subsidy, but the actual subsidy is higher than the
nominal subsidy rate of both of these programs;
(2) Improving repayment rates frees up considerable additional resources;
(3) Both programs are very deeply subsidized, once the effect of loan
defaults are taken into account.
% of Total Loan Element Loan Default Effective Grant Total Effective
Project Cost (A) Rate (B) Due to Default Grant 1-(A) +(C)
(C)=(A) X (B)
VAMBAY 50% 60% 30% 80%
NSDP 70% 80-86% 60% 90%

 
Appendix 5: Partial Survey of Implicit Subsidies through Land
Grants in Karnataka
To understand the likely significance of this phenomenon, the paper sought to examine the
value of land provided in relation to the housing units constructed.  There is little data,
throughout India, on the cost of land, the extent of vacant lands or the amount of land
occupied by slum-dwellers.  In Karnataka, a partial survey was undertaken to get a sense of
these unaccounted-for cost components.  Computations of the real value of the subsidies,
based on the results of the survey, are presented in Table 5.  They show that, in relation to
housing costs, the value of land accounts for a very high proportion of the subsidy, often
around 75 percent of total costs.  In well-functioning markets land costs rarely exceed 35
percent of the property value.
While this initial survey does not provide conclusive evidence, it nonetheless suggests first,
that implicit land subsidies may be worth multiples of the budgeted housing subsidy (in these
cases the average is over three and one half times).  Thus, if Table 5 were representative of
all programs, and, if even only half of the land provided as an unbudgeted subsidy could
instead be converted into cash, the current direct subsidy program could be increased to
more than two and one half times its current size.  
Table 5: Hidden Subsidy on Land in Bangalore Slum Assisted by VAMBAY, NSDP and
Urban Shelter Programs
 

Second, when the underlying value of the land in the programs is high, beneficiaries “cash
out” because they prefer to consume less land and housing, and more of other things.  This is
not to argue that the slum dwellers should not be entitled to land and secure tenure, but rather
that building low cost housing on high-value sites is likely to be an inefficient means of
providing a housing subsidy to the poor.  Measures such as beneficiary relocation, as was
used in the MUTE in Mumbai, are worthy of further consideration [23] as alternatives for
providing an equivalent housing subsidy.  
 
 
Robert M. Buckley is an Urban Housing Adviser at the World Bank, and a member of the
Advisory Board of Global Urban Development. He has worked on numerous urban and
housing finance projects for the World Bank over the past 20 years, and is the author or co-
author of many books, articles, and reports, including Housing Finance in Developing
Countries,  Thirty Years of Shelter Lending, and Shelter Strategies for the Urban
Poor.  Mahavir Singh works for the Planning Commission of the Government of India. Jerry
Kalarickal is a consultant for the World Bank and co-author with Robert Buckley of Thirty
Years Shelter Lending  and Shelter Strategies for the Urban Poor.
 
[1]
 There is some degree of flexibility in how these programs are implemented at the State
level.  When discussing specifics of these programs, the paper will be referring to how these
programs are implemented in Karnataka.
[2]
 Given the difficulties in using allocated funds and the widely variable spending patterns
involved across states this figure must be viewed as a conservative approximation.
[3] 
Using the urban poverty line of about $120 a year for 1999/2000 (converted at Rs. 45 per
dollar; World Bank, Poverty in India: The Challenge of Uttar Pradesh, May 08, 2002.  Annex
Tables A1.1) this level of assistance amounts to about 2.5 percent of the income of those at
the poverty line.  This level of assistance cannot improve much on what the poor are
spending already.
[4]
 Tenth Five-Year Plan, p. 625.  The Ninth Plan  was the first time that attention was given to
urban poverty as a distinct policy issue.  Previously, from a policy perspective poverty was
synonymous with rural.  The Tenth Plan continued and deepened the discussion of urban
poverty and what needs to be done to improve these programs, giving particular emphasis to
increased participation.  Of course, there are other mitigating factors in determining the size of
the subsidy needed, including how deep in poverty a household is, the cost of housing, and
whether or not the subsidies are targeted on the poor.  The observation in the text attempts to
suggest that given the observed locational distribution of the poor there is an empirical
question of whether housing subsidies are targeted on the poor or some other characteristic.
[5]
 Marja C Hoek-Smith and Douglas Diamond (March 2003) and Stephen K. Mayo (1986)
provide a more complete discussion of these and other measures to evaluate housing
subsidies.  The former paper is The Design and Implementation of Subsidies for Housing
Finance.  Prepared for the World Bank Seminar on Housing Finance, March 10 – 13, 2003;
the latter appeared in the Journal of Urban Economics.   PPS. 229-249.
[6]
 http://www.worldbank.org/oed/
[7]
 http://www.ebrd.com/
[8]
 Such community groups existed under the Urban Basic Services for Poor (UBSP) scheme,
and continued to operate under the Golden Jubilee Self-Employment Scheme (called SJSRY)
that replaced UBSP.
[9]
 In Karnataka, for instance, a particular notified slum is selected based on a survey which
tries to find out whether the beneficiary will build a house if selected and whether they will
repay the loan.  The survey is conducted by the assistant executive engineer in the Slum
Clearance Board.  The program does not specify the design of the house. 
[10]
 All three programs/schemes are in operation in Karnataka.  Two of them are assisted by
GOI (i.e. VAMBAY and NSDP) and implemented by the Karnataka Slum Clearance Board
(KSCB).  Urban Shelter is a GOK scheme implemented by the Rajiv Gandhi Rural Housing
Corporation Limited (RJRHCL).
[11]
 The Kudumbhashree is a women-based participatory poverty eradication program initiated
by the Kerala Government.  It comprises of a set of community-based organizations of
women from poor households that has a semi-official organizational structure and runs in
conjunction with local government bodies.  At the lowest level are neighborhood groups
(NHGs) that comprise of 15 – 40 families.  These are primarily self-help groups that are often
linked to thrift organizations and micro enterprises.  Ten to fifteen NHGs are federated at the
ward level to form the Area Development Societies (ADS).  Finally, representatives from the
ADS form the Community Development Society (CDS).  The CDS is monitored and
supervised by the representatives from the Local Government.  The Kudumbhashree program
is multifaceted in that it uses this organizational structure to implement poverty eradication
programs that range from human development, community health, micro finance, and now,
micro housing. 
[12]
 It is estimated that the average cost of community toilet seat has been estimated to be Rs
40,000/- per seat.  Therefore, a 10-seat or a 20-seat toilet block meant for men, women and
children with separate compartments for each group and special design features will cost
around Rs four hundred thousand or Rs eight hundred thousand respectively. 
[13]
The information on Nirmal Bharat Abhiyan was assembled from
http://www.kudumbashree.org/Guideliness/VAMBAY.htm and a Government of India note on
the VAMBAY program.
[14]
 Mayo 1999, p. 21.
[15]
 Published News accounts indicate recurrent instances of political interference and
corruption in the selection of beneficiaries.  The KSCB officials also admitted political
interference in the selection of up to 10% of total beneficiaries.
[16]
 The prioritization of beneficiaries are as follows: 1) Freed bonded laborers, 2) SC/ST
households (within this households who are victims of caste-based violence and/or
households headed by widows or unmarried women get priority) 3) Non SC/ST households
below the poverty line 4) Families and widows of personnel in the armed forces who are killed
in action 5) Households displaced by other developmental projects.
[17] 
When civil society organizations assisted slum dwellers with housing finance and involved
them in pre-project planning, repayment of loans has been almost 100 percent.  In Kerala
where the government targeted beneficiaries through local self-help groups, the repayment
rates for the Mythri program were around 70 percent.  Evidence from VAMBAY in Bangalore
shows that ultimately, beneficiary participation not only improves repayment of loans, it also
enhances beneficiary satisfaction due to participatory design.
[18]
 These subsidy rates include an implicit grant element that arises due to poor loan
repayment performance.  Annex 2 provides a simple illustration of how low repayment rates
can increase the effective subsidy element in these housing programs. 
[19]
 See Aaron and von Furstenberg (1971) for a discussion.  Henry J. Aaron and George M.
von Furstenberg, The Inefficiency of Transfers in Kind: The Case of Housing Assistance,
Reprint 210, The Brookings Institution, Washington, DC, 1971.  On the subsidies in
developed economies, see Mayo, (1986) ob cit. that provides calculations for Germany and
the US.  On the per unit subsidy estimates for seven developing countries see Mayo and
Gross, (1987) World Bank Economic Review.   “The Economics of Low Cost Housing in
Developing Countries”, pps.  301-337.
[20]
 A deadweight loss represents the loss in resources involved with the distribution of a
subsidy or imposition of a tax.  In general, it is equal to half the subsidy rate times the
responsiveness of the market participants.  The measurement in the text assumes that the
price elasticity of demand for housing services is equal to one, as found in the literature.  An
approximation of the loss is equal to the subsidy rate times half the elasticity.  See Mayo
(1986) for a comprehensive review of these calculations for the U.S. and Germany.
[21]
 This is the same figure reported by the Ramanathan Foundation Study (2002) for earlier
years.
[22]
 For illustrative purposes, the paper assumes that there is no subsidy in the interest rate
and free land (discussed elsewhere in the paper).  When these are offered, this adds an
additional subsidy element.
[23]
 The relocations under the Mumbai project are described in a number of SPARC
documents and the circumstances leading to the relocation are by no means a proposed
solution.  However, the highly successful method of participatory decision-making leading to
the relocations may provide a model for other programs.
 
Housing need and housing demand can often be confused yet they have
different meanings. Every household has a housing need irrespective of
income or type of housing. Housing need is described as “the quantity of
housing required to accommodation of the agreed minimum standard and
above for a population given its size and household composition without
taking into account the household `s ability to pay for the housing assigned to
it” (Robinson, 1979:56-57). This is not be confused with housing demand
which is defined as the relationship between “the price of housing and the
quantity and quality of housing for which people are able and willing to pay”
(Shucksmith, 2002:61). An individual or household has an unmet housing need
when they fail to exercise effective demand for decent housing (Oxley, 2009:6).
By satisfying housing need it enables the empowerment of people to be able
to live in satisfactory housing despite their possible inability to afford it (Tighe
and Mueller 2013:87). Most housing problems are essentially ”problems of a
lack of effective demand for decent housing” (Oxley, 2000:2), It is therefore
vital that the correct housing is built to meet the needs of the population; this
will increase the demand for housing and play a significant role in improving
the economy.
Housing need depends on various factors that will differ from country to
country particularly in developing countries (Struyk, 1998:21). Firstly the
population in the UK is growing; this creates greater numbers of households
requiring more housing. “Household numbers for England are expected to
grow by an average annual rate of 220,000 over the decade to 2021” (Wilcox
and Perry, 2013:8) shown in Appendix A, as a result more housing must be
built in order to accommodate this need. 122,590 new homes were started in
2013 which is a 23% increase from 2012 shown in appendix B (DCLG, 2014:4).
Household numbers are rising due to population growth putting pressure on
housing, infrastructure, schools and hospitals (Madden et al. 2010:3).
Households are also changing, people are living longer meaning housing
must cater for elderly people, building more retirement housing could
consequently free up family homes for young people thus solving some
housing need issues (Best and Porteus, 2012:3). Longer life expectancy means
Households are staying together for longer, it’s now suggested that 60% of
over 60`s own their home outright (DCLG, 2013:18). Households have different
housing needs, not everyone demands a one bedroom house for example the
most common household between 2011-12 was couples with no dependent
children accounting for 35% of the population (DCLG, 2013:18). Household
patterns are constantly changing over time, its vital therefore that the correct
housing is supplied to meet current and future needs, the number of one-
person households is expected to grow in the UK by 60% by 2025-30 and as a
result this must be addressed (OECD, 2011:29).
The standard of living is increasing in the UK; this means that people now
expect more from their homes. Some countries have now “shifted from
increasing the number of units to increasing the quality of units” (Noguchi and
Poterba, 1994:224), certain amenities such as double glazing windows used to
be a luxury now it is almost expected in most properties. “Quality and
affordability are key for housing in a western society” (Pacione, 2009:215), the
minimum standard of housing is rising meaning there is a requirement for
‘decent, safe and secure housing both with new builds and renovations` (GLA,
2013),”Poor housing impacts directly on residents’ health and educational
attainment” emphasising the need for quality housing (Wilson, 2010:76). This
not only an issue of new homes but also of existing housing both with social
housing and in the private rented sector, many existing social houses were
built decades ago and therefore their condition may be lacking in standard.
Vale (2013:114) explains another pressure on housing standards, the
increasing pressure to build environmentally friendly and efficient housing.
One of the main elements to assessing housing needs is to examine existing
stock as “existing stock usually accounts for the majority of dwelling stocks”
(Xue, 2013:65), of which in wales 83% is in the private sector (welsh
Government, 2008:26). Current stock must be reviewed when considering
calculating housing requirements for the present and future; this is explained
later in the essay. This finally leads onto the type housing needed; “the biggest
problem is that as a country we are simply not building enough affordable
homes” (Shelter, 2013) and therefore the public needs are not met, the type of
houses build should also reflect the population’s household structure.
Housing demand is affected by several separate issues to housing need,
understanding these issues is important for current and future demand to be
met. Firstly and most importantly the supply of housing is not addressing the
UK’s demand, “there are not enough affordable houses in the economy”
(HCTC, 2013:75). The Government sets targets for the number of houses which
need to be built yet these are rarely met and the demand keeps increasing,
“almost half of London’s largest developments are not meeting the affordable
housing targets being set by local authorities” (BBC, 2013). Despite its
importance, “housing is yet to have the same political profile as health and
education” (Wilson, 2010:76). One of the main issues with regards to housing
demand not being met is that private developers will not build housing they
won’t be able to sell and therefore another reason for more affordable
housing (Empty Homes, 2014). Housing supply must be calculated for
development, for example taking deaths and existing stock into consideration.
House prices also affect housing demand, there are not enough houses being
supplied at the right price to meet the demand therefore the price of housing
rises as people who have money will pay to have a nice house resulting in
“increasing numbers of people being priced out of the market” (Stephens,
2011:6). “Falling house prices due to the recession have not solved the
problem of affordability as they have been accompanied by tighter lending
criteria” (Wilson, 2010) especially with deposits, as a result the help to buy
scheme was introduced.
Housing demand depends on several other factors such as income and
wealth, these terms are very different to an economist; wealth represents the
accumulation of economic resources valuable to a household where income is
a flow measure of capital over a period of time (Pozdena, 1988:25). Wealth
and income can give access to credit loans and mortgages, “credit access and
mortgage availability go a long way to promoting higher quality and
affordable housing” (Nothaft and Erbas, 2002:12). Due to the credit crisis many
people’s income and wealth have been affected, this has had an effect on the
housing market and people’s ability to demand housing. Secondly the
availability of credit and obtaining mortgages is something that has resulted
in households being unable to afford housing. Lenders look at current income
and financial assets because they represent measurable indicators of a
borrower’s means of repaying the loan (Pozdena, 1988:26). The supply of
money in the economy will affect mortgage interest rates and availability.
“People are getting second jobs when interest rates rise to cope with higher
mortgage repayments” (Telegraph, 2013), as a result this has led to many
people not being able to afford the housing supplied.
There are many factors contributing to housing need and demand however
“different needs may warrant different solutions” (Bramley et al, 2010:17), not
everyone needs to be provided with social accommodation perhaps the issue
can be solved by enhancing or adapting an existing property. As a result there
are several different models that can be used to assess housing requirements.
The first approach to be discussed is the household and dwelling balance
sheet, this is a simple way to reveal housing shortages or surpluses (DoE,
1980:56), it simply compares the number of households to the number of
dwellings. This method may show a shortage or surplus however doesn’t take
into account many other factors such as home ownership, the location, nature
of dwellings or condition of housing. As a result the balance sheet can prove
inaccurate and “tend to double count or overestimate requirements” (Monk
and Whitehead, 2010:60). The second approach is the net-stock approach
which is characterised by Holmans (1995)(Whitehead and kleinman, 1992), it
consists of measuring different types of need and forecasting household
growth, estimating housing need for the present and future. The model
“exemplifies the important link between household growth, need and housing
investment” (Kleinman et al, 1998:78).
Third is the affordability approach, the aim of this is to identify the relationship
between house prices and household income to determine housing
requirements (WMRA, 2014), it is calculated by taking the percentage of
households unable to purchase plus household formation minus social sector
relets which equals the additional housing requirements. The model however
“does not purport to measure needs relating to house condition or
unsuitability within the social sector” (Bramley 2010:38). The final method is
the gross flows approach. Used to create current housing need, this is
calculated by taking “Gross household formation by category, and adding the
tenure propensity of each category to arrive at the demand for social housing
from new households” (Pinto, 1995:75). This was used by the Greater London
Authority for the London housing capacity study (Livingstone, 2005), it
provided an ambitious growth plan where a regional housing growth target
was set for 457,959 houses to be provided from 1997-2016 (Manzi,
2010:107).The concept is effective as it uses actual behaviour such as age and
cohort effects rather than affordability norm (Boelhouwer et al., 2005:103).
Quantity, quality and affordability are at the heart of housing need and
demand issues in the UK and must be addressed in order to meet current and
future housing requirements. This essay has defined the difference between
housing demand and housing need and provided insight into the factors in
which they depend on. Changes in the population and households are
guaranteed to change in the future and therefore must be taken into
consideration. Housing demand is mainly affected by the price of housing and
the factors surrounding it such as supply and income, addressing these factors
has led to not only solving current needs and demands but also the
importance of planning for the future. This has been shown through the
explanation of several different models displaying ways of estimating future
and present housing requirements such as the net-stock approach or
affordability approach. In conclusion for current housing needs and demands
to be met larger amounts of housing must be provided at a price that is
affordable and of a good quality, by setting and reaching targets this will
hopefully meet the needs and demands of the present and the future.

HOUSING SURVEYS

Description
The purpose of the housing survey is to describe housing conditions of households and
their housing expenditure.
Censuses do of course have the advantage of covering a larger sample but they do not
provide information on rents, charges, financing plans, income, and many other features
of French people's quality of housing (especially the most poorly housed) which are
covered in detail in the housing survey.
It has many uses: structural data for projects, detailed study of sub-populations and
modelling behaviours, short to medium term analyses or analyses in pseudo-panels
based on chronological comparisons between successive surveys.

History
The survey has been carried out since 1955.
Firstly carried out in metropolitan France, it was extended to the overseas departments in
2006 and then to Mayotte in 2013.

Documentation by year
 Mayotte Housing Survey 2013
 Housing survey in 2013
 Housing survey in 2006
Type of operation
Survey

Frequency of data collection

Punctual or aperiodic

Mayotte Housing Survey

2013
Statistical presentation

Statistical concepts and definitions

- the physical characteristics of the housing stock (size, sanitary facilities, heating,
annexes);
- the quality of the dwelling: condition of the housing and the building, noise, exposure,
location, environment, neighbourhood, security, quality of existing facilities (heating
installation), use of clean energy;
- the legal measures for occupation of the dwelling (form and origin of ownership, rental
legislation, State aid);
- difficulties in access to housing, household solvency, the workings of rental
relationships;
- expenditure associated with housing (rents, rental or joint ownership charges, prices
and borrowing for recently purchased dwellings, loan repayments for home ownership,
repairs and maintenance) and benefits the occupants receive;
- resources received by the different members of the household;
- housing assets held by the household;
- household residential mobility, the opinion that households have of their housing and
their possible desire to change;
- unusual accommodation situations for individuals in a household, individual occupancy
status ;
- the children of the reference person and/or his/her spouse living outside the parental
home.

Housing survey in 2013

Statistical presentation
Statistical concepts and definitions

- the physical characteristics of the housing stock (size, sanitary facilities, heating,
annexes);
- the quality of the dwelling: condition of the housing and the building, noise, exposure,
location, environment, neighbourhood, security, quality of existing facilities (heating
installation), use of clean energy;
- the legal measures for occupation of the dwelling (form and origin of ownership, rental
legislation, State aid);
- difficulties in access to housing, household solvency, the workings of rental
relationships;
- expenditure associated with housing (rents, rental or joint ownership charges, prices
and borrowing for recently purchased dwellings, loan repayments for home ownership,
repairs and maintenance) and benefits the occupants receive;
- resources received by the different members of the household;
- housing assets held by the household;
- household residential mobility, the opinion that households have of their housing and
their possible desire to change;
- unusual accommodation situations for individuals in a household, individual occupancy
status ;
- the children of the reference person and/or his/her spouse living outside the parental
home.

Housing survey in 2006

Statistical presentation

Statistical concepts and definitions

- the physical characteristics of the housing stock (size, sanitary facilities, heating,
annexes);
- the quality of the dwelling: condition of the housing and the building, noise, aspect,
location, environment, neighbourhood, security, quality of existing facilities (heating
installation), use of clean energy;
- the legal measures for occupation of the dwelling (form and origin of ownership, rental
legislation, State aid);
- difficulties in access to housing, household solvency, the workings of rental
relationships;
- expenditure associated with housing (rents, rental or joint ownership charges, prices
and borrowing for recently purchased dwellings, loan repayments for home ownership,
repairs and maintenance) and benefits the occupants receive;
- resources received by the different members of the household;
- housing assets held by the household;
- household residential mobility, the opinion that households have of their housing and
their possible desire to change;
- unusual accommodation situations for individuals in a household;
- the children of the reference person and/or his/her spouse living outside the parental
home.

Definition of 'Affordable Housing'

Definition: Affordable housing refers to housing units that are affordable by
that section of society whose income is below the median household income.

Description: Though different countries have different definitions for

affordable housing, but it is largely the same, i.e. affordable housing should
address the housing needs of the lower or middle income households.
Affordable housing becomes a key issue especially in developing nations
where a majority of the population isn't able to buy houses at the market price.

Disposable income of the people remains the primary factor in determining

the affordability. As a result, it becomes the increased responsibility of the
government to cater to the rising demand for affordable housing. The
Government of India has taken various measures to meet the increased
demand for affordable housing along with some developers and stressing on
public-private partnerships (PPP) for development of these units.

Microfinance and macrofinance represent two types of funding-related

activities. The difference lies in their scope. Microfinance is an
individual-focused, community-based approach to provide money
and/or financial services to poor individuals or small businesses that
lack access to mainstream or conventional resources.
By contrast, macrofinance deals with an economy or an overall social
structure. It involves drafting policies, initiating programs like subsidies,
or funding and operating multi-year economic development plans and
projects that will generate employment or kick-start industry.
A $100 loan to a villager in an economically developing country that
enables them to buy necessary equipment for making ceramics would
be an example of microfinance; a government financing the construction
of a million-dollar hydropower dam that employs thousands of people
would constitute macrofinance.
KEY TAKEAWAYS
 Microfinance and macrofinance both deal with funding initiatives;
their difference lies in the scope and size of their efforts.
 Microfinance enables financial self-reliance for individuals,
providing them with money and education.
 Macrofinance deals with broader projects that affect entire
societies or communities, aiming to improve economies as a
whole.

Microfinance
Microfinance services include microcredit, microsavings, and
microinsurance. Microfinance aims to make individuals self-sufficient by
offering timely funding, helping them learn skills, and establishing a
stable means of livelihood.
Microfinance starts by educating potential borrowers about the basics of
how money and credit work, how to budget and manage debt, and how
to best utilize cash flows. Individuals are then provided access to
capital, at generous terms: lower-than-average interest rates, or the
waiving of collateral. Default risk for the lenders is mitigated by pooling
borrowers in groups (of, say, five or 10 people); peer pressure often
improves repayment rates. Pooling also builds the individuals' credit
rating and enables assistance among group members.
 
Microfinance starts with a focus on individuals, while macrofinance
starts with a focus on the regional or national level.
Macrofinance
Macrofinance aims for economic development more broadly, working on
a larger scale to achieve widespread benefits that involve entire
populations and multiple entities. For example, a state or province may
offer multi-year tax benefits to businesses, which set up factories or
offices in a city or region, which hire local residents and use local
suppliers or services. Financing for the endeavor is assisted by banks
or through public-private partnerships.
Although it will lose some revenue via corporate tax breaks, the
government benefits overall: the newly employed individuals will earn
more (taxable) income, as will nearby businesses (restaurants, etc.).
Property values will likely increase, and other companies might be
drawn to the region.
Key Differences
Other major differences between microfinance and macrofinance
include the following:
 Microfinance institutions (MFI), self-help groups (SHG), and non-
governmental organizations (NGO) are the primary funders in the
microfinance sector. However, public sector banks, for-profit
organizations, and private consumer finance companies are
starting to be involved as well. On the other hand, macrofinance
involves bigger entities such as governments, local authorities,
large corporations, banks, and established businesses.
 The amount of money involved in macrofinance is significantly
larger than that in microfinance initiatives. And the scale of
operations varies widely: Microfinancing can provide a $300 loan
to a work-for-hire mason to set up their own brick kiln,
while macrofinancing for large projects like a dam or road
construction offers hundreds of local masons employment for a
few years.
 Microfinancing is usually a continuous ongoing activity without
any defined end. A $50 loan available today to a fisher for buying
fishing nets can be extended to $500 tomorrow to help them buy
a boat; or, once this fisher becomes self-reliant and repays their
microfinance loan, the money can be moved to another eligible
individual. However, macrofinance projects have a definitive time
period, such as subsidies offered only for three years or a road-
building project to be completed in five years. 
 Microfinance aims at making individuals self-reliant. Say a
Bangladeshi tailor takes a $100 loan to buy a sewing machine. As
their tailoring business progresses, they may establish a
showroom and even employ a few individuals. On the other hand,
macrofinance aims to improve the overall economy. For example,
the government offering subsidies on fertilizers to all cotton
farmers aims to increase cotton cultivation, build a textile industry,
and help everyone economically. 
 Microfinancing carries the risk of default by individuals, while
macrofinancing faces challenges from corruption or non-
implementation of efficient policies.
 Microfinancing offers other social benefits imposed by terms of
the loan. For example, the terms might stipulate that borrowers
save a part of their income for the future or spend no part of the
loan on alcohol. Macrofinancing, on the other hand, enables
large-scale employment and development of new sectors and
businesses but does not guarantee the betterment of an
individual.