World Bank approves $190m loan to Tamil Nadu to address housing needs of poor

Tamil Nadu is rapidly urbanizing and is facing an increasing deficit in affordable housing supply.


World Bank | Washington DC | Updated: 01-07-2022 12:40 IST | Created: 01-07-2022 12:40 IST
World Bank approves $190m loan to Tamil Nadu to address housing needs of poor
Tamil Nadu is rapidly urbanizing and is facing an increasing deficit in affordable housing supply. Image Credit: Twitter(@SAgovnews)

The World Bank Board of Executive Directors has approved a $190 million loan to the southern Indian state of Tamil Nadu to address the housing needs of the lower-income groups and vulnerable population. This newly approved Second Tamil Nadu Housing Sector Strengthening Program is the second of a series of two single-tranche operations. This Development Policy Loan (DPL), the second in a series, will support the ongoing housing policy improvements introduced by the Government of Tamil Nadu (GoTN) and strengthen institutions managing the housing sector in the state.

Tamil Nadu is rapidly urbanizing and is facing an increasing deficit in affordable housing supply. It is estimated that by 2030 almost 63 percent of the population will be living in cities. The poor, particularly the informal workers with irregular incomes live in overcrowded urban slums, are exposed to health and climate risks, and have limited access to basic services. Also, many the poorest households have been unable to pay the upfront contribution required to access the government's housing schemes.

The Second Tamil Nadu Housing Sector Strengthening Program will continue the reforms started by the state under the first Development Policy Loan (DPL1), approved in May 2020. Under DPL1, the state government began gradually shifting its role from being a 'provider' to an 'enabler' of affordable housing. It also contributed to unlocking regulatory barriers and incentivizing private sector participation in affordable housing for low-income families.

The second DPL will deepen the reforms by introducing the next set of incremental shifts in policy, institutional systems, and regulations. It will also further enable both the public and private sectors to deliver diverse housing solutions, particularly focusing on serving the low-income and Economical Weaker Section (EWS) households.

"The Government of Tamil Nadu has made significant policy and regulatory changes to facilitate affordable housing solutions at scale and respond to the needs of the vulnerable and marginalized population. Increasing the availability of such homes will raise the disposable income of these households, and lead to a reduction in poverty and social inequalities," said Hideki Mori, the World Bank's Acting Country Director for India.

The DPL-2 Program will:

Support the key housing institutions in Tamil Nadu to better serve lower-income families by expanding the menu of affordable housing solutions for EWS households, using inclusive cross-subsidies, developing mixed-use and mixed-income housing, among others. The DPL also supports GoTN's initiative to bridge gender gaps in access to housing by ensuring women's ownership or co-ownership in government-sponsored housing.

Help mobilize partnerships with the private sector (developers, bankers, and households) for housing development in the state. These include reducing the time required for planning permissions using a single-window online portal, facilitating housing finance institutions to serve the poorest households, and empowering communities to take shared responsibility for the upkeep of the tenements.

Promote green and climate-resilient houses for the EWS and low-income groups, including mandating all new government-sponsored affordable housing projects to comply with energy efficiency design standards, which is the first in the country.

"The Program will help deliver transformative reforms in the housing sector in the state of Tamil Nadu," said Abhijit Sankar Ray, Senior Urban Specialist, and a World Bank Task Team Leader for the program. "Policy interventions in this program can provide useful learnings for other states in the country facing similar challenges in the affordable housing sector."

"It is a critical step forward for the GoTN to diversify its housing solutions for the poor," added Yan Zhang, Senior Urban Economist, and a World Bank Task Team Leader for the program. "The public sector can use its fiscal resources more efficiently by better targeting subsidies to the poorest and establishing evidence-based decision making to respond to the evolving demand of residents."

The $190 million loan from the IBRD has a maturity of 20 years including a grace period of 3.5 years.

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