Global Economics

Habitat Hammers Away on Indian Housing


At first glance, the scene resembled a highly festooned traditional Indian wedding with a never-ending guest list. Well, except two of the guests came with a Secret Service entourage. Drums, bugles, and cymbals struck at 6 p.m. sharp on Oct. 29, as villagers in bright red turbans and flaming yellow saris led former U.S. President Jimmy Carter and wife Rosalyn in a procession into a mammoth tent with green and orange cloth lanterns.

The Carters' visit to the tiny village of Malavli, about 70 miles outside of Bombay, kicked off a weeklong event to draw attention to India's dearth of affordable housing and to come up with innovative programs to address that problem. The 1970s-era President has long been associated with Habitat for Humanity, the global nonprofit organization that builds homes for the poor. And the next morning, the former first couple joined a group of helpers to lay the first brick for house No. 73.

That lot will eventually be the 360-square-foot home of Sadhiya Sheikh, 30, and her driver husband, Aziz. "People have the same hopes and dreams across the world, to have a house of their own," said Carter at a press conference soon afterward. The Carters' fascination with India began way back in the 1960s, when his mother, Lillian Carter, served as a Peace Corps volunteer in Vikhroli, a Bombay suburb. In the 1970s, when Carter visited India as President, the village of Chuma Keragaon in Harayana in north India was renamed Carterpuri.

Corporate Sponsors Kick In It was also an auspicious day for 60-year-old Vithabai Baban Tikone, a widow, and her field-worker neighbor Jijabai Kedari, 33. They will also soon be homeowners. They performed the traditional Indian ritual of lighting a lamp and incense sticks; decorating the doorstep with colored powder and flowers; and offering prayers on the land where their house will be built. "For us, it is a dream come true," says Tikone, who had saved about $1,200 in 15 years as part of a self-help group.

Some 2,000 Habitat volunteers will help build 100 homes for the villagers, who will relocate from 26 villages dotting the nearby Sahayadri hills. This isn't a giveaway program. Beneficiaries are shelling out $553 each, or about one-third the $1,660 total cost of each house, in addition to helping out with construction.

The balance is being put in by Habitat and corporate sponsors. They will be repaid on an interest-free mortgage with monthly installments of $14 over eight years. "We will pay up and not default," says Jyoti, Tikone's 23-year-old daughter-in-law. She figures that with the family's monthly income of $77, they will be able to save at least $44 and easily cover loan repayment.

Micro Home Finance Despite India's spectacular growth this decade—its economy has clocked 8%-plus growth over the past three years—nearly 30% of India's 1 billion-plus population lives below the poverty line. India, though, is also home to some of the most innovative programs to redress that social ill. It has a deeply entrenched microfinance movement, in which loans of as little as a few hundred dollars are directed to poor entrepreneurs to set up businesses such as small grocery stores, family farms, or tailoring shops (see BusinessWeek.com, 8/22/06, "India Banks are Big on Microfinance").

Habitat hopes to bring the same approach to home finance, to which three-quarters of the poor have no access. Says Jonathan Reckford, Habitat International CEO, "Our objective is not just to build homes for the poor, but build a community and a future." Habitat, through its local program called India Builds, plans to build 50,000 homes by 2010. The program, which requires some reliable income, won't help India's most destitute, however. Government officials note that in an average city with a 50,000-plus population, 40% of residents are squatters.

Newcomers to major cities often first live in makeshift housing. Consider Bombay, one of the most densely populated migrant cities in India. Of its 18 million inhabitants, 60% live in an estimated 37,000 slums covering about 8,700 acres. Land is scarce, and that freed up for residential development doesn't address low-end needs.

Bombay's Real Estate Catch-22 And if the city is to expand, it has to free up more land for growth. However, the new homes being built tend to be way out of the financial reach of the poor. "Bombay needs about 45,000 new housing units every year, but what's being built is only around 25,000 for the last 15 years and for middle- and higher-income groups," according to one government official who preferred not to be identified.

Without affordable housing, plenty of squatters see no real reason to try to save money at all for a decent home. They live in shantytowns and pay minimal rent, but are essentially beholden to the whims of slumlords, who pay off the police and municipal authorities to look the other way. They have no qualms about reclaiming swampland to erect one- and two-room cement structures with a tin roof.

Town planners say the only way out is for the government to build low-cost housing in a city where real estate is prohibitively expensive. "But it's a Catch-22 situation where to recover the high land acquisitions costs, the houses are built for the middle- and high-income group, completely ignoring the lower-income people," says V.M. Phatak, a retired country planning official of the Maharashtra Metropolitan Road Development Authority.

Employee Habitats In such a situation, Habitat's own microfinance model makes housing for the poor practical. And with a global operation and high-profile brand ambassador, companies are willing to lend their names. "Events like these create awareness for corporates to come forward and help," says Sanjay Nayar, Citigroup (C) CEO for India, Nepal, Sri Lanka, and Bangladesh.

Citigroup and Whirlpool (WHR) are behind the program, and so are Indian companies such as the Aditya Birla Group. The diversified industrial material and telecom group first tested low-cost housing with Habitat for employees at one of its plants, and then helped build homes for tsunami-affected areas in south India. A lot more needs to be done. But Habitat's effort is a move in the right direction.


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