The government of India, the state government of Tamil Nadu and the World Bank have entered legal agreements to help low-income groups in the state to get access to affordable housing.
The legal agreements were signed for two projects – USD 200 million First Tamil Nadu Housing Sector Strengthening Programme and USD 50 million Tamil Nadu Housing and Habitat Development Project, to strengthen the housing sector policies, institutions and regulations in the state.
The First Tamil Nadu Housing Sector Strengthening Programme supports the government’s ongoing efforts to increase availability of affordable housing by gradually shifting the role of the state from being the main provider to an enable.
It will also aim to unlock regulatory barriers and incentivise private sector participation in affordable housing for low-income families.
With the allocation provided under the Pradhan Mantri Awas Yojana (Urban) and the two projects from the World Bank, a large number of the urban poor in the state are expected to get access to better housing and, in the process, improve their living conditions.
Nearly half of the state’s population is urban, and this is expected to increase to 63 percent by 2030. An estimated six million people are currently living in slums, representing 16.6 percent of the state’s urban population.
Concurrently, the Board has also approved USD 50 million Tamil Nadu Housing and Habitat Development Project to support innovations in housing finance and strengthen housing sector institutions in the state.
It will finance the newly created Tamil Nadu Shelter Fund (TNSF), an innovation in housing finance in India, by providing an equity contribution of USD 35 million.
This initial support to TNSF will enable cross-subsidisation opportunities where higher returns from commercial and high-income developments will compensate for lower returns from affordable housing.
This will make affordable housing commercially viable for potential investors. The project will also strengthen the capacity of key housing institutions including the Tamil Nadu Slum Clearance Board, the state’s main provider of affordable housing; the Chennai Metropolitan Development Authority, the land use planning authority for the Chennai Metropolitan Area; and the Tamil Nadu Infrastructure Fund Management Corporation, the asset management company of TNSF.
The loans of USD 200 million and USD 50 million from the International Bank for Reconstruction and Development (IBRD) have a maturity of 20 years, including a grace period of 3.5 years.