CHAPTER ll

REVIEW OF LITERATURE

2.1 Home has been the centre and instrument for mankind's moral and

material progress ever since the advent of civilisation. Since home life

affects the very foundation of an individual's life, the house becomes an

integral part of it. The first step in house construction is collecting money

to own a house. These days one need not have ready cash to start house

construction. There are many financing institutions which give a helping

hand in fulfilling one's dream of owning a house.

This is a topic on which many studies have not been done in our

country. The available literature is reviewed under the following heads.

Importance of housing, problems, shortages, cost effectiveness,

environment awareness and various sources of housing finance,

urban~sat~on approach, marxian views, effects of decentralisation, and

the developmental efforts for the future housing sector.

2.2 IMPORTANCE OF HOUSING:

According to Krishnamachari (1980) as stated i m e prea'mbte'of ' . . . . . - . .

, . - . \

the National Housing Policy, "shelter is a basic human need and as an

intrinsic part of human settlement, is closely linked with the process of

overall socioeconomicdevelopment. Though a house is essentially a place

of dwelling, it also fulfils many important social needs of the household.

Besides prov~ding shelter, it creates employment, generates voluntary

savlng and creates a conducive condition needed for achieving crucial

goals "'

In the opinion of Naik (1981) "housing is an essential element of life

for most human beings. The modern concept of housing does not limit the

idea of houslng merely to the provision of ~hel ter . "~

Housing constitutes a physical matrix in which human interaction

occurs. The house that people live in, touch upon every facet of their lives

and the society as a whole" as cited by Paul S. (1 983)-3

According to Satyanarayana (1987), housing is an element of

material culture, is one such devices to overcome threats against physical

elements or security to lives and serves as an important purpose by making

the provis~on of shelter. It provides a place for the operation of many human

activities Irrespective of place and time man is using a place of

accommodation which is called a house. It helps people to interact within

the family and with the outside world.4

As c~ted in Encyclopaedia BritanniB, the world housing has a

general meanlng covering conditions and statistics applying to all the

dwellings of the community. It is used to refer to the problem created by

deficiency in number or defects in conditions of the d~e l l i ngs .~

1 Krishnamachar~ S M (1980). 'Mobilisation of Finance for Rural Housing". Yojana Publication Division. New Delhi, Vol. 26 pp. 16-18.

2 Naik D.D (1981) "Housing Finance Pamphlet 163," Commerce Publication, Bombay PP 1, 12, 15 and 18

3 Paul S (I 983) "A study of the experience of house builders of the middle income group in the urban and rural areas': Master's thesis Mahatma Gandhi University.

4 Satyanarayana C P (1 987) 'Housing ruralpoor and their living conditions"Gian Publishing House, Delh~ - 7 P 15

5 Encyclopaedia Brftannrca (1943) Company of Encyclopaedia Britannica Vol. Ill. P. 825

As stated in lndia year Book (1988) a certain minimum standard

housing is essential for healthy and civilised existence. Housing activity

serves to fulfil many of the fundamental objective^.^

Beyer (1965) states that house is a bulky, durable and permanent

product, which has a fixed location being used only in the place where it

is built. Once built, it tends to remain in existence for many years long

after i t has served its usefulness. It becomes almost a part of the land.7

As stated by Sweta Misra (1996) the importance of housing was

universally recognised from the dawn of history. With the advancement of

knowledge and civilisation man became particular about sanitation,

environment, privacy and location of the house. He became conscious of

better facilities which make his life easy and comfortable.'

2.3 PROBLEMS OF HOUSING:

As stated in the selected papers of N.B.0 and U.N. Regional

Hous~ng Centre by J.P. Sah "Housing as a problem is not unique to lndia.

There 1s hardly any country whether developed or under developed in the

world today which could justly claim to have solved this problem. The

problem of housing in the poor or economically less developed countries

particularly those of Asia, Far East and Africa assume a more painful

complexion because such countries do not only have serious housing

shortages, growing additional housing needs and poor housing stocks,

6 lndia year Book (1988-'89) Director. Publication Division, Ministry of Information and Broadcasting. Government of lndia, New Delhi, p. 597.

7. Beyer, G.H (1985) 'Housing a factualanalysis"the Mac Millan Company, New York, p.2.

8 Sweta Misra (1 996) "Housing - changing perceptions - Rural housing,mbIems and strategies", Kurekshetra special issue. May-June p.80.

but are woefully deficient in essential services and community facilities

also ''=

Dr K.N. S. Nair and S.G. Jayachandra Raj (1994) are of the opinion

that "Kerala stands unique in the realm of growth and development. But

even in the wake of states' rapid expansion in the social sector, it is to be

observed that Kerala projects a dichotomic picture of development.

comprising of feeble economic structure (commodity producing sectors)

along w~th developed social structure (Physical quality of lif..el,The 43rd .. . , .,.* .. . ~ .. .

round of National Sample Survey, pertaining to the period 1987-88 on the

level and status of housing in lndia portrays a clarity of vision on various

aspects of housing on a macro level.l0

R Balachandran (1996) is of the opinion that Kerala has been badly

affected by the slump more due to the mushrooming growth of builders as

well as the withdrawal of NRls particularly from the Gulf. The market became

overheated and it crashed at great speed when non-trade barriers began

creat~ng its own impact - the unclear political situation, the fluctuations of

the dollar and so on."

As stated by S.D. Gosangadi in Manorama year Book 1992,

houslng requires huge capital resources. Developing countries suffer from

the syndrome of low investment, low capital formation, low productivity,

9 J.P. Sah (1969) selected papers from training course on sociological and economic aspects of housing, 2-3. NBO No169 'Problems of housing finance and investment with special reference to lndia "

10 Dr. K.N.S. Nair and S.G. Jayachandra Raj (1994) "Housingdemandin Kerala by 2001. A.D. Kerala calling, the authoritative English monthly of the Government of Kerala, pp. 5 .6 , 7.

11 Batchandran. R . (1996) News paper 'The Hindu" Monday Ocober, 14; IRealEstate a feature of changing trends in housing pp. A and C.

low savings, leading to scarcity of resources. It is a vicious spiral from

which they find difficult to extricate thern~elves."~~

As cited in the Government of Kerala status paper (1980), the

problem of housing is more acute in Ernakulam than any other district in

the state because of the fast increasing density of the population. Another

major problem in this field is that about 20-25% of the existing houses are

unfit for human dwelling. Owing to various obvious reasons the problem of

houslng in the district is becoming more and more severe as the years

pass by l 3

According to J.P. Sah "housing is not a static but a growing

problem Rapid urbanisation particularly in those countries which have just

begun to move along the path of economic and industrial development. It

impl~es structural changes in the economy, and a drift of population from

the rural to urban areas. As this urban ward drift of population gets

accelerated, it creates an immediate problem of housing the migrants in

the receiving urban areas.14

As cited in Manorama Year Book (1997) "Housing is an integral

part of over all policy improvements of human settlements and economic

development. India faces a huge backlog of 31 million units as evinced by

the growth of slums, inadequate services, rising cost of shelter and

inadequate supply of formal housing. It is recognised that the magnitude

of the problem calls for the involvement of various agencies.15

12 Manorama Year Book (1992) S.D. Gorangadi -General Manager Housing Bank. Bombay. Focus on Housing - Shelter for Millions "Do you have the money?" p. 381.

13 Government of Kerala (1980) status paper, Ernakulam District, District Planning Officer, Ernakulam, p. 94.

14 J.P. Sah (1969) selected papers. up. cit.

15 Manorama Year Book (1997) with a special feature on 50 years of Indian freedom and Democracy and development. 3Zna year of publication p. 600.

Dr. C. Harichandran (1 989) states that due to budgetary constraints

and other pressing problems the housing shortage and substandard

houses have increased over the years.16

2.4 HOUSING SHORTAGE:

As clted by Dr. K.N.S. Nair and S.G. Jayachandra Raj (1994), the

populat~on of the state is expected to grow at a rate of 1.1 % to reach

about 325 lakhs by the turn of the century from 291 lakhs in 1991. In order

to eliminate housing shortages about 15 lakh houses will have to be

provided by the public sector assuming that the current trend in private

sector w~l l be maintained.i7

In Manorama year book (1992) S.D. Gosangadi states that "as per

the estimate of the National Building Organisation based on census figures,

the usable housing stock rose from 68.8 million units to 102.7 million units

between the two decades from 1961 to 1981, despite the fact that, there

is a huge backlog of housing shortage in the country.''

Mr. John advocates more private participation in the housing sector.

Admitt~ng that the existing procedures were not conducive for private

investment in the housing sector, he calls for a policy restructuring to

promote, public and private ownership ventures in the housing sector.

Therefore, the need for tapping managerial and financial resources of the

private sector has become inevitable. lg

16 Dr. Harichandran C. (1989) "Housing Development Finance" Yojana Publication Division, New Delhi. Vol. 35. p p l l - 2 5 .

17 Dr. K.N.S. Nair and S.G. Jayachandra Raj (1994) op.cit.

18 Manorama Year Book (1992) op. cit.

19 P.M. John (Hous~ng Commissioner, Kerala) (1996) 'Low cost housing"The Hindu' survey of the environment

According to K. Srikant (1996) during the last five years, many of

the so called complexes have sprouted all over the cities with maximum

concentration in K ~ c h i . ~ "

According to Gopinath Rao (1 988) housing shortage is a universal

phenomenon. It is more acute in developing countries. In lndia the backlog

by 2000 A . 0 is about 4.5 million housing units which has to be built every

year2'

In the opinion of Paulose (1 979), the world population in 1978 was

roughly 4200 million. It was in 1830 that the population of the world reached

the first one thousand million. In another hundred years the population

doubled reaching 2000 million in 1930. It further took only thirty years more

to add another thousand million. The rate of growth is nearly 2% per year.

It is estimated that by 2000 A.D. the population of the world would be in

the order of 6500 millions.22

As stated by Solanki (1989), in lndia at the beginning of 1980, the

total shortage of housing was estimated to be of the order of 20.1 million 1

ie. 5 million in the urban area and 15.1 in rural areas.23 I 1

8 !

As c~ted in the lndia year Book (1989) the housing requirements I . ,

est~mated for lnd~a, IS an annual construction rate of eight to ten dwll ing

units per thousand population in the next two three decades. This should

M Srikant. K . (1996), The Hindu daily Monday Oct. 14.1996 Realestate -afeature - Highrise apartments in cities, p. D.

21 Gopinath Rao, C.H. (1988) 'Ownership of flats; Sai Ganesh offset printers - Santhome Madras 4 , pp. 1-4.

22 Paulose T K ( 1 979) 'Experience and experiments in town and countryp1anning"R-8 Jawahar Nagar, Tvm. 3 , p 127

23 Solanki, M . (1989) "House to be built formil1ions"Yojana Publication Division, New Delhi. Vol. 32. . Pp. 27-29.

be ach~eved in order to prevent further deterioration of housing situation.

Based upon the census of National Buildings organisation, has assessed

the housing inadequacy in the country during 1985 to the order of 247 lakh

dwelling units; 188 lakhs in rural areas and 59 lakhs in urban areas. But

apart from this shortage of this magnitude, the increase in population

between 1985-1 990 would generate an additional requirement of housing

un~ts to the extent of 16'2 lakhs of which 124 lakhswill be in rural areas and

38 lakhs in urban areas.24

According to Rangwala (1977), the magnitude of the housing

problem in our country is so heavy, that it will require considerable passage

of time for the country to offer a sweet home to every family in our nation. In

order to fulfil this objective, the concept of town planning is accepted by

our nation and accordingly haphazard development of land is restructured

to a certain extent.25

As stated by Jayaram (1987) National Building Organisation set up

by the ministry of works and housing in 1954, estimates the housing

shortage as increasedfrom 14.5 million units in 1971 to 23.8 million units

in 1984 of which the share of urban area is alarming.26

According to Jaigopalan (1990) analysis of 1981 census data

revealed that in cities with over 50,000 inhabitants, roughly about 47% of

24 lndia Year Book. 1988-89; Ministry of information and Broadcasting, Government of lndia, p. 527.

25 Rangwala S.C. (1977) Town P1anningR.C. Patel, Charotar Book Stall, pp.51-61.

26 Jayaram N. (1987) 'Housing problem in lndia - a critical assessment" - Housing in lndia. p. 26.

the people live in one room houses and with an average of 4.36 persons

per house *'

Chacko (1 989) was of the opinion that housing shortage in lndia in

1981 was 21 million units. In the beginning of the 7th five year plan in

1985, it was put as 24.7 million units. Due to increase in population between

1985-1990 another 16.2 million units will be needed. The approximate

addition per annum is only 1.83 units. By A.D. 2000, the population is

expected to be 980 million. Requirement of houses may be approximately

196 million units based on 5 persons per unit. Number of usable or livable

units are expected to be only 86 million leaving a shortage of 100 million

which means by 2000 A.D., 56% of the population in lndia will be homeless

or inadequately housed.28

As stated by Rajan (1991), the number of families in need of the

house of their own in Kerala is 10 lakhs. Ernakulam, district has a shortage

of one lakh housing units.29

In the opinion of Agarwal (1 958), Despande (1 975) and Paulose

(1 979), the reasons for housing shortage include the following.

The acute shortage of housing in urban areas is due to increase in

population. House building activity has not kept pace with the increase in

population. New houses are not built in proportion to the increase in

population, but on account of refugee influx and industrialisation, the number

- - p p p p p

27. Jai Gopalan (1990) "Paper presented at a seminar on "Recent trends in housing, Asst. Professor. Department of Civil Engineering P.S.G. College of Technology, Coimbatore.

26 Chacko K.O. (1989) A Seminar on 'HousingFinance"Annual General body meeting of co- operative societies

Rajan, K.R. (1991) "House for Allin Ernakulam District", Indian Express, Kochi. February 27th 0.1

of old houses have been reduced. Despande (1975), further adds that

the Increase in population, increases the problem of managing the limited

space available. Creation of space is hlghl~g~s.iv_eJ.~ce_i_ssnno~gn!y . . , ~ - . - ~ ..

-..------- a question of where, but also a question of when. Aggarwal ( I 958) opines

, y;J

that due to refugee influx, the shortage of houses which was already a

different problem became still worse and has given rise to slums.30

Ja~gopalan (1990) is of the opinion that rapid industrialisation has

glven way to squatter type housing trends in slums. In the opinion of Parekh

(1 988) ~n developing countries urban population accounts for 70% of the

populat~on 3'

According to Aggarwal(1958) due to industrialisation of cities large

number of people were attracted to their industrial centres and left their

village homes. The shortages of houses in the cities became acute due to

overcrowding and the katcha houses in the villages were deserted which

soon crumbled and fell to ground for want of care."

Despande (1975) opines that the introduction of the Rent Act by the

government in 1940 in several states apparently to protect the interest of

the lower, middle and poor classes has done more harm than good. Besides,

it has done great injustice to small property owners in particularwho were

prohibited from raising the rents above that prevailed prior to 1940. In many

30 Aggarwal S.C (1 958) 'Recent Developments in Housing"; Jain Book Agency Connaught place, N. Delhi. pp. 134-136. Despande (1975) 'cheap and healthy house for the middle classes in India - United Book Corporation, Pune, pp. 1-10.

31 Parekh, D.S. (1988) "Housing problem in lndia - Today and 2000 A.D." Forum of Free Enterprise - Primal Mansion Bombay pp. 1-16.

32 Aggarwal S.C. (1958) Op. cit. pp. 134-136,

instances these rents after paying taxes donot have anything to meet the

enhanced cost of repairs.=

Bes~des, these, Gopinath Rao (1988) is of the opinion that non-

availability of land, price escalation of overall construction of houses, short

supply of materials and lack of knowledge about several public sector

institutions which offer loan at low rates of interest, are the causesof housing

shortage 1

Munjee etal. (1990) opine that the lack of adequate housing finance

is a major constraint to increase the housing supply.%

As stated in Encyclopaedia Britannica the high initial cost of eVgh

a small dwell~ng, the permanent and immovable character of houses wtren

erected and the custom of majority of consumers, contribute to the shortage

of hous~ng

The year 1987 was observed as the international year of the shelter.

The gvernment of India announced National Housing Policy during this year.

It is the document which outlines the forthcoming housing trends. As per

the policy statement the total deficiencies in housing in 1985 is 24.7 million

units. In urban centre eighteen percent people dwell in slums and four

percent on platforms. Thirty to thirty five percent of the population live in

one room tenements. Seventy to eighty percent of the urban population

are having rented accommodation. In viewof these, government set a goal

33 Despande (1975) op. cit.

34 Gopinath Rao (1988) op. cit., pp. 1-4

35 Munjee M. Gupta, D Mehta and Hutheesing V. (1990) "Housing andhousing finance in India" Shelter Conference, Housing Finance International. pp. 26-28.

36 Encyclopaedia Britannica (1 943) op. cit. 825.

"shelter for all by 2001 A.D. and the National Housing Policy specifies the

act~vity and trends that will lead to that goal. The other objectives underlying

the policy are to motivate and help all houseless and inadequately housed

people to have access to land, material, technology and finance, to

encourage ~nvestment in housing and to create suitable environment to

max~rnise housing efforts by removing constraints (Jaigopalan 1997).''

According to Solanki (1989), the means for curbing housing problem

are varied. Housing meets the social and economic needs of the family.

Therefore it is necessary that Government should participate actively in

hous~ng programmes in order to accelerate the pace of construction of

houses, particularly for the sake of economically weaker sections."

In the opinion of Modak (1971) the housing need can only be arrived

at by collecting information regarding housing required to reduce

overcrowding in existing dwellings, to provide for natural increase in

population over the next twenty years, to provide for victims of house

collapses and to provide accommodation for slum dwellers and foot-path

dwellers 39

Madhav Rao et a/. (1985) suggests a complex housing problem

like ours requires a concrete national effort. The housing policy must not

be viewed simply as an instrument for providing shelter, but rather as an

instrument of social policy to achieve growth and social justice."

3i' Jaigopalan (1990) op. cit.

Xi Solanki (1989) op. c ~ t .

39 Modak N V and Ambedkar V.N (1971) "Town andcountry planning andhousing: Orient long man limited. p. 112.

40 Madhav Rao, A.G.. Murthy and Annamalai G (1985) "Modem Trendin housinginDeveloping Countries; Oxford and IBH Publishing Company. New Delhi, p. 341.

2.5 COST EFFECTIVENESS:

Bhaskar Rao (1979) draws the attention of the public and private

sectors to housing conditions prevalent in lndia, growing housing needs

in the country and estimates requirements of building materials, land and

man power. He also identifies critical areas where policy changes are

needed to meet increasing housing needs.41

Harilal(1986) presents a study on the labour process in the building

industry in Kerala. It shows the characteristic features of the transition of

the building Industry from the pre capitalist to the capitalist mode of

production 42

Francis Cherunilam (1 987) deals with the housing problems in lndia.

He also draws attention to housing co-operatives and housing finance."

Varghese also draws attention to housing problems and gives a

picture about the sources of available housing statistics, housing definitions

and thew limitations. He argues that cost reduction and cost control are

essential 44

Vinaylal (1987) gives a picture about budget and housing sector

and Murthy focuses on lndira Awaz Yojana and construction of low cost

houses. Sarkar (1 987) deals with the problems and critical issues in rural

housing 45

41 Bhaskar Rao B (1929) 'Housing and Habitat in developing countries". Newman group of publishing, New Delhi.

42 Harilal K.N. (1986) "Kerala's Building industryin transitionn- A study of the organisation of production and labour process. M.Phil. Thesis, Tvm (CDS)

43 Francis Cherunilam (1 987) 'Housing in lndia", Himalaya Publishing Bombay.

44 Varghese. K.V. (1983), Economic and social aspects, Eureka Publications, New Delhi.

45 Vinaylal D. (1987) 'Budget and housing sectors"Economic and political weekly vo1.22. No. 15, April 11

Thomas Paulose's (1 988) study brought out the potentiality and

possibility of utilising the services of voluntary agencies of non-

governmental organisation in the field of housing. He also argues that cost

control and cost reduction are essential and also mentions innovative

approaches to shelter problems."

Rosely's (1988) work also deals with housing and housing policies

and programmes in Kerala. 47

Navin Chandran and Balraj Mehta (1 988) deal with problems and

critical Issues in rural housing. Srinivasan (1 988) says that promotion of

new technology in the rural part is particularly a difficult task. The social

customs, traditions and occupations of the people have played a decisive

role in the historical evolution of house types in villages. He also deals

with some suitable appropriate technologies for rural housing."

Kiran Wadhva (1988) gives a picture about housing programmes

for the urban poor. He gives a brief review of the housing policies of the

Government of

Arun Kumar (1 989) presents a paper on National Housing Policy .

He also dep~cts a picture of the housing situation in

46 Thomas Paulose (1988) "Public housing': Housing in Kerala M.A. Muttilib, Akbar Alikhan Regional Centre for urban and environment studies, Hyderabad, Sterling Publishers. p. 129.

47 Rosely C.T. (1 988) "Housing in Kerala - an analysis - with special reference to the housing needs of the EWS in Chavakad Block Thrissuf M.Phil dissertation, CUSAT.

48 Navin Chandran (1988) 'criticalissues in ruralhousing" Kurukshetra Vol. 37. No. 8. November pp. 6- 10

49 Kiran Wadhva (1 988) "Housing programmes for urban poor shifting priorities, Economic and Political Weekly" vol. 23, No. 34, AUQ. 20, p. 1762-1767.

50 Arunkumar ( 1 989) "National Housing Policy; the implications Economic and Political Weekly," Vol. 24, No. 23. June 10, pp. 1285-1293.

cedric Pugh (1990) studies the theory and policy evaluations in

public housing, squatter settlements, land management, housing, finance

and the government of hou~ing.~'

Augusty (1 990) through his study attempts to examine the effects of

changes and transformations in the housing economy on the cost of house

construct~on and the pattern of house construction in Kerala. The study

also evaluates the policy and architectural responses to the changes in

the hous~ng sector.52

S~nce the mid seventies, the house construction activity in Kerala

has taken an upturn. G. Gopikuttan (1990) analyses the impact of this boom

In factor and material market, employment, skillmix and techn~logy.~

Rakesh Mohan's articles (1 992) on housing and urban development

seeks to bring to the fore the urgent issues concerning urban development."

B~ndu Narayanan's study (1993) on rural housing in Kerala depicts

a plcture of hous~ng problems and she also stresses the need for lowcost

houses 55

Rajiv Sharma (1993) brings an article on rural housing Athul kumar

Srivastava (1 993) argues that housing has not received priority under the

51 Cedric Pugh (1 990) 'Housing and urbanisation : A study of India" sage publications. New Delhi.

52 Augusty K.T. (1990) 'Housing in Kerala : A study of some aspects of finance and the choice of technology in construction, M.Phil dissertation centre for development studies, Thimvanathapuram

53 Gopikuttan G. (1 980) 'House construction boom in Kerala" Economic and political weekly September 15 . Vol. 15. No. 37 PP 2083 - 2088.

54 Rakhesh Mohan (1 992) 'Housing and urban development policy issues for 1990s. Economic and political weekly Vol. 27. No. 36. Sept. 5 pp. 1913-1920.

55 Bindu Narayanan .M (1993) "Rural housing in Kerala" - A case of Trikkur Panchayat M.A. dissertation Dr. John Mathai centre, Arnathukara. Trichur.

five year plans and the resource constraints on the government budget is

responsible for shortage of funds for housing."

2.6 INNOVATIVE APPROACHES TO HOUSING:

The report of the Expert Committee, Government of Kerala (1974)

gives a detailed picture of various cost reduction techniques and materials

In hous~ng It also checks the viability of these techniques.

Laurie Baker's Book (1986) on low cost housing is the product of

his vast and varied experience. The techniques have been discussed by

Baker in his books with suitable explanatory sketches and diagrams5'

Wilson and Aslam (1991) highlight the problem of housing specially

In Kerala. They made an attempt to assess the outflow of money from the

state for construction. 'The financial problems for salaried individuals in

relation to ~nvestment on housing is also analysed. They suggest a solution

to these problems by means of economic house building technique which

can bring down cost by 30%.%

Josen Alex's study (1 991) attempts to analyse the attitudes of the

people towards low cost housing. In this he also deals with housing

situations and problems and analyses cost reduction aspects of low cost

houses.5g

56 Rajiv Sharma (1993) 'Rural housing schemes" Yojana, October 15, Vol. 37, No. 18, pp. 15-21

57 Laurie Baker (1986) 'Houses - How to reduce building costs, published by COSTFORD. Sreerama Polytechnic, Triprayar Valapad, India.

58 Wilson P.R. and Aslain M K M (1991) "House building" - its impact on individual and the economy, Ras publishers. Cochin.

59 Josen A1ex.M (1991) "Low cost housing - Technology evaluation and attitudinal survey, M.B.A. project report, school of management studies CUSAT. p. 37.

Regikumar (1 992) also stresses, the relevance of low cost building

schemes, techniques and building materials. He analyses the technical

feasibility and financial viability of the unit.B0

Kaul (1994) deals with a number of building materials and

technologies which came up as a result of continuous R and D efforts in

the country such as utilisation of fly ash, sand, lime bricks, soil stabilised

blocks, ferrocement, precast roofs, floors and walling components and use

of plastics. He argues that by adopting such innovative methods of

construction, cost of construction will wme down and speed of construction

WIII ~ncrease.~'

Narayanan and Mohankumar (1994) presented a paper analysing

the hous~ng problem from the resource base point of view and attempts

to h~ghl~ght the need for evolving 'contextual technologies' that use locally

available materials that can act as alternative to the presently popular

budding materials.@

Jacob Philip (1995) explains about cost reducing innovative

alternative building materials and techniques in house constru~tion.~

Mistry (1995) also deals with alternative building materials and

techniques in house construction. Sengupta (1995) introduces some

60 Reg~kumar .G (1 992) Low cost of building material manufacturing unit multi dimensional feasibility study - M.B.A. project report CUSAT. p. 2.

61 Kaul P.K. (1994) 'Housingproblem in India" a critical assessment - Housing in lndia p.26

62 Narayanan N.C. and Mohan Kumar (1994) 'Sustainable resource ufilisati0n"in a seminaron cost effective technologies and the use of indegeneous materials in housing and habitat sector- Kerala State Nirmiti Kendra, Thiruvanathapuram.

63 Jacob Philip (1 995) 'Kuranja Chilavil Veedavaikam, (Low cost housing)"Article Published in Malayala Manorama Daily on May 9 Tuesday p.13.

building materials and composites from agro-wastes. He also stresses

the polnt that techno economic feasibility of manufacturing and building

mater~als and techniques in house construction Sengupta (1995)

introduces some building materials and composites from agro-wastes. He

also stresses the point that techno economic feasibility of manufacturing

and bullding materials or components from agro wastes depends largely

on the collection of and delivery system adopted?

Mathews (1995) gives a picture of cost effective technologies for

housing. He explains about building materials, building components and

building systems.65

Sakarlya George (1995) and Parameswaran Nair give a detailed

plcture of varlous alternative cost effeettue- huilding techniques and

materials wh~ch are developed by continuous research and development.=

2.7 HOUSING AND ENVIRONMENT:

According to M.B. Achwal (1990), environment improvement and

housing are intrinsically linked in the field of development of the community.

The role of the community worker to assess the needs of the community, to

mobilise available material and manpower resources, to develop co-

operation, and to help in executing projects is appreciated and is now used

in all community oriented programmes. The planner and the user today

are poles apart. Henceforth it would be better if environment improvement

64 Sengupta J. (1 995) "Building materials and composites from agro wastes" NCHF Bulletin Vo1.7, No. 11, May pp. 3-9.

65 Mathews M.S (1 995) "Cost effective technologies forhousing"paper presented on a seminar organised by Kerala State Nirmiti Kendra, Trivandrum, p.1, April 29.

66 Sakariya George and Parameswaran Nair (1995) 'Seminar on specialities of Nirmiti Style (Monday 9th Oct. 1995. Organised by Kerala State Nirmiti Kendra. Regional Centre, Ernakulam.

in housing find their rightful places as part of the broader field of the

community de~elopment.~~

Purl's book (1 993) is not only a detailed study of the problems of

dwellings with specific conditions of hot climate, but also deals with allied

Issues like environmental consciousness, rural urban population distribution

and pollution challenges.=

Mathur (1993) also made a good attempt to deal with various

aspects of housing. He deals with housing problems, significance of

building materials and environmental aspects. He also highlights the

appropr~ate housing technologies and economical housing and attempts

to deal wtth housing and shelter in areas prone to natural disasters.-

Narayanan and Mohankumar (1994) present their paper stating

that modern industrial activities and many of the sophisticated systems

and techniques create adverse effects in our environment and ecosystems.

The massive volume of housing activity in Kerala during the past few

decades also has had its impact on the wider economy, ecology and

society. So11 erosion and land slides have became regular features in the

high lands during the monsoon.7o

6'7 Achwal(1991) Voluntary agencies and housing, evolving new strategies formass housing, p. 84.

€23 Puri 6.6. (1983) "Mass scale housing for hot climate. Oxford and IBH Publishing Company, New Delhi.

69 Mathur G.C. (1993). Low cost housing in developing countries"0xford and IBH Publishing Company, New Delhi.

7CI Narayanan and Mohankumar (1994) op. cit.

According to Gnanaharan (1994) a significant portion of the

exploitation of nature owes its origin from the demand of the housing sector

for t~mber "

As stated by Trivikramji (1 986) the unregulated land mining in the

m ~ d and low land region has caused heavy damage to the river eco-

system 72

2.8 SOURCES OF HOUSING FINANCE:

In the opinion of Mathur as cited by Paul (1983), the financial burden

of ~nvestment in housing is generally very heavy, when the owner does not

have sufficient funds available to pay for the site and the entire cost of

construction, one must make arrangements to obtain funds from some other

sources 73

Barness (1954) says that the problem of raising the money arises

irrespective of the method one builds a house. Most of the people would

find it impossible or would not choose to pay down the total sum to cover

the whole cost. They therefore seek to raise a loan on mortgage from a

local authority or a building society or an insurance company.74

Agan (1 966) opines that there are two ways to buy a house. One is

to pay for I! outr~ght in cash, the other is to make a down payment and to

cover the balance with a mortgage which will be paid out of future income."

71 Gnanaharan R. (1 994) 'Use of indigeneous timberin housing sector." In seminar, volume of Kerala State Nirrniti Kendra pp.43-45.

72 Thrivikrarnji K.P (1 986) -River metamorphosis due to human intewentions in the Neyyar Basin, Kerala Department of Geology, University of Kerala, Thiruvananthapuram.

73 Mathur (1983) opcit.

74 Bamess R (1954) "Home Management"George Newness Limited. 15-17, Long Acre London, Vol. II. p. 691

75 Agan T (1966) "The house, its plan and use"0xford and IBH Publishing Company, New Delhi. p. 266.

In the opinion of Nickell and Dorsey (1976), the three methods of

financ~ng home ownership are cash, cash and credit and contract method.76

Naik (1981) is of the opinion that housing loans are usually advanced

against, the security of mortgage of land and the building to be constructed

with the loan. Housing finance is therefore a mortgage finance.77

According to Munjee et a/. (1 990), India's progress towards the

strategy of housing development may be measured by institutional \ processes that began in 1970s. An apex financial institution, the Housing i

and Urban Development Corporation was entrusted with financing various I house building agencies. Households were encouraged to form primary

co-operative housing societies. These societies in turn were funded

\ Finance Corporation (HDFC) as a specialised lender of household^.^^

, !\\

through LIC which sets aside for this purpose a particular quantum of the 1 I

resource. Housing finance as a financial intermediation process . : commenced only in 1977 with the establishment of Housing Development '. i

According to Harichandran (1989), the objectives of the National

Hous~ng Policy include motivation to help people particularly the houseless

to secure for themselves affordable shelter, to promote investment in

hous~ng in order to achieve a sustained growth of nation's housing stock."

76 Nickell P and Dorsey J .M (1976) "Management in family living: John wiley and sons incorporated. New Delhi, p. 295.

77 Naik D.D (1981) Housing Finance Pamphlet (163) Commerce Publication Bombay 20 pp.1, 12.15 and 18

78 Munjee et a1 (1990) op, cit. p.28.

79 Harichandran C (1989) op.cit. pp. 20-24.

In the opinion of Bhalla (1991), the present housing shortage in the

country, is estimated to be around 30 million dwellings. National Housing

Bank established in July 1988 aimed at meeting the challenge by

mobilisation of household savings through Home Loan Account Scheme,

facilitating easy access to institutional credit for housing, and the continuing

concern for affordability of housing by different income g r o ~ p s . ~

Munjee et a/. oplnes that credit flows into the housing sector

or~g~nates e~ther from formal or ~nformal sector. The formal sector includes j budgetary allocations, of central and state governments, financial

institutions like the LIC, Unit Trust of India, Commercial Banks, Provident

funds and Public Sector Institutions such as HUDCO. Besides the formal ;

sector includes, Co-operative Housing Finance Societies, and Housing;

Finance Companies like HDFC. The informal sector includes households

themselves, public and private sector employers extending housing loans

to their employee^.^'

As Parekh (1 988) states, the formal institutional funding of housing

was Rs. 1,071 ,I 8 crores and informal funding was Rs. 3,10,805 crores in

the year 1982-83. Hence about 75% of the investment in housing was from

informal sources."

The main underlying problem in the opinion of Nargowala (1966),

encountered in financing of housing is raising capital. The various ways of

raising and mobilising capital as suggested by Nargowala (1966) include

general tax revenues, special taxes, public borrowing, employer finance,

80 Bhalla R (1991) "National Housing Banklndian Express, Kochi 29th February p.3. 8'1 Munjee etal. (1990) pp. 26-28 op. cit.

8% Parekh D.S (1988) op. cit., pp. 1-16.

LIC, employer's provident fund, Reserve Bank and State Banks,

Scheduled Banks, income tax commissions, State Housing Finance

Corporations and apex co-operative housing finance societies."

The future strategy of housing finance as stated by Parekh (1990)

is to enhance the loan origination process for housing throughout the

country, to develop an institutional network that would facilitate the

origination process, to identify the potential resource base for the system

as a whole and to simplify the legal system with respect to risk management

of hous~ng finance institution^.^

A scheme has been formulated by Rajan (1991), the former

Collector of Ernakulam, through which he envisaged that all the homeless

families of the district can have their own h ~ u s e s . ~

As S.R. Pillai Kalathil (1996) stated that it will be advisable for all

governments and public sector housing finance organisations to have a

central pool arrangement of counselling with would-be borrowers. Legalities

will have to be simplified. He advocates that tax exemption from annual

income for person taking a loan for his own occupation will have to be

increased c~nsiderably.~

Usha Patel (1996) explains that at present housing through bank

finance has been a part of Bank's priority sector lending. Besides, every

83 Nargowala H.D. (1 966) 'Summary of working papers on Housing Finance, selected papers of a symposium on Housing Finance, NBO Publication, pp. 142-146.

84 Parekh D.S. (1990) op.cit.. pp. 1-16. 85 R.R. Rajan (1991) District Collector Ekm., Newhousing scheme to benefit the poor, Indian

Exp. Kochi, Feb. 19. p.4.

86 S.R. Pillai Kalathil(1996) "Housing Finance help or hurdle, Kurukshetra, special issue May -June 1996, India's Joumal of rural development, pp.94-98.

public sector 1 nationalised banks are expected to allocate every year a

specified percentage of deposits and plan for its deployment for financing

direct as well as indirect housing programmes. In fact financing for housing

particularly for weaker sections has been continuing as part of the twenty

polnt programme from 1975. Besides a good number of banks have

established their own housing finance subsidiaries in order to meet the

challenges of financing housing in a planned and systematic way.87

As we find in Economic Review, Government of Kerala (1995),

Kerala State Co-operative Housing Federation is an apex financing agency

in the Co-operative Sector. It extends financial assistance for the

construction of houses through its 207 affiliated primary societies. Kerala

State Nirmiti Kendra has been established with the objective of promoting

low cost housing and habitat development.=

Kerala Economic Review 1994 states the involvement of institutional

finance for housing. During 1993-94, KSHB and Housefed together have

raised more than Rs.56 crores for housing activities in the state.OS

Thomas Paulose (1988) gives a true picture of housing policies

and programmes in kerala. It has been formulated mainly on the basis of

the policles and programmes in the respective five year plans, with

modif~cat~on to suit, the physical, social and economic conditions,

87 Usha Patel ( 1 996) "Development Concept, Rural housingWKurukshetra May - June special issue pp. 101-102

88 Government of Kerala (1995) Economic Review 1995. State Planning Board, Thimvananthapuram

89 Government of Kerala (1994) Economic Review, State Planning Board, Thimvananthapuram.

emphasls has been given to improve the quality of life of the weaker

sections of the society.g0

Peter Malpass (1 991) depicts the need for housing finance. Housing

IS unavoidably, expensive to produce. In order to build houses, a builder

brings together land, labour and materials often using borrowed money to

finance. He continues his argument by making a distinction between

development finance and consumption finance. The former refers to the

money which is needed to pay for the initial construction of housing whereas

the latter refers to the ways in which the households meet the cost of buying

or renting. What consumers need is some method of spreading the cost

of housing over a long period, thereby reducing the cost to an affordable

proportion of regular income.g1

According to Carole Rakhodi (1991) the finance for house

construction and purchase is in very limited supply in the third world. The

formal sector housing finance is only available to thesmall portion of the

urban population. This has led to increase in finance systems including

surveys of international literature.=

According to Deepak Razdam (1990) the sources of informal

savings are seen to be cash and bank deposits, assets like jewellery,

loans from friends and relatives and to a small portion of fundsfrom money

lenders. The government plans to bring about appropriate changes in the

90 Thomas Paulose K (1 988) Innovative approaches to housing the poor - Role of voluntrary agencies - a success story - Published by Mrs. C . Mathews. 6-8, Jawahar Nagar. Tvm, p.7.

91. Peter malpass and Alen Murie (1 991) housing policy andpractice". The financial framework - Fourth Edition. Mac Milllan p. 183.

92 Carole Rakhodi (1991) Housing Markets in the third world cities. Research and policy into the 1990s. p.50.

approaches of the existing financial institutions so as to make them more

responsive and accessible to households. The NHB would be encouraged

to concentrate on the promotion and regulation of housing finance

inst~tutlons in the public and private sector.g3

Pravin Singh of Mumbai writes in the Financial Express about the

reduction of Interest rate by the HDFC by 1% in order to encourage NRls

to Invest in the Indian real estate. NRls especially from West Asia and the

U.S have shown interest in real estate in lndia due to low property prices.%

Aaron Chaze in his article on HDFC in the Financial Express

states that while HDFC has reported a growth in business volumes, it

does very llttle to inspire stock market. In his opinion the effect of lower

lending rates have beer) absorbed and interest spreads have begun to

improve

Abha Lakshmi and Atiquir Rahman in their study on housing and

health in the low income households in the Aligarh city are of the opinion

that income determines the man's way of living, his housing conditions,

his food habits and his local residence. A proper housing is the basic need

to attain good quality of life."

Un~ted Nation's Report on Human settlements Habitat 11 (1996) in

their discussion on global plan of action stresses the importance of financial

93 Deepak Razdam (1990) "Housings managable challenge" Yojana Publication Division. New Delhi, Oct. 1-15. pp. 9-10.

94 Pravin Singh (2000) Financial Express (Daily) "Economy and Banking" Tuesday Jan. 18. 2000 Kochi, p. 11 'HDFC cuts NRI loan rates by 1%.

95 Aaron Chaze (Jan. 2000) Financial Express. Kochi. Thursday. 13 Jan. "HDFC Volumes up" -Profit growth stagnates p l

96 Abha Lakshmi Singh and Atiquir Rahman (1998) Indian Journal of regional science vol. XXX No.2 . Regional Science Association of lndia 'Housing and Health in the lower income households"

~nstitutions for housing and their duty to give priority to the weaker sections

of the society. It is said that the housing finance serves as the conventional

market but does not always respond adequately to the different needs of

the large segments of the population, particularly those belonging to

vulnerable and disadvantaged groups. Therefore it is necessary to

integrate housing finance into the broaderfinancial system and to use the

existing instruments or develop new instruments as appropriate, to address

the financial needs of people having limited or no access to credit.97

P. Muthuram (1999) is of the opinion that housing finance, particularly

retall housing finance of late is acquiring great importance because of

government's incentives and stability in prices. All the banks and institutions

are plunging to have their own share in this sector. The finance Act of 1999-

2000 has given greater thrust to housing and house financing activities.

Housing flnance offers safe, secured, profitable and diversified asset

portfolio 98

Urbanisation has led the 21st century societies to a severe housing

problem and hence the problem of housing finance. As Sanjay Gupta states

"urbanisation has had its toll on Indian Social Matrix, where an agriculture

based soc~ety residing in indigenously managed conglomerations is

gradually shifted to towns and cities. Marginal utility of housing became

so high that speculative pricing came into interplay making bare necessity

unnecessarily

9i' United Nations Report of the Human settlements Habitat 11 (1 996) A/CONF/165/14, Global Plan of Action p.40.

98 Muthuraman P ( 1 999). 'Housing Finance in 1ndianIBA (Indian Bank Association) Bulletin, Sept. 1999 p . 26

99 Sanjay Gupta (1 999) "Dream house at affordable cost. " HDFC Pioneer in home loan. Shelter Vol. 1 1 . April 1999

According to J.K. Gupta, housing is known to make substantial

contribution to gross national product and gross capital formation of a nation

and has far reaching consequences on the health, efficiency and

economy.1W

Vijaya Bhole in her research thesis cites that the economic factors

seem to have placed severe impediments in the house building activity.

Among the most important economic factors rising land value seems to be

major constraints in house building activity. She mentions that taking

advantage of the wide gap between demand and supply of urban land,

the speculators are operating in the metropolitan area in a very

unscrupulous manner for earning money.lol

David Drakakis speaks of the necessity of slum improvement

programmes by stating that innovative approaches to the housing

shortages of the third world, broadly encompasses government subsidised

programmes which are involved in varying degrees, co-operation between

the conventional and non-conventional sector.102

In the opinion of Claude Gruen, urban renewal has not provided

equivalent price standard dwelling units to supplant this competitive function

of the slums. The economic determinants of housing quality work within

the parameters of income and willingness to spend for housing exhibited

by the population of urban area.lo3

1 DO Gupta J.K. (1 998) "National Housing and Habitat Policy Shelter- A HUDCO - HSMl Publication, New Delhi.

101 Vijaya Bhole (1 986) "Residentialland use development in metropolitan cities - Ph.D. Thesis, Osrnania University. Secunderabad, p. 24&- -.----

102 David ~rakakjs - ~~i f f i~( lS3l~73%inisat ion, process - Government Public Housing ch.5. p. 113, Croorn Helm.

103 Claude Gruen (1970) "Slums and urbanisation" - Urban renewals' role in the genesis of tomorrow's slums D. 345.

Leland and Leo Grebler (1977) in their decision on Government

schemes on housing state that the housing boards and development

authorities though are the only responsible authorities to care for the

housing, unfortunately they are found to be exploiting the common man by

creatlng deliberately a dearth for housing by building their monopoly and

doing extensive publicity and ultimately not responding to the housing needs

of the s o ~ i e t y . ' ~

Keith and John (1980) bring in a new picture of housing problems.

They say that pubic housing policies of one sort or another are obviously

of great importance in advanced capitalist systems. Explaining the general

role of the state and linking this to its specific role in housing markets is a

crucial problem for Marxist theory. The sprawling growth of suburban

housing estates around major cities has been one of the most striking

aspects of post war urban development in the United States.'05

If housing were produced and supplied at lower unit cost, new

dwellings could be built in larger number. Reduced unit cost may be

achieved through the application of technology without sacrificing the

quality of the product or through the construction of dwllings of lower quality,

says Charles Abrams.lffi

K.V. Varghese while explaining the main housing problem

states that housing sector is indissolubly linked with financial sector. He is

104 Leland S. Burns and Leo Grebler (1 977) 'The housing ofthe Nations analysis and policy in a comparative framework. Macmillan press, effects of housing investment in a national economy

105 Keith Basset and John R. Short Routledge and Kegar Paul (1980) Housing and Residential structure - alternative approaches. Boston and Henly p.222.

106 Charles Abrams (1971) 'The language of cities," New York viking press p.243.

of the opinion that housing is a very expensive commodity which needs

heavy capital outlay testifies to the vital role of finance in housing sector. In

fact, housing leans heavily on finance which makes housing a function of

finance to a considerable extent.lo7

According to Prof. W.G. Grigsby the matter of adequate financing

for ageing sectors of the housing stock is a large component of the total

residentla1 finance problem.lW

The main characteristic of housing finance is cited by Charles

Abrams As for him housing requires special kind of finance mostly and

preferably long term finance.lq

Another important characteristic was explained by C.M. Palvia. He

states that housing finance is not as self-liquidating as agricultural finance

and industrial finance. Investment in agriculture or industry yields quick

return. So the lenders are reluctant to lend to house builders. Hence housing

finance is much more sensitive to the level of interest rate rather than

agricultural or industrial finance.'1°

The four approaches formulated from the available literature on

housing are urbanisation approach, marxian approach, decentralistion

approach and the developmental approach. Housing Finance is widely seen _,

107 Varghese.K.V. (1988) 'Housing problem in 1ndia"Eurekha publications New Delhi.

108 Grigsby.W.G. (1 967) "Home finance and housing quality in ageingneighbowhoods". p.105, Adam Nevitt. Macmillan. London, New York.

109 Charles Abrams (1964) 'Housing in the modem world, London. Faber 8 Faber - 24 Russel square

11 0 Palvia C.M. (1 965) 'Principles andpractices of mortgage financing with particularreference to present situation in ESCAFE region, paper presented at the symposium on housing finance New Delhi

as a difficult subject, inherently complex and constantly changing. The basic

issue IS the relationship between housing costs and consumer incomes.

The vital role played by the private and public sector to ease the financial

burden of the house builders in both developed and developing nations is

to be identified. The purpose of this is to learn from the past experience

and to effect major changes in order to establish a coherent overviewwhich

will provide a basis for evaluating the prospects for the new millennium

housing scenario.

2.9 URBANISATION APPROACH:

Shelter is basic human need. The traditional definition of housing

is the highest andfines(.prodtlctsfcivilisation. Every human being require;

shelter, a roof over one's head and for most of the individuals it means a

home, a permanent 'base' where a greater part of one's life is spent. \ ! i, Further, it is also identified that housing in an urban setting plays an . ; i.

important role in the use of energy, the design of transportation networks

and commun~cation system.ll'

Although the definition of housing varies, majority of the scholars

define as building or a part of the building which is designed to be occupied

by a single family or an individual. R. Neutra (1951) broadly described

housing as "interior and exterior spaces" and specifically as "the nursery

in which the child spends its formative years, the bath in vhich the essentials

of cleanliness are taught, the structure containing the rooms, the street'to

which the structure bel~ngs.""~

111 C.S. Yadav (1987). Perspectives in urban geography Vol.ll "Cities and Housing"- Concept Publishing Company, New Delhi.

112 Neutra R. (1951) 'Survival through design' Oxford University press. New York.

The traditional definition of housing as shelter, a 'commodity' or

'product' IS not adequate because housing includes more than just shelter,

states Stewart (1 979): Housing is more approximately defined as a process

tnvolvlng the interaction between an organism and environment. The

organlsm may be single individual, a family or a communal group. The

environment refers to natural surroundings along with political, economic,

social and cultural environment surrounding the organi~rn.~'~

Rapport (1964) states that it is a truism that various dwelling forms

result from a complex phenomenon which defies any single explanation

but responds to the environment of people holding different attitudes and

ideals. Various religious social, cultural, physical and economic factors

form the base of different houseforms which vary from culture to culture

and from area to area.lq4

A comprehensive definition of housing is provided by Samuel Aroni

(1978) who postulates that "every society developed or developing has a

bas~c need for housing. For every individual, alone or a part of a family

unit, be it a cave or a castle is more than a physical shelter. It should be a

residing place in which where one fulfils the fundamental purpose of human

society. For the individual or the family, the house is both shelter and symbol,

physical protection, and physiological identity of economic value and a

foundation for security and self r e ~ p e c t . " ~ ~

11 3 Stewart K K a y (1 979) 'Twentieth century from an ecological perspective" - Housing design - the story of housing - Macmillan publishing co. Inc New York p.449.

114 Rapport Amos (1964) House form and culture; prentice Hall Englewood Cliffs N.J. p.46,

11 5 Samuel Aroni (1 978). "Housing Policies: A developing world perspective" -Housing Science, Vol. 2, p. 299

2.9.1. Ecology and Housing design:

It IS a general belief that human desires change in the societal

context, so must the design of the shelter change. Housing form in an urban

sett~ng 1s a direct consequence of a whole range of socio cultural factors

which takes place in a broad ecological context. Due to technological

innovat~ons, the method of planning and housing code have changed

considerably. The change in the design of housing is the consequence of

a whole range of social, cultural and environmental factors which occur in

a broad ecological framework. The adoption of technological innovations

is always influenced by the social values of the group in which an individual

resides Housing designs then are influenced not only by the natural

environment, the size and characteristic of population and the available

technology, but also by the social organisations within society, economic

and political activities and cultural values.l16

A given culture has a symbolic image and meaning of housing.

Rapport (1 964) has rightly remarked that housing design changes as the

social image of 'right' and adequate. As a matter of fact changes in design

occur as a result of reactions to symbol and fashion that occurwithin the

limits of available materials and technology.l17

1'16 Stewart K .Kay . op. cit., p. 453

1'17 Rapport A . o p , a t p. 130-135.

Slum clearance is hailed as a step towards the goal of the 1949

Houslng Act by the United State Congress, a decent home and a suitable

living environment for every American family.I18

As old slums are levelled other urban neighbourhoods begin to

breed new slums. The slum clearance projects themselves generate effects

that are addlng impetus to a process that results in the cumulative

development of blight in the older, low rent neighbourhoods outside the

clearance areas. Agreement as to what constitutes the slum is by no means

universal, slum criteria are established subject i~ely .~~~

In order to sustain the global environment and improve the quality of

living in the human settlements the Habitat Agenda and Istanbul Declaration

comm~tted itself to sustainable patterns of production, consumption,

transportation, settlements development, pollution prevention, respect for

the carrying capacity of eco systems, and the preservation of opportunities

for future generations. A declaration of co-operation in a spirit of global

partnersh~p to conserve, protect and restore the health and integrity of

earth's eco system.IZ0

Frederick Engels brings out in his writings on The Housing Question

(1 970) the hollowness of the philanthropic approach to housing and asserts

that the basis of human welfare is not pity and compassion, but the principle

of equal rights and opportunities. The present chaos in urban life is a product

118 Unitedstate congress, The Housing Act of 1949, public law 171.81st congress, 1st session.

11 9 Seeley John R (1 959) "The slum; its nature, use and users Journal of the American Institute of Planners Vol. 25 Feb. 1959.

120 Habitat Agenda and Istanbul Declaration (1996) 11 United Nation Conference on Human settlements (UNCHS) 3-14 June United Nations. Department of public information, New York p. 8-10

of social order that caters to the need of a chosen few. In such a society

the housing shortage is no accident; it is a necessary institution and it can

be abolished togetherwith all its ill effects on health, environment etc. only

if the whole social order from which it springs is fundamentally

refash~oned.'~'

2.9.2 Influence of Industrial revolution:

It IS an obvious fact that the industrial revolution in the nineteenth

century has greatly shaped the technological innovations which in turn have

influenced the design and location of housing. It had also influenced the

form and quality of human environment, population, city growth, social

organisation family patterns and housing.122

In the words of Stewart "the industrial revolution with its two

attendants, the increasing specialisation and high level of technology,

brought changes in the social and family values and family structures which

In turn influences the design of houses.lz3

Ogbum (1 968) states that the families differ from each other in terns

of choice of location and capacity to pay for housing and the structure and

location of family is changing constantly which in turn influences the housing

design. As a matter of fact family size and stage in the life cycle have

greatly influenced the type of housing that is needed at a given point in

t ~ m e . ' ~ ~

121 A.R. Desai and Devdas Pillai (ed) (1970) slums and urbanisation- Bombay popular prakasan - reprinted from the housing question by Frederic Engels. Lawrence 8 Wishart Ltd. 1942.

122 C.S. Yadav (1987) cities andhousing: op. cit., p.6.

123 Stewart K . (1979) op. cit.. p.476.

124 Ogburn William F. (1968) 'The changing functions of the family" in Robert F. Winch and Lonis good man - selected studies in marriage and family p.27.

Increase in the size of the family demands more space within the

house and also the demand for ownership of a single family home increases.

This demand reaches the peak at about the age of 35-54and thendeches

slightly as families in the contracting stage of the life cycle begin to reduce

the slze of their homes in response to the decreasing family size.125

The world housing situation is grave; it has worsened considerably

In less developed countries. Richard F Muth and others have explained

the factors affecting the conditions of urban housing. The dismal picture of

the world housing is portrayed by the estimates for the year 2000. (United

Nations World Housing Survey, 1974) It is estimated that in the year 2000

the urban populations of developing nations will triple and 65% of its citizens

will live in urban life. It is further highlighted that the present day urban

~nfrastructure was proposed to handle a 2 to 4 percent increase in the

annual shelter need.lZ6

According to Richard (1968) the two of the most important urban

problems of today are those popularly described as urban blight and

suburban sprawl. Urban blight is to a very great extent responsible for

suburban sprawl. The former refers to the poor and perhaps deteriorating

condit~on of central city housing stock, the latter to the striking tendency in

recent years for population to grow at more rapid rates in the suburban

parts than in their older, more centrally located parts.lZ7

125 Stewart K . (1979) op. cit. p.478.

126 United Nations world housing survey 1974.

127 Richard F. Muth (1968) Issue in Urban Economics. Based on papers presented at a conference sponsored by the committee of Urban Economics of resources for the future.

The growth of slum or poor quality housing in recent years are based

upon the factors that influence its supply schedule. In many, the increase

In the supply of poor quality housing results from a decline in the demand

for good quality housing. A variety of reasons such as the development of

automobile transportation, physical obsolescence, poor initial planning and

failure of local governments to supply a proper level of municipal services

have been suggested for the initial declines in the demand for good quality

houslng. Another group of forces which might tend to increase the supply

of poor quality housing might be lumped under the heading of market

imperfections and external economies. It is frequently asserted that capital

market imperfections prevent property owners from undertaking

expenditures on existing residential real estate in the older part of the

cities that would otherwise be privately profitable or socially de~irab1e.l~~

Planners and others have long felt that non-residential land uses

tend to reduce the volumes of surrounding residential properties. Such

effects would of course, provide a rationale for zoning regulations which

limit the uses to which land may be put in different areas of a city. Davis

and Whtnston (1962) have argued that a single property owners'

expenditure for improvement of a structure tends to make the immediate

surrounding more desirable. Thus owners of surrounding properties benefit

too, and are discouraged from making improvements in their own

properties. In this way from the social view point too little has been spent

on impr~vement.'~~

128 lbid.,

129 Otto. A. Davis and Andrew 6. Whinston (1961) 'The Economics of Urban Renewal"- Law and Contemporary Problems vo1.26 (Winter 1961) PP. 105 - 117.

2.10 DECENTRALISATION APPROACH AND CENTRALITY OF FINANCE

According to Ball (1988) housing is unavoidably expensive to

produce. Even the most minimal dwelling occupies land and relatively large

amounts of materials and labour for its production. In order to build houses,

a builder brings together land, labour and materials often using borrowed

money to finance the process.lm

Boddy (1 976) explains that at the end of the construction period the

builder needs to realise or convert into money the capital invested in the

completed dwellings so as to finance the next site and so on. The builders

profitability depends on the rate at which capital circulates from the money

form into the built form and back again. As this highly simplified model of

the construction process indicates builders have a strong interest in rapid

ctrculatton of capital.131

Holmans (1987) expresses the consumer% point of view. The high

cost of housing means that most people cannot afford to pay the full cost of

su~table accommodation from income or savings, but neither can they

postpone their consumption until they can afford to buy outright. The high

cost of housing in relation to incomes means that consumers require some

method of spreading that cost over long time.13>

Historically it was private renting which provided the standard

method of cost spreading. Landlords would typically invest their own or

borrowed money in houses produced by speculative builders and they

130 Ball. M (1988) Rebuilding Construction, London. Routledge

131 Boddy. M.(1976) Building societies and owner occupation, in Housing and class in Britain. London, Political Economy of Housing workshop.

132 Holmans. A. (1987) Housing policy in Britain, London. Croom Helm.

would then draw an income in the form of rents paid by tenants. This form

of prov~sion came to dominate the housing market in the nineteenth century ',

Britain. but it was a system which was never capable of producing enough

housing to meet demand or of guaranteeing that the poor could occupy

housing of a satisfactory standard. There remained a significant gap

between the price of decent accommodation and the rent that could be ,:

afforded by a large proportion of working c l a s ~ . ' ~

The housing goals that have been established by Congress in

Brita~n call for a massive programme to provide suitable housing at the

lowest poss~ble cost for Americans of all races and all economic levels.

The ex~st~ng system 1s fragmented, unsystematic and not oriented to the

pecul~ar requirements of the housing process. The financing of housing

offers corporate and institutional investors attractive opportunities for long

term prof~t '"

Many local housing authorities particularly rural ones have operated ; \ ,

on a decentralised basis for many years, but others are moving at varying' ; '

speeds in this direction. Decentralisation is a verygeneral term which hi& , I

a great variety of specific objectives and practices. Managerial objeqlves

are concerned with the efficiency and effectiveness of the managkment

and maintaining the stock in good condition. The political objecthes are

more far reaching, they range from providing a friendlier service tp tenants

to altertng fundamentally the relationship between the local authority and

res~dents and therefore between public, landlord and tenant. The political

133 Peter Malpass (1 990) A new country of Social Housing. Stuart Lawe and David Hughes (ed) London

134 C.A. Grubb . M. I . Phares (1 980) 'Industrialisation a new concept for housing. Praeger publishers Newyork, Washington. London, p.36

objectives represent the major difference between the recent

decentralisation initiatives and those pursued in the 1970s, which were

mainly concerned with managerial objectives.lS

It is evident that the new initiatives in Britain - privatisation,

decentralisation a o d ~ o ~ l m u ~ i t y ownership are different from each other.

There is no consensus about the appropriate direction and different people

are pursuing different visions of what the housing system should look like.

Nor are these visions confined to the housing sector, but can also be seen

to be ~nfluencing measures such as privatisation and decentralisation in

other social services. However, they appear to be more developed in

housing than elsewhere, which is probably because of the unique nature of

housing as a commodity and of the organisation of the housing system.lS

As Whitehead (1983) observed housing is essentially a private

good with fewexternalities. In other words the benefits and disbenefits of

housing largely accrue to the individual owner or user of the property, rather

than to the community at large. Whitehead therefore concludes 'housing is

a readily marketable commodity suitable for private provision in a mixed

economy. Indeed the housing system already constitutes much more of a

mixed economy with public, private and voluntary organisations all involved

~n its prov~sion.'~'

Hadley and Hatch (1981) advocate a change of emphasis away

from the traditional objectives of state provided social services, of

135 Hambleton. R . (1 978) Policy, Planning and local Government Hutchinsion London

136 David Clapham (1990) Assistant Director Centre for Housing Research glasgow. 'Public Housing; current trends and future development Ch.9. the new face of public housing.

137 Whitehead. C. (1983) privatisationandhousing in J. Le grand unwin. London . P.117.

uniformity, hierarchical accountability and administrative standardisation,

to a system relying on community based organisation and designed for

flexibility, accountability, to the consumer and disprofessionalisation.~~

2.10.1 Effects of housing investment on national economy:

2.10.1.1 Effects on employment:

Dunlop and Mills (1968) analyse the labour market. Home builders

use a dual labour force skilled workers or key men and transitory workers

are hired and trained as needed. Even in the United States the task of

training a man to do non-keyman's work on a home building site is not long

and difficult. Such training is usually informal, consisting of thejob instruction

by a more skilled mechanic with work experience. In periods of labour

shortage in construction home builders hire and train many persons.l"

Further, there is easy mobility into and out of the U.S. residential

construct~on industry. C. Swan (1971) found that the annual percentage

change in contract construction employment 1949-70, had a co-efficient \ of 1 01 with respect to the annual percentage change in the contract !

?

construction labour force during the same period. The increase in

constructlon employment has attracted labour into the sector almost man j

for man. There is further. substantial flow of manpower into and out of ,'

construct~on in response to changes in other job opport~nities.'~~

138 Hadely R. and Hatch.S. (1 981) Social welfare andthe failure ofthe state, Allen and Unwin London.

139 J.T. Dunlop and D.!. Mills (1968) Man power in construction; A profile of the industry and projections to 1975. P.245.

140 C.Swan (1971) Labour and material requirements for housing Washington, Brookings Institution P.358

In terms of the macro economy, housing ranks fairly high as an . employment generator This IS due In part t o ~ ~ ~ t m r c l lrnkages whlch

- H'

produce jobs in bulldlng materials and related lndustrles Forward llnkages

exemplified by housing induced consumer purchases of furnishings and

other equipment. Construction moved upto fifth place as a generator of

low skilled jobs and stood second as an employment generator for

profes~ionals.'~'

2.10.1.2 Effects on income and saving:

Job creation through residential construction generates income that

spreads throughout the economy by means of multiplier linkages. The

estimates of income multipliers vary somewhat among countries but

calculations for Columbia, Korea, Mexico and Pakisthan converge roughly

on a multiplier of two.142

Aside from generating income multiples during construction, houses

may become income generators during occupancy. This is the case when

dwelling accommodates economic activities alongside domestic

functions. Particularly in Latin America, homes also house small business

operations. Housing may also generate income after construction when it

IS operated as investment property, though perhaps not by the intent of its

sponsors. In Kenya owners of dwellings constructed with the assistance of

direct Government financing and land subsidy often sublet their homes at

rents form thirty to ninety percent greater than their own payment^.'^

141 C . Arand (1973) Direct and indirect employment effects of Eight Representative types of Housing in Mexico, in C . Arand et al.. studies on employment in the Mexican Housing Industry.

142 National planning office of Columbia (1972) Aspectos Cuantitatives delplan de Dessarrollo, Bogota.

143 G . Schechter et al., (1963) Report on co-operative housing andrelatedactivities, prepared for the agency for lntemationalDevelopment, Washington Foundation for co-operative housing P.10 and L.N. Bloomberg and C.Abrams, U.N. Mission to kenya on Housing (Newyork.1964)

Experience indicates that the desire to buy or upgrade a home is

one of the most potent stimulants of consumer saving since expanded

saving is a crucial condition for alleviating the chronic capital shortage of

LDC, this is of particular importance to low income nations. To the extent

savlngs generated by anticipation of home purchase represent net

addition to the total funds available for investment, they help to reduce

current consumption and therefore moderate increases in consumer prices

and unfavourable effects of imports of consumer goods on the balance of

payments 144

2 10.1.3 Effects on the level of prices:

Expansion of residential construction in LDCs is widely believed to

be inflationary or atleast to stimulate h~gher price Increase than most other I

investments. The relationship between housing investment and prices , . . . . . .

requires some theorekal clarification. An' crease in the demand for any .* ! 'v" !

good w~l l not only affect the price of that good but also the prices of goods ',

and services to which it is linked through derived demand. The extent of .:

i

the price effect w l l depend on the source of f~nancing which stimulated

the demand increase and on the tightness of the linkages between the

final demand sector and the intermediate supply factors. With expenditure I I budgets of economic units fixed in the short run, the increase in housing

demand must be offset by decreases in the demand for other non-housing

goods. The expansion of building may generate increased imports of

construction materials and equipments, but trade flows of non-housing

goods are not necessarrly changed or their change is indeterminate.'"

144 Organisation for economic co-operation anddevelopment, committee for invisible transaction. capital market study general report paris (1967) P.125.

145 Leland S. Burns and Leo Grebler (1 977) "The Housing of Nations - analysis andpolicy in a comparative framework - Macmillan press.

Much of the discussion deals with 'sectoral demand shift inflation,

(rap~d shlft in consumption demand), a phenomenon analysed by the

structuralist' school of development economist who maintain that supply

rnelasticities combine with downward inflexibility of prices and money

wages to generate substantial inflations. Indeed sectoral shfts may be more

inflationary in LDC because supply elasticities are significantly lower than

in developed countries

Turntng to linkages the impact of domestic prices of increasing

house production depends on the supply elasticities of backward linked

goods and services and on the flexibility of prices throughout the economy.

With rapid shifts in demand for construction the production of required

inputs approaches short run capacity. Again if the increase in the final

houslng demand is domestically financed, inter sectoral reallocation takes

place and the prices would be expected to decline in sectors which

experience shrinking demand for their output. The price offset wil l not occur,

however if the market structure in the affected non-housing sectors prevents

price flexibility. In this event, the result will be general inf1ati0n.j~~

2.10.1.4 Effects on the balance of payments:

Wrth production of varying degrees depend on imports, house

construction influences a nations' balance of payments position though it

affects on the trade balance. The weight and bulk of many construction

inputs, the relative case of substituting indigenous for foreign products and

146 C. Schultze (1 959), Recent inflation in the Unitedstates, joint Economic Committee, U.S. Congress 86th Congress I session. (Washington; U.S. Government printing office)

14.7 lbid..

the geographic dispersion of production, tend to make housing one of the

industries' potentially least dependent on imports. While luxury housing in,

many LDCs has high import requirements, this doesnot hold for housing to :i : I i , ! ,

accommodate those currently living at very low standards. Since imported ; i items make up such a small proportion of total inputs, their price elasticity 1 of demand may be quite high. Hence changes in 'taste or other factors j

tr~ggerlng new demands or an increase in the average quality of new '

housing, can generate a rapid growth in payments for imports for some 1 classes of materials. Electrification for example, can lead to derived

I

demands for electrical fixtures which domestic industry is not equipped to

supply Thus imports of building materials and supplies to LDCs may !

expand for sometime until domestic substitution stimulated by secular

demand shifts take their place.'" i

2.11 MARXIAN VIEWS ON --.- H O W N G : -- Marx himself did not write very muoh on housing. There are only

some passing references in "Capital" to slums and urban development in ,'

the nineteenth century England and also some brief points on urban ground '.

rent, Engel wrote more and drew directly upon some of Marx's economic

theory at several points.'49 .?

A number of other authors have gone back to his early work and

noted how his description on concentric zone in the city has superficial

similarity to the later concentric zone model of B u r g e s ~ . ' ~

The differences are also important. Engels closely related his

concentric zone to an analysis of class structure. The industrialisation of

148 Housing of Nations, op, cit., P.203.

149 Engels ( 1 958) The condition of the wofking class in England. Black well, London.

150 J . Anderson (1977) "Engel's Manchester', Industrialisation, workers housing and Urban Ideology", political economy of Cities and Region No. 1, Architectural association London.

Manchester involved a growing spatial separation which stamped new

patterns of residential differentiation on the old commercial city. Whereas

Burgess model of Chicago was based more on a description of the

residential succession of ethnic and status groups.151

Engels addressed himself more directly to housing issues in his

later work "On the Housing Question" (Engels 1970) he makes a number

of ~nteresting and provocative points. "On the Housing Question" is partly

an attack upon Proudhon who had argued that workerlcapitalist

relationship was basically similar to the tenantllandlord relationship. Engels'

denies this arguing that housing problem is not directly the result of the

exploitation of the worker, as a worker by capitalists. The tenantllandlord

relationship takes the form of an ordinary commodity transaction obeying

the normal rules of the market. Rent reflects building and maintenance

cost, land values and the state of supply and demand. The rent payment

involves the transfer of already created values(wages) to the landlord; the

transact~on does not involve the exploitative creation of surplus value as

does the workerlcapitalist relation~hip.'~~

"On the Housing Question" is also partly an attack on reformist

support for home ownership for the working class. Engels directs much of

his fire against Sax who supported the building society movement as a

means of encouraging home ownership giving workers economic

independence and a stake in society and ultimately promoting social

stability. Engels argues that lowering housing costs would simply result in

lower wages being paid by capitalists; home ownership would tie workers

151 Richardson. H. W. (1977), The New Urban Economics Pion, London. 152 Engels. F (1 970) "On the Housing Question, progress publishers Moscow.

more firmly to particular factories and employers and reduce their

bargaining strength and building societies were either speculative

organlsations or they catered primarily to the petty Bourgeoisie. He quid

see no solution for the working class in building societies or home

ownership. Simply put, the housing problem was inseparable from the

capitalist mode of production; it could only be solved by the abolition of

that mode of production; the abolition of the big city and ending of the

separatton of town and country.lS

21.12 DEVELOPMENTAL APPROACH:

2.12.1 Prospects for the future:

Malpass (1 990) and Murie (1 990) explain that space doesnot permit

a full account of the new financial regime for local authority housing.

However, ~t is important to acknowledge that the system which came into

operation in April 1990 in Britain, embraces both capital and revenue

finance. Throughout most of the century, housing expenditure by individual

local authorities was not directly controlled and that the central Government

sought to exercise influence via subsidy system. In the late 1970s the

introduction of the Housing Investment programmes (HIPS) placed an

annual limit on borrowing and in 1980s limits were placed on the use of

capital receipts from sales of land and houses. The newfinancial regime

for the 1990s represents an attempt to lighten central Governments control

of local authority, capital spending in general and of particular importance

in housing 1s the rule that reduces authorities ability to spend capital

receipts from Council house sales.154 - 153 Keith Basset and John R. Short (1980) Housing and Residential structure - After native

approaches. Roultledge and Kegan paul, London. Boston and Henley.

154 Malpass. P. (1990) and Murie A (1990) Housing policy and practice 3id (edn) London. Macmillian

The new regime is consistent with broad policy trend. It is also

consistent with past legislation to the extent that it combines aspects of

long and short term thinking. Governments have to consider short term

feasibility as well as long term strategy and 1989 Act provides a good

example of the centres' readiness to sacrifice principles to feasibility. In

terms of the historic problems of financing council housing the new regime

represents a clear position. As an approach to the financing of public

housing it is grounded in a particular ideological perspective on the future

role of Council housing and local Government.'"

2.12.2 Proposals for reform:

The most far reaching proposals for the reform of housing finance

in Britaln in 1970s were put forward by Kilroy (1978). He argued that green

paper on housing policy had rejected the fundamental reform of the system

of tax relief on mortgage interest. Kilroy advocated "organic reform" M i c h

would involve, interest rate relief, ceiling on mortgages etc.'"

Kilroy (1 980) however revised his views regarding organic reform.

He argued that mortgage tax relief above the basic rate of tax should not

be axed. nor should the (then) f 25,000 ceiling be lowered.lS7

Llpsey (1982) also favoured the ending of mortgage tax relief, but

phased over a period of five years in the form of a 20% reduction every

year

- 155 Stuart Lowe and David Hughes (ed) (1991) ' A newcenturyofSocialhousing. ch.5, financing

of public housing (Peter Malpass)

156 Kilroy ( 1 978) "Hous~ng finance, "organic Reform'Labour, Economic, Finance and Taxation association. London.

157 Kilroy (1980) "The financial Implication of Govt. policies on home ownership". S.H.A.C. London

158 Lipsey D . (1982) A. Bill, Sunday Tirnes, 28 November,1982

More radically, Holmes (1981) suggested that not only should tax

relief be abolished at higher levels but the remainder should be phased

out in annual stages over 10 years.lS9

All the proposals to a greater or lesser extent would reduce the

amount of money which existing owners or first time buyers would have at

their d~sposal for house purchase ceferis paribus. The level of effective

demand would be reduced and hence lower house prices in real terms.Im

2.12.3 Development philosophy and housing provision:

One of the most interesting attempts to relate housing investment

to overall growth patterns was that of William and Mary Wheaton (1972)

who put forward a model which attempted to illustrate howthe allocation of

housing resources changed at various stages of economic development.

Their purpose was to discoverwhich stage was likely to produce the best

returns. In terms of capital formation, for the lower cost. Almost inevitably

self-help housing was identified as the best investment value, although the

rationale for this was not clear. One of the main limitations of this, like

many other models was that it was conceived in a political and social

vacuum. The realities of established power structures, whether capitalists,

socialists or totalitarian were conveniently ignored.lB1

For the early stages of economic development and urbanisation,

prior to any large Government Commitment to housing programmes, the

159 Holrnes. C. (1 981) The Decay ofBritish Housing, New states man 18 December 1981.

160 Paul. N. Balchin (1987) Housingpolicy an introduction, Croorn, helm, London, Sydney Dover, New Hampshire

161 Wheaton. W.L.C. and Wheaton M.F. (1972), Urban Housingand EconomCDevelopment, in D.J. Dwyer 141-51

model puts forward a gradual, common distribution of deployment of

resources Throughout this phase, the resource share of lowcost housing

IS commensurate with the growth of urban migration and the resultant

appearance of squatter communities. The limited public housing

constructed durlng these early stages is mainly for Government and quasi-

Government employees thus expanding slightly the middle level of resource

allocatron lS2

Despite the success of the reallocation programmes and the

promotron of development in more remote regions, population growth has

cont~nued in the largest cities and considerable housing problems remain

in China and Soviet Union. Forced relocation in the rural areas has been

attempted in both Countries as well as in vietnam but any success in terms

of population reduction would seem to be short lived. As Falkheneim (1 973)

has noted, the dynamics of hyper urbanisation defy simple solutions as

much in the totalitarian states as elsewhere.lBJ

A commitment to urban growth does not necessarily ensure a

commitment to welfare programmes in the cities. However many

development strategists such as Friedman (1979) and Wu (1979) see this

as an avenue for increased capitalist exploitation rather than improving

the welfare of the urban poor. Unfortunately as far as the urban poor are

concerned the type of housing construction generated in the third world is

primarily geared towards the middle and upper income groups.'"

162 David Drakakis -smith (1981) Urbanisation, housing anddevelopmentprocess, Crook Helm London

163 Fa1kheneim.V.C. ( 1 973) "Urbanisation in China, problems of communism Vol. 22 pp. 77-80.

164 Friedman. J . ( 1 979) "The Crisis of transition; a critique of strategies of Crisis management, development and change Vol. 10. No.1 pp. 125-153(177) Wu. C . T. (1979) Economics or polities. The new regional planning, proceedings of the 8th waignicseminar, University of Papua New Guinea. Port Moresby.

2.12.4 Focus on low income housing:

The plcture that has been emerglng in the course of the study of the \

dlstrrbutlon of loans wthrn the houslng f~nance sy$tem IS one rn which the i

early 1970s saw a steady growth in the proportron of loans going to the

most comfortable 20-30 percent of the urban population. Nor was the trend ,; strictly a function of saving and loan system's sources of funds. Not I withstanding the fact that a sizable number of families living on moderate 6

8' 1:

Incomes was given opportunities for home ownership that never had existed

prior to the establishment of the National Housing Bank, it was clear that j the financial apparatus as it stood was not geared to ensure an adequate I

t

assault on the massive housing deficit that still faces 6 r a ~ i l . I ~ ~

Out of the recognition of the inadequacy of existing structures and

rnechanrsrn came the first firm steps in utilising the house finance systems

proven capacity for capturing resources to help expand the supply of low

cost housing on financial terms suitable to those with modest incomes. In

order to implement the National Low Income Housing plan, a new low

income Housing Finance System was formed within the frame work of the

regular Housing Finance system. Unlike the creation of the savings and

loan system, the implantationof thisnew Housing Finance System didnot

evolve the formation of any new financial institutions. Instead new

relationships were specified between existing BNH (National Housing Bank

of Brazil) agents and Co-operating state and local Governments.lLL6

165 Urbanisation, ~nequality, political economy of urban and rural development in Latin America Vol. 5 "Latin American urban research series; sage publishers, Beverly Hills London 1975 ch. 6 Housing F~nance in Brazil - Carlow Reynolds and Robert T. Carpenter p.164.

166 lbid..

2.12.5 Synoptic Constraints on Construction Costs:

2.12.5.1 Land:

Land is a major item in housing costs. In some cities, in situations k as varled as those of Hongkong, Mexico city and Kabul, it is the single c

most expensive component. The basic reason for high land costs is

expanding demand against a relatively inelastic supply but many other

factors also contribute. Some are commercial in origin, ranging from over

concentrated ownership, spatial preferences and development after

natives Other factors are related to administrative influences such as urban

planning goals, taxation policies and political stability. Despite this range

of potential causes, speculation by a relatively limited number of land

owners IS commonly held to be the principal reason for high urban land

prices through out most of the developing

Most public land is now leased rather than sold, Governments at

vartous levels are empowered to make compulsory purchases, taxes are

levled on ~dle land and land values are being related to tax scales.1m

Yeh and Laquian (1 979) point out that most of the positive measures

that can be taken to reduce land cost involve major policy changes, on the

part of natlonal and Urban Governments. Direct appropriation and

alienahon of land in particular seem to be essential if price spirals are to

be brought under control. This means increased public ownership and the

167 Urbanisation, Housing and Development Process - David Drakakis - Smith. Croom Helm, London (1981)

168 Santiago A.M. ( 1 976) U a a n land policy andland reform areas in the Philippines; in J . Worg pp.137-151

Casanova. R .N . (1 97415) "Evolving a Philippine Land policy for low cost housing NEDA, journal of development pp.349-369.

success of the Government housing programmes in Hongkong and

S~ngapore has largely been based upon this principle. However in many

third world countries resumption is quite difficult not only because of

entrenched elitist interests but also because of extensive land holdings by

powerful consewattve institution^.^^^

2.12.5.2 Building materials :

The materials used in housing construction comprise the largest

budding cost component, usually accounting for 60 to 70-percent ef tbe

total. S~nce 1972 costs have risenmarked~~ during a period of General

World inflatton and this has had severe effects on the price of the finished

house. The rise in house prices has been proportionally greaterthan that

for materials since many builders have introduced a risk component into

selling prices to cover themselves against the inflation of material costs

during construction. These do not always occur so that increased profit

taking has characterised the industry in recent years. Given the importance

of material components within total costs, an expansion in lowcost housing

construction will depend strongly on adequate supply of cheap raw

materials. Any attempt to reduce the over all construction cost must

therefore make a close scrutiny of this particular factor. The effects of

world inflation on material costs in developing countries have been

aggravated by the heavy reliance of some nations on imports.170

169 Laquian A.A. (1 979) 'Housing Asia's Millions; problems, policies andprospects for low cost housing in South East Asia."

International Development and Research centre Ottava. Y E H , S.H.K. (1979) Public housing in Singapore, University press Singapore.

170 David Drakakis - Smith (1981) op. Cit., p. 175.

One of the most encouraging developments in this field occured in

Chile during the Allande Government when a building materials co-

operatwe was established. At its peak it supplied 20 percent of the

mater~als used in the entire country, manufacturing some 15 percent of its

own supplies. In this way the co-operative was able to reduce the price of

its raw materials by 20 to 30 percentq7'

When the world prices are high the domestic market suffers

shortages, as did the Philippine construction industry between 1965 and

1970 ''?

2.12.5.3 Labour:

Another important component in construction cost is labour. In most

developing countries this constitution about the one third of the over all ,

total where as in Europe labour costs are nearer to one half. In

genera1,labour is abundant in the cities of the third world and wages are

low. However some countries have recently experienced shortages of

skilled manual workers, as well as technical and professional staff which

have resulted in a very rapid rise in wage levels. Faced with the shortages

of skilled workers and escalating labour costs, many developers both public

and private have begun to consider the use of semi-industrial construction

methods. The schemes involved in the European and American context

where labour constitute a very high proportion of total costs. The application

of prefabricated techniques in the third world is thus of more value unless

1 71 United Nations (1976) 'World housing survey 1994 New York

172 Makanas E.D. (1 97415) 'Inter industry analysis of the housing construction industry, NEDA journal of development 150-1 73.

substant~al savings are also made on the cost of materials, since this still

constitutes the most important input in developing countries.ln

In addition to the direct cost of labour, consideration must also be

glven to the multiplier effect which employment in the construction industry

can have on the economy as a whole. Cockburn (1971) has dcu la&d . . +--,

that direct employment in construction, together with a s s o c i a p k

extraction, manufacturing and distribution could involve up to lbperceiit of

the total labour force although in reality it seldom reaches its level.

Nevertheless the potential for construction employment in the cities remain

high since they are the focus for most building investment.'14

There is an increasing evidence that much of the labour is recruited

from rural settlements through personal contact of the labour foreman.

Whilst the construction industry may not have the absorbent capacity

anticipated in Urban centres, its role in labour turnoverwithin a circulatory

migration system constitutes an equally important part of the process of

change lT5

Bettelheim (1972) claims that the maintenance of the village ties

has been deliberately fostered by capitalism in order to provide a social

and economic cushion in times of recession. As a result, this gives the

173 David Drakakis - Smith (1981) op. Cit. p.177.

174 Cockbum.C. (1 971) 'Construction in overseas development, Ekislies Vol. 31, No.186, p.347- 52.

175 Lominitz.L. (1 977) "Mechanism of articulation between shanty town settlers and the urban system, shanty towns in developingnations", wenner - gren foundation New York. Strettan.A. (1976) "The Building industry and urban employment generations in the Philippines Department of Economics, Research school of pacificstudies. Australian National university, Canberra.

labour recruitors themselves a crucial position as brokers on the interface

between the formal and informal ~ectors."~

The above discussion of various aspects of housing in general and

housing finance in particular has been a modest attempt to develop a

structure for the present study. The chief contention of this conceptual frame

work is that housing scenario in a developing country with its complicated

structure cannot be explained with a single theory. A synthetic approach

which takes into consideration the impacts of urbanisation.

decentralisation, marxian views on housing, cost analysis and

indegenisailhf house designs, alone can do justice to the housing sector

whi&.is being investigated.

176 Bettelheim. C. (1972) appendix I theoretical comments in A.Emmanuel, "Unequalexchange: A study of the imperialism of trade." monthly review press New York pp. 271-322.