Blog

08 Dec 2013

Author: Md. Manjur Morshed

Are Government Land and Housing Projects Necessary?

Introduction

Demand for land and housing in Dhaka city is extreme. The city ranked 11th among the world megacities in 2010, with an estimated population of 16 million (UN 2010). This is expected to increase to 25 million by the year 2025. Housing this demographic trend has been a challenging task. At least 100,000 household units are required every year only to house this additional population (Seraj, 2009). Such a rapid housing supply is constrained by the shortage of affordable and legal land. This post addresses some of the issues concerning government land and housing projects and looks into their viability. Below is an overview of the current land and housing scenario in Dhaka city.

Table 1: Overview of the Land and Housing Situation in Dhaka City

Population	16 million (UN, 2010), projected to grow to 25 million by 2025
GDP growth rate	6.7% (2010-2011)
Per capita income	$2,000 (PPP; 2012 estimated)
Population Density	- 27,700 people per square kilometre (The Financial Express, 2013)
Slum Dwellers	- 3.4 million (of whom 92% do not earn enough to meet theirbasic needs) (The Financial Express, 2013)
Formal Housing	- About 15% of the total 1 million household units - Public housing is about 10% of the total (Islam, 2004)
Land Price	- Dhanmondi is the most expensive, roughly Tk 3,500 or $60 per ft2, Gulshan about Tk3,194and Baridhara aboutTk 3,000 (WB, 2007) - Land prices in some cites of the US are as follows ($/ft2): Boston 13.1; Chicago 14.5; and New York 32.3 (GlaeserandGyorko, 2002) - Land price in Dhaka city is higher than in most cities in the US, while the per capita GDP in the United States on a PPP basis is 20 times that of Bangladesh (WB, 2007)
Land Ownership - Just 30% the city population has control over 80% of the land (Seraj and Afrin, 2003). - 97% of the urban poor in the city do not own any land (WB, 2007)
Housing Ownership	- Dhaka has the highest price-income ratio among South Asian cities, at greater than 5:1. The highly unequal income distribution pushes down the proportion(The Financial Express, 2013). A price-income ratio of between 2:1 and 3:1 implies that a significant portion of the middle-income population can afford to purchase a house.

Land is the basic element of housing supply and, given the speculative land and housing price, it is also one of the major sources of wealth accumulation. The two predominant modes of land and housing supply are: ‘public or formal’ and ‘private (both formal and informal)’. The public land and housing supply has consistently failed to address the land need of the urban majority and therefore, the private mode has been the predominant mode.

Theoretical Lenses of Land Supply

State-led land and housing has been the major source of the formal mode, especially in countries with socialist roots (e.g. Bangladesh). In general, government provision has focused on select groups e.g. government employees, and has been used to camouflage inequality rather than to redistribute income, land and wealth (Gilbert, 1981). There have been a few initiatives for the low income groups, mostly for slum and squatter people, but these have failed due to poor preparation and ill-management (for Dhaka city, see Choguill, 1988). Ultimately, the majority of the urban population have to fend for themselves, and often they have to rely on illegal and inadequate solutions e.g. private illegal subdivisions, slums and squatters.An often citied problem of land and housing access is the low affordability. However, empirical evidence suggests to the contrary that the poor are able and willing to pay because they pay more to illegal/informal providers than formal ones.

Certain Marxist analysts have suggested that the housing problem in Third World cities is a consequence of capitalist development (Choguill, 1988). The Marxist explanation of social class where the capitalist class (or ‘bourgeoisie’) owns the means of production e.g. land, shelter and industries (Livesey, Unknown). According to Vandergeest (1997), the state is a self-benefiting organization at the expense of the society it governs, and protects the interests of the elite.

Among many external role players, the World Bank is by far the world’s largest multilateral aid agency and plays an important role in setting the agenda for analysis of the housing and land market and identifying policy approaches. Over the past four decades, the Bank’s land and housing policy has shifted from centrally planned to participatory approaches: direct land and housing provision by the government in the 1970s; public institutions playing a central role in the sustainable and integrated urban development in the 80s; enabling of the market and government agencies played a managerial role in the 90s (often termeda neo-liberal policy). Since the private sector is more efficient than the public sector in providing land and housing (Cheung, 1978), ‘enabling the market’ has become the official doctrine of land and housing for most third world countries.

An Incomplete Account of the Public Land and Housing Supply
Bangladesh’s brief period of trying to emulate Singapore’s solution in the 1970s ended in failure because the apartments were produced at a cost which ranged from 2.4 to 7.8 times the maximum affordable by a household at the 80thincome percentile. Between 1973 and 1990, an estimated 8,500 housing units, 169 flats, 1674 semi-permanent houses, and 5245 plots were developed by government agencies all over the country. Almost all of these were allocated to government employees, i.e. civil servants and the military (Choguill, 1988 and1989).

In 1993 the National Housing Policy of Bangladesh annexed the recommendations of the World Bank, and the latest of these is the enabling policy. The policy suggestion is to intervene in the land market, in an enabling capacity, to remove the existing impediments in supply and transfer. Subsequently, it mentions that the government’s main role is to promote and facilitate the provisions of shelter by indirect measures. The direct provision of housing is the responsibility of the individual (RAJUK, 2006). Despite this declaration, government agencies continue to intervene directly.

For example, recently, RAJUK has been developing an apartment project targeting low and middle income groups [Uttara 3rd phase]. In this project, the price of an average 1250 ft2apartment is 5,600,000 BDT [52 $US/ft2]. The design of these apartments consider space for car parking and servant quarters, which is not coherent with low and middle income groups in Bangladesh. In fact these housings are implicitly targeting upper income g[1]. Government projects such as Vhashantek, which specifically targeted low-income and landless people ended in failure. Concerning government land projects, the balance is tilted towards the privileged groups e.g. government employees.

RAJUK has several land projects (Table 2), including a new town (Purbachal) in the eastern fringe of the metropolitan area. The new town is the biggest planned township in the country, with an area of 24.88 km2 and an estimated 26,000 residential plots of different sizes.The new town will be equipped with infrastructure and urban facilities. Eight-lane roads will connect the new town with major highways leading to different parts of the country. The new town is against the suggestion of the Dhaka Metropolitan Development Plan (DMDP) Structure Plan (RAJUK, 2006).

Table 2: Major Land Projects by RAJUK

Name		Area (km2)	Serviced Plot (Apartments)	Population accommodation
Present Projects	Purbachal (New Town)	25	28000 (62,000)	3 million
	Nikunja	0.3	500 (Unknown)	5,000
	Uttara 3rd Phase	21.3	7500 (22,000)	156,000
	Jhilmil Project	1.5	1800 (9,500)	Unknown
Future Projects (Savar, Gazipur, Keraniganj)		New Town	Unknown	Unknown

Source: RAJUK 2010

From the land (plot) distribution of Purbachal New Town (Table 3), about 63% of the total land plots are reservedfor selected groups: government job holders 40%, employees and officials of semi-government bodies 15%,and officials of the RAJUK including the ministry concerned 2.5%.Only 22% of the total land plots are forwage earners and other categories of employees.

Table 3: Land Distribution of the Purbachal New Town

Categories	Percent
Government and Semi-government (incl. RAJUK and ministries concern)	63
War Veterans	2
Journalists	1.5
Artists and Sportsmen	1
Businessmen and Industrialists	10.5
Private Job Holders and Wage Earners	22

The Daily Star, 2009

Finally, Dhaka city is topographically constrained by developable land. This real scarcity is compounded by an artificial scarcity due to the lack of utilization of public land (Khas land). Public land in the inner city area remains undeveloped and/or isdeveloped with very low density (Tejgaon airport, the cantonment area); this constitutes as much as 20 percent of the total land area (WB, 2007). Subsequently, most of the public housing stocks are developed at very low densities, despite the very high land price.

Concluding Remarks

From the above discussion, several conclusions can be made about government land and housing projects. Firstly, these projects do not benefit the urban majority and the poor, but effectively benefit a few selected groups such as government employees. Secondly, government projects are contradictory to the ‘enabling the market’ policy, and land projects such as the Purbachal New Town are effectively a violation of the DMDP. Thirdly, given the scarcity of buildable land and the extreme price, government projects and land uses are inefficient. Therefore, it can be concluded that the government land and housing projects are not necessary.
The market solution to the land and housing problem is not necessarily the best way to address the housing need of the majority. Even though the market is responsive to the demand, there are major negative consequences, e.g. speculative land subdivision, overinvestment in the land and housing market, and environmental consequences. The World Bank also recognizes these problems, and from 2000 onwards, the Bank’s policy recommends that the market imperfections are pointed out, together with opportunities for government investment. The public-private partnership (PPP) is one of the most prominent housing policies that has emerged to strike a balance between the public inefficiency and private efficiency. PPP is considered to be a non-profit public expenditure, in which public agencies often provide the land and the private sector is responsible for its efficient development. PPP can also be used to cross-subsidize the lower income groups at the expense of the upper income groups. About 3.29% of the total budget expenditure for the 2013-14 financial year was allocated for PPP, while nothig was allocated for land and housing projects.

References (No particular style is followed)

Choguill, C. L. 1988. Problems in Providing Low-Income Urban Housing in Bangladesh. Habitat International, 12(3): 29-39.
Choguill, C. L. 1989. Building for a Better Dhaka: Policies for Housing and Infrastructure Development. In S. U. Ahmed (eds), Dhaka: Past Present Future, Dhaka: Asiatic Society of Bangladesh, 523-41.
Cohen, B. 2004. Urban Growth in Developing Countries: A Review of Current Trends and a Caution Regarding Existing Forecasts. World Development, 32(1): 23-51.
Gilbert, A. 1981. Pirates and Invaders: Land Acquisition in Urban Colombia and Venezuela, World Development, 9: 657-678.
Glaeser, E. L and Gyourko J. 2002. The Impact of Zoning on Housing Affordability, Harvard Institute of Economic Research, USA.
Halcrow Fox and Associates, EDU International and Bangladesh Consultants Limited. 1993. Housing sector institutional strengthening project: final report, Dhaka: Government of Bangladesh and Asian Development Bank.
Livesey, C. Unknown. Social Inequality – Theoretical Perspectives: Marxism. Sociology Central, UK.

RajdhaniUnnyanKatripakha (RAJUK).2010.Preparation of Detailed Area Plan (DAP) for Dhaka Draft Plan: Metropolitan Development Plan (DMDP), Group-A, RAJUK, Dhaka.
REHAB (Real Estate and Housing Association of Bangladesh). 2012. A Comprehensive study on the real estate sector of Bangladesh. REHAB, Dhaka.
Seraj, T. M. 2009. Housing Problem and Apartment Development in Dhaka City. In Ahmed, S. U. (Eds.) Dhaka: Past Present Future, Asiatic Society of Bangladesh, Dhaka, 507-22.
Seraj, T.M. and S. Afrin, 2003. Solving Housing Problem Through Private Sector Real Estate Development in Dhaka. In N. Islam, ed. Water and Sanitation for Cities, World Habitat Day 2003 Souvenir, Dhaka: Centre for Urban Studies (CUS), Bangladesh Institute of Planners (BIP).
Sivam, A. 2002. Constraints affecting the efficiency of the urban residential land market in developing countries: a case study of India. Habitat International, 26: 523-537.
The Financial Express. 2013. We Dhaka stands Today. (accessed 5 June, 2013).
The Daily Star.2011. Lottery for Purbachal, Uttara plots likely Sept 16. (accessed 5 July, 2012)
UN (United Nations). 2010. World urbanization prospects: The 2009 revision. CD-ROM Edition – Data in digital form (pop/DB/WUP/Rev.2009). Population division. United Nations, New York: Department of Economic and Social Affair.
Vandergeest, P. 1997. Rethinking of property, Common Property Resource Digest, 41.
WB (World Bank). 2007.Dhaka: improving living conditions for the urban poor, Bangladesh Development Series Paper no. 17, The World Bank Office, Dhaka.

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Undocumented money could account for upto 80% of Bangladesh‘s GDP. In the 2013-14 financial year, the government gave an amnesty on investment in the real-estate at 10% tax, and such an opportunity is repeated every year. A significant portion of this undocumented or black money is re(invested) in the land and housing market in the city (REHAB, 2012).