The Use of ADRs & TDRs in Slum Upgrading Mathew Chandy CHF International World Bank Fourth Urban Research Forum May 2007
CHF International TDR - Lessons from Mumbai CHF International has worked in over 100 countries and currently operates 88 programs in 36 countries. CHF Office of Development Finance currently oversees 12 microfinance operations and in 2005, managed over US$57 million in loans CHF shares expertise by providing technical assistance to credit unions, microfinance institutions, cooperatives, nongovernmental organizations, and commercial banks in the countries where we work. E.g.: In India, with support from USAID, CHF has worked with local NGOs and the local government in the delivery of 2 distinct models of slum upgrading, improving the lives of people living in over 100 slums.
Mumbai Background 19 million residents on a peninsula 54% live in 4,000+ slum pockets (13-20% of land area) Rent controls discourage reinvestment on 50% of properties Floor Space Index (FSI like FAR) maximums are regulated at very low levels Most big city downtown have FSI between 5 and 10 Set at 1.00 to 1.33 in 1964 -- lower than existing level in effort to de-congest peninsula Existing buildings with higher FSI do not redevelop Objection to raising FSI because utility and road shortages
Mumbai Background Average density of city = 15,000 persons per sq. km. Average floor area per resident = 2.7 sq. m. Shanghai average floor area per resident = 13.1 sq. m Pre-1985 effort to remove all slums and provide government housing 1980s World Bank Slum Upgrading Program promotes in-situ solutions; still some demolition 1991 adoption of ADR / TDR program shifts to private sector cross-subsidy approach 1995 revision to Slum Rehabilitation Scheme (SRS) gives right to free housing, increases private market incentives
Four Types of ADR/TDR 1. Cessed property ADRs Additional FSI for use on-site to cross-subsidize improvements to dilapidated buildings 2. Heritage property TDRs Unused FSI above existing structure can be used offsite 3. Reservation TDRs Donated land earns FSI equal to that on the land donated for use off-site Construction of public facilities on donated land earns 1.33 additional FSI for use off-site 6-9% of listed lands obtained TDRs in 13 years mostly in suburbs
4. Slum TDRs Slums are sending areas Anywhere north are receiving areas Owner of slum land must build 225 sq. ft. housing for existing residents in G+5 or G+7 As slum residents occupy the new units, owner is granted TDR certificate for 1.0 sq. m. ADR for each 1.0 sq. m of replacement slum housing built Owner must use ADRs on site until minimum density of 500 du/ha is achieved Above that minimum, ADR can be used on-site or offsite at owner s option But once 2.5 FSI reached, ADR must be used off-site
Slum TDRs Applies to private and govt. owners of slum lands 70% of slum residents must agree and CBO formed Slum residents get replacement unit free Developer must contribute Rs. 20,000 per slum unit to seed fund operations and future maintenance Transferred to CBO for use when housing completed Developer must contribute Rs. 840 per sq. m. of built area (above 1.33 FSI base) to fund infrastructure required to offset additional density Property taxes on slum units limited to 20% of normal rates
Strategy 2: zoned for additional housing in situ relocation Strategy 1: Free spaces along main streets for commercial (cost recovery)
Operation of a TDR system Additional Development Rights TDR moves north TDR Receiving Area Additional Development Rights Slum Redevelopment Site TDR Sending (donor) Area
Mumbai Land Prices and their Influence on TDR Feasibility TDR - Lessons from Mumbai
City Institutional Structure Slum Redevelopment Authority Designated as Planning Authority for slums Authority to amend Master Plan for slums Authority to grant building permissions in slums Rights of appeal limited Rights of eminent domain available even though land and developer may be project Regular city and regional agencies retain planning and building authorities for the receiving areas.
Supporting Institutions TDR Brokers TDR - Lessons from Mumbai Lots of TDR certificates held for speculation CBOs Each slum must have a CBO, and the CBO must register as a cooperative society before funds are transferred NGOs Involved in only a small minority of SRS projects SPARC (advocacy has evolved into a developer) National Slum Dwellers Federation community organization Mahila Milan women s savings and credit schemes CLIFF bridge financing until TDRs earned and sold
Results of SRS Program 1,350,000 sq. m. TDR issued in 2000-2003 105,000 150,000 slum dwelling units built in 10 years Projects for 182,000 units implies housing for 500,000 to 750,000 Over 10 million still live in slums - 300 new residents daily Increased density in slums and private areas Better slum housing with utilities and individual toilets CBO societies offer some tenure security High operating costs elevator buildings (5 x ground floor costs)
Challenges 1. Opposition to use of TDRs in Receiving Areas One way northward ratchet is a blunt tool No mapping of receiving areas to ensure adequacy of infrastructure and roads Non-mapping may have diffused early political opposition After nine years, Public Interest Litigation (PIL) filed to invalidate use of TDRs in crowded northern areas 2006 -- Trial court upheld legality of TDRs On appeal to Supreme Court
Challenges 2. Volatile real estate markets Value of TDRs varies widely with swings in property value, changes in building development rules, and status of court challenges From Rs. 400 per sq. ft., up to 1,600, down to 550, up to 2050 Changes in value of 400% (or down to 33%) have been common Mumbai may be particularly volatile because very low FSIs make land price a very important factor in development costs Land value in Mumbai may be 15-20 times construction costs
Challenges 3. Adequacy of Infrastructure In theory, TDRs should only be used to build additional FSI in areas with adequate infrastructure Since there may be no such places in Mumbai, city may be following a policy of allowing FSI in areas with less inadequate infrastructure 4. Corruption New sources include manipulation of slum resident lists to increase TDRs
Challenges 5. Administration Requires better coordination on land and building records 6. Commercial Space Slum residents who had commercial uses requiring ground access lose those areas everyone gets a 225 sq. ft. unit 7. Larger Spaces Residents who currently occupy more than 225 sq. ft. lose space
Areas for Further Study Impacts on participating residents No rigorous studies of impacts on livelihoods, health, housing quality, or impact of higher operating charges on net family income Quantified pre-/post- studies should be designed for a sample frame of future projects to develop statistical measures of impacts on residents Real estate market impacts Infrastructure and road congestion impacts of additional density Impacts on residents of receiving areas
Areas for Further Study Replicability in smaller cities Real estate pro forma studies should determine the role of Mumbai s extremely high land values (and low FSI) in the viability of the program For cities with lower land values, identify how incentive ratios could be varied for success and/or how available funds from NURM Mission could inject appropriate subsidies to enable efficient use of TDRs Administrative reforms needed for efficient use of ADR/TDR schemes
Conclusion Mumbai s ADR/TDR program has produced 105,000 150,000 units of slum replacement housing over a 10 year period Through the SRS program, many costs of providing slum housing have been shifted from the public budget to the private sector and residents of TDR receiving area The effectiveness of the SRS program may be tied to Mumbai s low levels of FSI and very high land values Major direct and indirect impacts of the program deserve more detailed study