Proposed Loan, Grant, and Technical Assistance Grant Kingdom of Bhutan: Green and Resilient Affordable Housing Sector Project
Introduction:
Bhutan is steadily urbanizing. The share of the urban population increased from 30% in 2005 to 42% in 2021, driven by an average annual growth rate of 1.9% over that period. The urbanization rate is projected to reach 56.8% by 2047.2 Urban population growth is fueled by rural migration, mostly to the four largest urban centers of Gelephu, Phuentsholing, Samdrup Jongkhar, and Thimphu, which account for 59.0% of the total urban population. While 58.0% of the Bhutanese population still lives in rural areas and engages in small-scale and subsistence agriculture, the constant flow of rural migration to urban centers is exerting mounting pressure on urban services.
Bhutan has a chance to be proactive and focus on housing development. Economic growth in the capital city, Thimphu, has been fueled by expansion in construction, services, and manufacturing. Bhutan has a current overall unemployment rate of 2.4%, which is low relative to neighboring South Asia countries. Government of Bhutan’s Twelfth Five Year Plan, 2018–2023 calls for developing the economy by fostering growth in the private sector, which will create jobs and contribute to sustainable poverty reduction and the country’s transition to green and resilient development.
Affordable Housing demand:
Affordable housing development in Bhutan has not kept pace with population growth, particularly in urban areas where the demographic increase puts pressure on the limited usable and appropriately zoned land and pushes house prices up, making it increasingly unaffordable. In 2017, the estimated shortfall of housing nationwide was 21,156.4 Nearly 63.5% of urban households rent, 17.5% live in rent-free dwellings, and only 19.0% of households own their homes.
The affordable housing shortage is particularly acute for low income households, who spend on average more than 40% of their income on housing—greater than the recommended 30%.6 Housing options are becoming increasingly unaffordable for low income households and vulnerable groups, including women, leaving them in:
(i) overcrowded conditions in shared accommodation.
(ii) residing in informal settlements.
Poverty, Social, and Gender:
The project is categorized effective gender mainstreaming. Women comprise 39% of the civil servants in Bhutan. Households headed by women comprise 27% of the target population. The lack of affordable housing affects women as they are generally responsible for household management. A gender equality and social inclusion action plan will address these matters, including:
(i) at least 30% of housing tenure allotted to households headed by women
(ii) three integrated service centers established to deliver services to women and children, including a shelter for victims of gender violence, and a daycare and counseling facility benefiting at least 700 female household members
(iii) two women’s self-help groups established for recycled waste livelihoods
(iv) capacity building on gender mainstreaming
(v) gender-sensitive policies. The NHDCL will engage a civil society organization to implement gender equality solutions.
Sustainability:
Affordability is crucial for ensuring the sustainability of the project. The project beneficiaries currently pay rents equal to 20.7%–41.0% of their household income for homes averaging 69 square meters. Under the project, the proposed rent for a unit averaging 69 square meters with better services is significantly less, at 16.3%–29.1% of household income. The market rent for comparable houses is between 35%–44% of household income.
Conclusion:
The NHDCL prepared a resettlement framework, draft resettlement plans for the subprojects in Thimphu and Phuentsholing, and a draft due diligence report for Trashiyangtse following ADB’s Safeguard Policy Statement. The project will not consider any subproject with significant involuntary resettlement impacts. The government land required for the sample subprojects is 4.5 hectares. The sample subprojects will affect 18 households with 65 members, through physical displacement and/or loss of livelihoods; and four households with 19 members, through loss of minor structures and/or trees.
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