This is a presentation based on Affordable Housing and Housing Finance Issues and Solution and it made at IDB Workshop – Jeddah Saudi Arabia (September 15, 2012)

The Muslim world represents 1 of 4 humans on the planet. Nearly the same share in a number of countries. Represents 1 of 2 poor on the planet. An acute challenge of widening demand/supply gap and rising housing backlog. Most of the housing backlog and short supply are in the low-income segment of the population. Population growth and urbanization are further compounding the existing huge backlog. Rising costs (land, construction, construction materials) are making housing unaffordable for the poor.

>IDB study suggests housing needs of the Muslim World at 8 mn units, nearly all in Low-Income Segment
– The estimate needs further analysis and breakdown
– MENA 3.2 mn;
– Asia 2.7 mn; and
– Africa/others 2.3 mn.
>Urban population likely to rise from 1/4th to 1/3rd of total.
> Rapid Urbanization is a major issue in low-income housing.
> The need for new housing of 8 mn due to population growth is based on 5-5.5/HH and population growth at 2.5%.
> Urbanization and population growth further increase. The year-on-year housing needs in major metropolitans.
> Supply is 30-40% on new demand for housing.

> As most of the housing shortage is in the low-income segment, the poor need empowerment through housing finance.
> Institutional Housing Finance is either non-existent or in the infancy stages in most of the Muslim World (Afghanistan and some African Countries).
> Slightly advanced in some others (Malaysia, Turkey, Egypt, Morocco, Indonesia, Pakistan, and Saudi Arabia).
> Regulatory Framework is also quite similar.
> Additional challenges include:
– Role and responsibilities of Specialized Housing Finance Institutions (HFIs) and Commercial Banks (CBs)
– Long-Term Liquidity Facility Institutions and Instruments.

> Asia-Pacific represents:
– 1/4th of the world population, and
– Nearly ½ of the World’s Poor.
> Housing is an essential part of political slogans.
– “Housing for all”;
– “Slum Free Cities”
– “Maang Raha hai har Insaan-Roti, Kapra, aur Makan” (Every human demands food, clothing and shelter); etc.
> In some countries there is SOME delivery but in most there is NONE.
> Each country in the region has its own geo-socio- economic parameters and all face a common issue of “shelter less poor”.
– Regional successful models would be needed for sharing experience and knowledge.

> Central Banks as regulators with limited focus on housing.
> Need to strengthen regulatory regimes with the development and implementation of:
– Prudential Regulations;
– Mortgage Guidelines;
– Developer Finance Framework etc.
> Mortgage Law/Foreclosure Law with a focus on Sharia- Compatible Housing Finance.
> Housing Finance Regulatory Framework for developers and the construction industry with a focus on Low-Cost Housing.
> Fiscal Regimes with a focus on Low Income Housing (“LIH”).
> Country-specific definition of Affordability in terms of Cost of house and area.

> An issue of faith e.g. Afghanistan with nearly 100% Muslim Population.
> Also an issue of Financial Inclusion. Even if conventional finance is available, Faith-Based clients are not available.
> Standardization and Diversification of RE/Housing Products on the Asset Side and Liability Side.
> Islamic REITs and MBS Products.
> Role of Islamic Banks and Islamic Windows of Conventional Banks.
> Need for Research and Development Center.

> No Muslim country has any Housing Observatory or Housing Information System (except Egypt).
> To address the challenge of Pro-Poor LIH detailed data on Income Segments, Affordability in terms of Finance and Supply are needed.
> Central Banks need to play a proactive role in compilation of Data on Housing Finance, Income, and Affordability.
– Such data should cover Geographical and Income segments.
> Developers and Governments ( e.g. Housing Ministry) need to compile data on Housing Supply.
> An increased role of Developers Associations, Mortgage bankers Associations, and bodies of other Stakeholders.