A proof of a scheme for no Government Cost Net Profit to State Method for Slum and Shanty rehousing and area regeneration in a developing country using Capital Markets WITHOUT BANKING SYSTEM

1. Dr DARIN GUNESEKERA
Of
Capital Markets for the
Marginalized (CMM)
PRESENTS
“Let’s take the
Capital Market
HOME
to The People ”
(c) CMM 2008 1

2. Presentation Introduction
April 2009
This Presentation presents a Capital Markets

based Concept for providing modern quality
housing and neighborhood development for
persons at low levels of income in growth
urban areas.
It is NOT based on State spending but

provides PROFIT to the State while relieving
it of welfare burdens.
It is based on regulated markets; NO ROLE

Required for Foreign Donors nor NGOs.
It is based on using Urban Planning tools for

economic development.
(c) CMM 2008 2

3. A Global Problem
From USA to Kenya, London to Colombo: we have

slums & shanties for low income, local authority
deficits, lack of affordable housing.
Yet Colombo has free trade in materials and

USD30 per month wages. Why does London have
the same affordable housing problem?
Affordable social housing problems seem

independent of housing costs, wage incomes.
Over-all, every year construction efficiency

improves but homes are dearer. Why?
(c) CMM 2008 3

4. Global
Crisis
Growth
City =
Donors
Rich get Richer
Donor World Bank
Poor get
Keep People in Slums
Housing Poorer
Through
Loans Onsite Upgrade
Founder
On Risk
Decent
Housing Slums
Shanties Grow
Shortage of
Faster than
Over 50% of
current stock Economy
(c) CMM 2008 4

5. (c) CMM 2008
2006 5

6. The Insight
This is a Stock Exchange Problem

We have removed Capital Equity Markets

from the longest gestation private projects
(supply of homes)
There is a Malfunction in Planning

We have accepted plans where housing is

a luxury output and not where homes for
all is a requirement
(c) CMM 2008 6

7. The Solution which Follows
The need is to “Bring the Capital Market Home

to the People”, i.e. design the correct Stock
Exchange Instrument
The need is to make Planning Market driven;

where Social output is Market linked
The best way is to bring the poorest urban

persons into the Property Ladder, Financial
asset ownership and so the start of the Middle
Class economic way. CMM 2008
(c) 7

8. Key -Land Cycle Process.
Land Cycle 1
First vacant or
1
acquired land (Trust 1)
Land Cycle 2
Occupied Estates:
2 3
(Trust 2, 3 of Cycle 2)
Occupied Estates: 4 5 6 7
(Trust 4..7 of Cycle 3)
Land Cycle 3
– projects exchanges new units for vacant possession of old
units
– New units must be more attractive to encourage the move
(c) CMM 2008
2006 8

9. RESULT = Pilot Project I
675 apartments in first

time ever high rise
occupation by slum/
shanty dwellers in “Streets
in Sky” design voted for by
them.
Corresponding 8 sites

(4000 persons) in same
neighborhood vacated
Land/ built space market

given to regeneration.
(c) CMM 2008
2006 9

10. Project Results
FINANCE

Total Investment = SLRs600M (USD6M)

Outside Community Sales (Financial

Return) = SLRs1700M (USD17M)
SOCIAL

Self sustaining 675 homes paying rates

Lives transformed from Shanty to Middle

Class
Regenerated Neighborhood

All Children go to School

(c) CMM 2008
2006 10

11. Project Results
BEFORE AFTER

(c) CMM 2006
2008 11

12. Social Real Estate Investment
Trusts - I
Vacant
Land
Possession
Social
Authority
Housing TRUST
Resident
Shares Shares
• Start with a compact city area re-development project plan
• Existing Social Housing residents approve the plan
• This facilitates a Trust market deal between the landowner
(Authority) and social housing residents.
• The deal is shown above
(c) CMM 2008
2006 12

13. The People’s Stock Exchange
(c) CMM 2008
2006 13

14. S-Reits II
SREIT is financed by investors and land/ home buyers.
Shares liquidate into cash or land/ homes
Cash via
Investment
Banks
Investors TRUST
Shares*
* Includes right to ownership of a specific house / flat
(c) CMM 2008
2006 14

15. S-Reits III
On Capital Marketplace
Trade via
Investment
Banks *
Investors EXCHANGE
On – going (Authority,
Individual,
STOCK Institutional)
Shares
EXCHANGE
Market:
Rationale: EXCHANGE Regulates Information Flow, Share
issue/ introduction.
(c) CMM 2008 15

16. SREIT – Notes on Working Features
 First SREIT: A specific time period; dissolves when the liberated
land parcels are sold under pre-determined Planning use.
 ALWAYS there must be a visualization of the following SREIT or
Successor SREITs.
The Housing SREITs that follow will normally include Affordable
Housing SREITs mainly.
Housing for sale SREITs should have format of End-User buy in.
As building is financed by investment End User buy in is through
share sale and equivalent of rent-purchase from a product
producer and not the equivalent of the mortgage process.
These are Developing Country friendly procedures.
Key decisions depend on circumstances; include the creation or
retention of a Development Corporation, a Trustee Corporation.
(c) CMM 2008 16

17. Meltdown – End of Bubble
Global Price Bubble Burst – In developing countries

We have been copying USA/ UK financial systems since

the Fifties, YET many persons did not realize
That the housing/ urban land price bubble was global

That banks had taken urban property as prime collateral

for loans, basing loan book value on the property
That all of the financial system of a developing country

had property as its base for assets, share prices
SO

When the bubble burst, share values evaporated, bank

assets dived, financial system gridlocked.
(In Sri Lanka, urban land increased 100 times in price across 25

years; declined 60% in a few months)
(c) CMM 2008 17

18. Global Stimulus & Bail - Outs
Developing countries are following Global Strategies:

Of fiscal stimulus to counter loss of cash inflows, exports

Bailing out financial firms and local mega-firms, exporters

But are constrained by:

Governments already in substantial deficit/ unhealthy debt

Multiple taxing systems unwieldy for easy tax cuts stimulus

Balance of Payments (BoP) as economy not fully open

So the following are crucial needs:

Quick implementation of IMF’s new trillion to their BoP

Bail-Outs that do not impact on Government Budget

Stimulus initiatives that have minimal impact on State

budget, debt and BoP.
(c) CMM 2008 18

19. Our Solution Delivers for Today
We meet Difficulties: Our Scheme

Accepts Today’s Prices, does not need greedy Bubble pricing

Is a Stimulus by planning and regulation NOT fiscal or

Government Spending
Promotes DOMESTIC industry, is minimal in imports,

maximizes stimulus effect on poor (best for BoP)
Does NOT need Banks but uses End-User’s Capital Market

Is a Safety Net where indeed people have fallen

Plus we meet Growth & Development NEEDS

We Bring Growth and Decency at the Poorest level.

ADD HOUSING where it is needed most – The Affordable.

We bring regeneration and development where it counts

most – URBAN PEOPLE ABSORPTION in modern sector.
(c) CMM 2008 19

20. THANK YOU
Please Join Our Movement
“Every Community Has the Right to create

Equity Capital”
“Every Urban Household has the Right to a

Planned Home”
Develop a Project with our help

Please contact Darin or CMM staff at

wiroshermes@yahoo.com
+94716659957 (call/ SMS)
(c) CMM 2008
2006 20