This document discusses low-income housing solutions for developing markets, focusing on examples in Kenya, India, and Sri Lanka. It proposes a real estate investment trust (REIT) model where low-income communities form a trust, issue shares to investors, and use the funds to develop high-quality, affordable housing. The Sri Lanka example transformed 675 shanty homes into an apartment complex, generating profits to regenerate surrounding neighborhoods. The REIT model provides financing from investors, develops and manages housing, and allows tenants to eventually own homes, transforming slum communities.

1. (c) CMM 2006 1
PRESENTS
“Low Income
Housing for 21st
Century Developing
Market Economies”
with KENYA, VARANASI, SRI LANKA images
Dr DARIN GUNESEKERA
Of
Capital Markets for the
Marginalized (CMM)

2. (c) CMM 2006 2
The Worst Slum in the World
 UN Habitat – worst slum and largest slum = Kibera
(peers in Latin America, Africa)
 Kenya background facts 850k homes short
 Kibera Growth; acceleration since 1998
 Market driven growth of Slum
 Market breeds Acquisition of Rights, unless Planning
forestalls these with economics.
 Unaffordability seen as transient and so diffused as an
issue
 No welfare
 Other market driven forces – Politics & Religion
 Slum Sprawl

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Our Future ?
 Wave of Change
 From Latin America, Africa
 Changing Face of Privatized Market Driven Slums
 Low income housing catchment
 Vice area
 Organized Crime
 Evangelists & NGOs
 Abdication by Planners
 Fire breaks
 Bowser deliveries
 Tapping Utilities

4. (c) CMM 2006 4
Sri Lanka Preventive
Project
 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.
 (See 5-2)

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

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Project Results
 BEFORE AFTER

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REIT Formation
 Cohesive Low Income group form base of
Trust with rent/ rent-purchase scheme of
down payment, monthly contract
 Shares offered to other takers
 Shares offered equally to investors
 Bargains of property exchange allowed
 Long Term Investment backed by land,
building and long term rental value
 Best with tie up with Industries (Workers –
Employer schemes) & Cooperatives

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THE REIT SOLUTION
 trustees
developer
Land in -Certs out
Cash in-Certs out
investors
Condo
Sales
market
Primary
market

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S-Reits II
Trust is financed by investors and home buyers.
Shares may convert to homes
TRUSTInvestors
Cash via
Investment
Banks
Shares*
* Includes right to ownership of a specific house / flat

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S-Reits III - A stock exchange
Trade via
Investment
Banks *
Shares
Investors
(Authority,
Individual,
Institutional)
On – going
STOCK EXCHANGE
Market:
EXCHANGE
EXCHANGE Regulates Information Flow

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MARKET BASIS
 Open Market Forces drive every decision point. No Market
– No Business. Attract market to do business.
 Do not disturb the normal way in which commercial
business is done except to increase choices to lower
income category
 Market is fully informed of all costs and transactions through
Prospectus & Reports and open accounting and booking.
Price arises in open informed market.
 Public Sector should agree to hand over former slum lands
or new lands with utilities for this scheme on condition that it
remains in low income rent range specified as percentage
of income, not rupee amount.
 Mortgage market opened for house/ REIT shares sales.

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REIT Extinction
 Type of REIT Recommended:
 For Livelihood Community - Permanent REIT
 For independent low income housing blocks – A
REIT with written-in liquidation plan.

Initially – REIT will show no dividend

Fairly soon – REIT will provide dividend

Later years when profits grow, dividend cap will
operate. The surplus will be allocated as share
purchase and transfer to tenants.

At end, full liquidation of Trust and individual
ownership by tenants turned condominium owners will
be accomplished.

13. (c) CMM 2006 13
Attractive for Investors
 Instead of buying real estate units at high
unit costs and stamp duty and capital
gains tax, investors may buy certificates in
small amounts like tradable shares.
 Certificate is backed by trust land and
buildings, conversion feature.
 Can be made tax efficient.
 In spectrum from Government Bonds to
shares these closer to State issues.

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The End User Loan Buyer
Home
Buyer
Loan
Certs
Condo
Loan 1
Loan 2

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DEVELOPERS SPECIALISE -
BUSINESS EASIER
 Developer is the
Manager charged with
construction. Yet the
Trustee safeguards
interests of buyers and
investors through
employment of
Consultant Technical
Managers who approve
payments.
 Trust has independent
finance experts.
 Developer is charged
with Marketing. Yet the
Trust safeguards other
stakeholders by
requirement of cash
flow and sales only
through Trust Accounts.
 Trust has independent
Financial Advisors and
Accounts and audit.
 Trust has independent
lawyers.

16. (c) CMM 2006 16
•Developer does not need to be harried by
Bankers to find funds for project. That is handled
by Finance Advisors and Financial Underwriters
and Investors and Home buyers.
•Developer does not need to be harried by Buyers
who demand financing from Developer. This is
handed over to the Financier market of institutions
who are in the business of extending credit to
individuals and home buyers.
•Developer can develop staff and expertise in
MARKETING and CONSTRUCTION of
HOUSING.

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FINANCE – SAVINGS TO
HOUSING EASIER
 A new route of secured
investment in housing
projects by small holder
investors opened.
 Investment in Trust
instead of Company
Shares means Directors
cannot use funds for
any other business, no
income tax on corporate
entity (Full flow through
to investors).
 Project has flexibility of
risk taking investors and
buyers to maximum
reducing Bank loans.
No exorbitant terms, No
large interest costs, No
penalties, No non-
competitive demands
on placement of project
funds and other
financial aspects.

18. (c) CMM 2006 18
•Trust delivers condominium title deeds when
available and loan agreement will allow for loan to
be converted to a mortgage loan.
•Financier would have enabled a customer with
lesser resources to become a home buyer and so
added to industry business and national home
ownership.
•Reduced cost exchange of loans for customers
with special needs will be possible owing to
flexibility of Certificate method of ownership.
Clients who are mobile within loan period can be
handled.

19. (c) CMM 2006 19
If the LAND-OWNERS be
shareholders
 Landowner transfers
land into a project
and realises basic
price plus share of
profit. This is fair.
 No under the table
transactions. Fair
value is gained for
the actual land he
gives up.
 Land price falsity or
manipulation made
public/ not possible.
 Artificial land pricing
stopped.
 Urban land
ownership as a
common activity
now becomes non-
speculative
commerce.

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Varanasi – A Community Joins
 Varanasi Silk Weavers unanimously form
the “Varanasi Weavers Trust” SREIT.
 The weavers, traders, businessmen accept a
full responsibility path
 For them housing and livelihood are
inseparable with Capital creation foremost
 They accept the path of collective strength in
bargains with commerce, government, market
 They open the door to investors through the
REIT trust of VWT.

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Driving Forces
 Livelihood is the highest priority driving force
amongst them
 This powerful economic force is utilized for
community cohesion.
 Awareness that housing, property basis, is needed
for livelihood expansion as an industry.
 Current market forces driving them to
 Extinction
 Slum sprawl
 “Kibera”
 REIT is understood as key to survival with
growth

22. (c) CMM 2006 22
Appreciating your kind attention
 THANK YOU
 To pursue REIT option please contact Dr Darin or CMM staff
at
wiroshermes@yahoo.com