(c) CMM 2008 1(c) CMM 2008 1

PRESENTS

“Let’s take the Capital Market

HOME

to The People ”

Dr DARIN GUNESEKERAOf

Capital Markets for the Marginalized (CMM)

(c) CMM 2008 2(c) CMM 2008 2

Presentation IntroductionApril 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 3(c) CMM 2008 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 4(c) CMM 2008 4

Global Crisis

Donor

Housing

Loans

Founder

On Risk

Decent

Housing

Shortage of

Over 50% of

current stock

Slums

Shanties Grow

Faster than

Economy

Growth

City =

Rich get Richer

Poor get

Poorer

Donors

World Bank

Keep People in Slums

Through

Onsite Upgrade

(c) CMM 2008 5(c) CMM 2006 5

(c) CMM 2008 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 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.

(c) CMM 2008 8(c) CMM 2006 8

Key -Land Cycle Process.

First vacant or

acquired land (Trust 1) 1

Occupied Estates:

(Trust 2, 3 of Cycle 2)2 3

Occupied Estates:

(Trust 4..7 of Cycle 3)4 5 6 7

Land Cycle 1

Land Cycle 2

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 9(c) CMM 2006 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 10(c) CMM 2006 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 11(c) CMM 2006 11

Project Results

BEFORE AFTER

(c) CMM 2008 12(c) CMM 2006 12

Social Real Estate Investment Trusts - I

TRUSTAuthority Social

Housing

Resident

Land

Shares

Vacant

Possession

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 13(c) CMM 2006 13

The People’s Stock Exchange

(c) CMM 2008 14(c) CMM 2006 14

S-Reits II SREIT is financed by investors and land/ home buyers.

Shares liquidate into cash or land/ homes

TRUSTInvestors

Cash viaInvestment

Banks

Shares*

* Includes right to ownership of a specific house / flat

(c) CMM 2008 1515

S-Reits IIIOn Capital Marketplace

Trade viaInvestment

Banks *

Shares

Investors

(Authority,

Individual,

Institutional)

On – going

STOCK

EXCHANGE

Market:

EXCHANGE

Rationale: EXCHANGE Regulates Information Flow, Share

issue/ introduction.

SREIT – Notes on Working Features

(c) CMM 2008 16

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.

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

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

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

(c) CMM 2008 20(c) CMM 2006 20

THANK YOUPlease 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)