24848766 the UN HABITAT Slum Upgrading Facility SUF Working Paper 10

7/30/2019 24848766 the UN HABITAT Slum Upgrading Facility SUF Working Paper 10

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SLUM UPGRADING FACILITYLand and Slum Upgrading

UN-HABITAT

SLUM UPGRADING FACILITY

woRkING PAPeR 10


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LAND AND SLUM UPGRADING

Nairobi 2009


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Copyright United Nations Human Settlements Programme

UN-HABIA, 2009

All rights reserved

United Nations Human Settlements Programme (UN-HABIA)

P.O. Box 30030, GPO Nairobi 00100, Kenya

el: 254 20 7623 120

Fax: 254 20 7624 266/7 (Central Oce)

E-mail: ino @ unhabitat.org

Website: http://www.unhabitat.org

Acknowledgements

Principal authors: Szilard Fricska, UN-HABIA and Ruth McLeod, Slum Upgrading Facility Pilot eam

Contributors: Marcel Pandin, Erika Mamley Osae, Ayanthi Gurusinghe, Joe Bishota, ProessorKironde, im Ndezi, Laxman Perera, Clarissa Augustinus and Liz Case.

Editor: Liz Case

Design and Layout: Anne A. Musotsi

Printer: UNON Printshop

Cover photos: Let: Women in Solo Indonesia, carrying materials for upgrading their housing.

Photo Ruth McLeod, October 2008.

Right: Residents of Amui Djor in Ghana, from a trip in search of water.

Photo Ruth McLeod, October 2008


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iii

Land and Slum Upgrading

Table o ContentsIntroduction 1

Land and nance in slum upgrading 2

What this paper is all about 4

Section 1: Understanding Land & Finance Issues 5

The challenges o conventional housing nance and the poor 5

Aordable land and security o tenure 8

A ramework or understanding land issues at country level 10

Land-based strategies or slum upgrading 17

Section 2: Slum Upgrading Facility Experiences rom a

Land-fnance Perspective 19Access to housing nance 26

Range o land rights 28

Security o tenure 33

Land markets 35

Institutional relationships 37

Land governance context 38

Land-based slum upgrading approaches 39

Section 3: Lessons-learned rom the Slum Upgrading Facility Experience 41

Conclusions 55

Reerences 59


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iv



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Introduction

The multi -stakeholder and multi -sector approach of the Slum Upgrading Faci l i ty provides

a forum for the voices of poor communities and slum dwel lers to be heard. Based on the

exper ience of implementing the SUF p i lot project in Indonesia , the f i rst and s ingle most

important issue to resolve for slum upgrading is secure land tenure. Marcel Pandin,

Indonesia Slum Upgrading Facil i ty Country Coordinator.

It is estimated that up to 1 billion people live in slums in the cities o the world one sixth o humanity and that the numbers are rising. Te UN-HABIA Slum Upgrading Facility Pilot Programme was

established in 2004 to examine ways in which innovative nance mechanisms can help address this

problem.

Te Slum Upgrading Facility is a technical cooperation and seed capital acility with a central purpose:

to test and develop new nancial instruments and methods or expanding private sector nance andpublic sector involvement in slum upgrading on a large scale. It is unded by the governments o the

United Kingdom, Norway and Sweden.

Te Slum Upgrading Facility operates under the premise that slums can be upgraded successully

when slum dwellers are involved in the planning and design o upgrading projects and able to work

collaboratively with a range o other key stakeholders. Te Slum Upgrading Facility works withlocal actors to make slum upgrading projects bankable that is, attractive to retail banks, property

developers, housing nance institutions, service providers, micro-nance institutions, and utility

companies.

Te Slum Upgrading Facility has pilot projects in Ghana, Indonesia, Sri Lanka and anzania, where

various approaches are being tested to support the purpose o the Pilot Programme. In order toacilitate this work, Local Finance Facilities have been established in Ghana, Indonesia, Sri Lanka

and anzania. Tese acilities are ocused primarily on accessing commercial nance or slum andsettlement upgrading, and they provide support that is reerred to as Finance Plus.

Formoreinformation,pleasereadWorkingPaper8onLocalFinanceFacilitiesavailableontheSlumUpgradingFacilitywebsitethroughwww.unhabitat.org.


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Finance Plus is about much more than just money. By oering Finance Plus, Local Finance Facilitiesaim to do the ollowing:

bring together key players involved in city and national level slum upgrading strategies to

address the challenge o nancing;

catalyse the integration o commercial nance into slum upgrading;

provide mechanisms to blend dierent orms o unding to maximize aordability, and;

provide a nancial mechanism to support the implementation o city-based slum andsettlement upgrading strategies.

At the same time, slum upgrading is about more than just houses. Te Slum Upgrading Facility PilotProgramme supports local slum and settlement upgrading initiatives that improve residents access to

water, to sanitation, to durable and suciently spacious housing and to secure tenure.

A. Land and fnance in slum upgrading

Slum upgrading is very complex. Unequal access to land and insecurity o tenure contribute to the

creation and persistence o slums. Historically, slums have been created by poor people occupying

public or private land to build their houses and communities. Teir land rights are not legallyrecognized by the Government, so they live in ear o eviction.

Conventional slum upgrading approaches have addressed land issues in a piecemeal ashion, usuallywith a preerence or providing individual land titles to the poor. Tis approach can create problems.

Te poor oten nd themselves in a position where they need cash. Teir land title, with its security o

tenure, is valuable. Tey may sell their land to higher income groups and move urther out o the city,creating new slums in the process.

Land values are rising in the countries where the Slum Upgrading Facility programme is beingimplemented, and that puts additional pressure on the land being occupied by slum dwellers. Any city-

wide or national approach to slum upgrading, thereore, must come to terms with land issues in a waythat ensures an adequate supply o land or all income groups.

Te nance side o slum upgrading is equally challenging. In conventional housing nance approaches,building or buying a home usually assumes mortgage nance (a loan secured by property). People

obtain a mortgage to access nance to buy a house or plot on which to build or improve their home.

But mortgage nance is not appropriate to the needs o the poor, who have irregular, inormal sectorjobs, who preer to build incrementally and who cannot aord (nor require) the building and planning

standards o middle income neighbourhoods.


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At the same time, rom a land perspective, mortgage nance depends on legally recognized land rightsand a unctional land administration system. Unortunately, neither o these conditions exists in the

vast majority o developing countries, where instead the reality is that land administration systems areconused and oten dysunctional, and the majority o the poor possess only extra-legal or inormal land

rights.

Tere is a very real danger that without a clear strategy to promote access to land and security o tenure

on a city-wide basis, inormal settlements will continue to grow and poor people will be pushed urther

and urther rom their jobs and livelihoods. Tis is why the approach o the Slum Upgrading Facility,which recognizes the critical importance and complexity o land issues in slum upgrading and in

accessing nance or slum upgrading, is needed more than ever.

A amily in an inormal settlement in Solo, Indonesia. Photo Ruth McLeod.


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Tis working paper aims to bring together the expertise o two dierent disciplines: land and nancialservices or the poor. Tis is done rom the perspective o the Slum Upgrading Facility, and land issues

and experiences drawn rom the Slum Upgrading Facility country projects are used to both illustrateand understand these issues.

Tis paper does not seek to provide a comprehensive overview o land, housing nance or inrastructurenance, but rather to catalyse discussion and debate around emerging Slum Upgrading Facility

experience, documenting some o the issues arising within the projects in Ghana, Indonesia, Sri Lanka

and anzania.

It also aims to consider some important questions around land and nance or the poor. Are poorhouseholds able to access land through the market? Are Slum Upgrading Facility projects providing

greater security o tenure through their pilot projects? How does security o tenure aect access to

nance? How are rising land values aecting the poor and their communities? How realistic is it toexpect unctional land administration systems in developing countries, and how have Slum Upgrading

Facility projects dealt with this issue? Finally, can the poor actually aord housing and inrastructure

loans?


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1 Understanding Land &Finance Issues

Market economies can be said to rely on three basic assets: land, labour and capital. Where access to all

three is readily available or all income groups and an enabling institutional and regulatory rameworkexists to support it, a housing market can operate eectively. In most developing countries, however,

the poor have limited access to land and capital and are thereore orced to rely on their own labour to

meet their housing needs.

Tis section o the paper provides an introduction to the land-nance challenge. Simply put, the

majority o the worlds urban poor do not have access to the conventional institutions responsibleor providing secure land rights and aordable nance. Rather, conventional institutions have been

designed to meet the needs o the middle- and upper-income clients on terms that are not accessible,

appropriate or aordable or the poor. Te ailure o conventional systems is one o the reasons why thepoor are aced with a choice between housing that is either aordable, but inadequate or housing that is

adequate but unaordable.

The challenges o conventional housing fnance and thepoor

Neither conventional mortgage nance nor housing micro-nance have, to date, met the nance needs

o lower or moderate income groups.

Te problems o mortgage nance have been well-documented by many authors and can be

summarized according to a three tier ramework based on Ferguson (2004):

Macro-economic actors: instability and high infation can create very high real interest ratesthat make lenders reluctant to lend large amounts over long periods o time. o manage

this risk, lenders may limit the number o loans given out and/or target them to more

reliable clients. Tey may also invest in high-yield and relatively secure instruments such as

Othercomponentsarealsorequired,forexample,buildingmaterialsindustry,xx.Formoreinformationontherequirementsofafunctionalhousingsector,

pleaseseeAcioly,Claudioyyy.GetquotefromClaudio

1.


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Government reasury bills. Tese strategies eectively shrink the available supply o money orhousing loans and concentrate those loans on wealthier clients.

Housing characteristics: nancial institutions preer the certainty that comes rom investing

in newly built homes that oten come with a manuacturers warranty and which comply with

local building and planning laws. I there is deault on the loan, these homes can readily berepossessed and resold to enable the institution to recoup its investment. Lower and moderate

income amilies, however, build incrementally or progressively sometimes buying a plot,

building a core unit and adding rooms over time. Tese homes rarely comply with buildingand planning laws. Furthermore, in most developing countries, inadequate legal rameworks,

the complicated and time consuming procedures and the political and reputational risk orepossession act as a disincentive to risk-taking or conventional nance institutions.

Underwriting or Risk Management Practice: conventional nancial institutions urthermanage their risks through requirements that are not appropriate or the poor, including: (1)

regular and sizable monthly payments over a long period o time (15-25 years); (ii) a proven

credit history with an established nancial institution; (iii) a stable and veriable income(typically in the ormal, salaried sector); and (iv) ull legal title to the land. Many lower and

moderate income households, however, have relatively unreliable incomes, no ormal credit

history, a preerence or short, small, sequential loans, and, as we will discuss below, no legallyrecognized land rights.

2.

3.

Lie in Old Fadama inormal settlement, Ghana. Photo Ruth McLeod.


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In short, conventional mortgage nance systems are simply not geared to the realities o the urban poor.Teir risk perception, rather, is geared to the realities o middle- and upper-income people.

Housing micro-nance, by contrast, responds better to the needs o the urban poor. Ferguson (2008,

pg. 1) summarizes the approach and products as ollows: the prototypical housing micro-nance

loan consists o a small, short-term unsecured credit (US$500-$2,500) with a term o two to veyears, depending on the context, to a home-owner to expand or remodel their inormally-built house.

Sometimes, micro-nance institutions oer somewhat larger loans (US$3000-$7000) at longer

terms (ve to 15 years) or a amily to construct a new home (oten on a lot that they already own),occasionally secured by a mortgage. Small home improvement credit, however, is the main market or

which micronance institutions have created a housing micronance product.

While housing micro-nance is also dependent on macro-economic stability, it goes signicantly urther

in adapting itsel to the realities o the poor in its appropriateness to progressive housing constructionpractice and in its underwriting/risk management practice. Te main areas o innovation in reaching

the poor include:

Recognition o progressive or incremental building practice. According to Ferguson (2008, pg.2) 50%-80% o the population in most emerging countries build their homes progressively.

Micro-nance institutions and housing micro-nance institutions accept the incrementalbuilding practice o the poor and structure their nance products to meet this demand. Tey

do this by oering successive, small loans with short repayment periods. Te vast majority

(some 80%) o such loans are or home improvement, though there are signs that in moreestablished markets as ound in Latin America, some housing micro-nance institutions are

providing loans or new construction.

Acceptance o more appropriate building/planning standards. Full compliance with planninglaws and building codes is less important than ensuring that housing quality is within the

acceptable norm or that community. Some housing micro nance institutions providetechnical advice or new construction as a way to ensure quality.

Legal evidence o land ownership is not required. For home improvement loans, legal evidenceo land rights generally is not required. Te economic costs, the complicated and time-

consuming process and social implications o repossession deter nancial institutions romexercising this option.

Group lending. o address the issue o high transaction costs compared to loan value andto mitigate risks related to deault, signicant innovation has occurred by bulk lending to

recognized community groups who take responsibility or regular collection and repayment.


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Nevertheless, Ferguson (2008) and others have criticized current housing micro-nance practice on theollowing grounds:

It does not meet eective demand, particularly or new housing. Ferguson (2008, p. 5) cites

population growth data by Cohen (2005), to conclude that even i housing micro-nance

continues to grow at current rates within micro-nance institutions, the total loan volume willbe trivial relative to demand in most contexts over the next 20 to 30 years that is, the peak

o the worlds low-income housing/urbanization emergency. Ferguson (2008, p. 2) cites the

World Resources Institute estimate that the global demand or home improvement loans isUSD 331.8 billion. Te demand or new housing construction is not included this gure; the

total gure, thereore, is likely to be higher.

Housing micro-nance is not core business or micro-nance institutions. Ferguson (2008,

p.3) cites a regional study o Latin America that concludes that housing micro nancehas proved useul to build customer loyalty, but is not a core product o micro-nance

institutions. While it helps diversiy portolios and build loyalty, it remains outside their core

business. In act, in many countries, micro-nance institutions will oer loans (or their clientswill take loans) intended or small-business purposes, but will use them or housing.

While housing micronance is more appropriate to the needs o the poor there are three related landissues that militate against its achievement o impact at scale. Te rst is that while home improvement

loans may be appropriate or slum upgrading, the limited nance available or new home construction

means that the sucient supply o adequate land or housing (and thereore slum prevention) remainsunrealistic or the near uture.

Second, the systemic or structural ailures or aordable land delivery must be addressed. In mostdeveloping country cities, authorities have never succeeded in making sucient land available to

accommodate the demand or housing or to eectively guide the growth o urban areas.

Tird, housing nance alone cannot meet the needs o slum upgrading. Inrastructure and basic service

needs must also be met, both the capital investment and the maintenance requirements. Te approach

to slum upgrading, thereore, must take a broader, more holistic approach to settlements nance,identiying comprehensively the costs and potential revenue streams rom any upgrading or land

delivery process.


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Aordable land and security o tenure

Land is a complicated issue. It is technical, political and highly context-specic. Non-land

proessionals, particularly i coming rom the private sector, aid agencies or non-governmental

organisations, tend to shy away rom land issues. Tis is unortunate, as the reticence to address landissues helps perpetuate the status quo, namely, the persistence o slums and a ailure to develop and

implement eective strategies or slum prevention.

Understanding land fve important concepts

First, land is a unique type o asset. Land is nite, xed and permanent in nature. Unlike labouror capital, it cannot be (easily) created. Due to its xed nature, each parcel has its own particularattributes, which in turn determines its value. For example, plots may be adjacent, but i one ronts the

main shopping area in a city, its value will be signicantly higher. Land is also a unique type o asset

because it is closely linked to individual and community identity, history and culture, as well as being asource o livelihoods. For many poor people, land may be their only orm o social security. As a result,

poor people in particular tend to be quite risk averse with respect to their land.

Figure 1 Dierent types o rights in land

Source: Dale and McLaughlin 1988, p. 3.


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Second, there is an important distinction between land ownership and land use. As Dale andMcLaughlin (1988, p. 19) note, Although the term land ownership is in common use, it is not

possible, in a strict sense to own land itsel. It is the rights to use the land that can be owned. Tedierent uses to which land can be put play a critical role in determining land values. What is

arm land outside a city today, or example, may become the site o a new commercial or residential

development in the uture. Who captures the gains rom changes in land-use is a critical issue or slumupgrading.

Tird, there are many diferent types o rightsin land, as illustrated in Figure 1. Sometimes theserights apply to the same piece o land. Dale and McLaughlin (1988, p. 19) state that land rights

have been described as a bundle o sticks, each stick representing something which may be done withthe land. Each individual stick denes a way in which the land may be used, the prot which may be

derived rom it, or the manner in which some or all o the rights may be disposed o by transer to other

people or to organizations. What Figure 1 does not show, however, is that these rights may be ownedby one individual, commonly owned, or that some o the rights may be contracted out to other people.

Moreover, it should be noted that each right comes with clearly dened responsibilities regarding the

exercise o that right.

Fourth, a system o land tenure denes who has what rights over a piece o land. Land relations existin a people-people-land relationship called tenure. It is important to note, thereore, that land rightsare socially constructed by people according to their norms and customs. In some parts o the world,

primarily the North, these relations are documented in a single statutory (legal) regime; in other parts

o the world, particularly the South, it is oten the case that more than one regime exists to regulaterelationships to land. Statutory regimes can co-exist with regimes based on traditional, customary and

religious oundations (or example, in many Islamic countries, inheritance rights are determined according

to a specic ormula codied in the Sharia). It is also important to note that in many countries, hybridsystems have emerged, blending elements o the statutory system with elements o the customary or

religious tenures.

Finally, security o tenurereers to the condence one has that their land rights will be respected.Conversely, insecure tenure reers to a situation in which there is a perceived or real possibility o eviction

or a loss o use rights. While eviction was a common Government response to the growth o inormalsettlements rom the 1950s through the 1970s, more recently evictions have been used to acilitate urban

redevelopment. Urban growth puts pressure on inormal settlements, both within and on the periphery ocity boundaries, and eviction is increasingly being used to acilitate private sector investment.

Formoreinformation,pleaseseeUN-HABITAT(007)GlobalReportonHumanSettlements.


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A Framework or understanding land issues at countrylevel

Tere are ve important elements to understanding the land situation o any country: the country context;

the range o land rights that exist; the operation o the land market; the institutional landscape; and nally,

the quality o land governance. Tese actors aect how poor people are able to access land and infuencethe kind o nance that is available to them. Tese actors are described below.

Country context reers to a countrys history, politics, geography, culture and religion. Some importantissues include: natural resource endowments; geo-political or strategic location; history o war, occupation,

colonization; traditional or religious leadership and institutions; etc. Tese actors determine the nature oland relations in a country and impact uture attempts at reorm.

Most importantly, the country context will determine the range o land rights or continuum o tenure thatexists in any country. While orms o land rights such as reehold and leasehold may be well-known, the

actual range o land rights is much broader, as illustrated by Figure 2 below.

Rights in land can be limited to the perception o tenure security a low risk o eviction, but a relativelyinormal and insecure orm o tenure. Depending on the country context, customary rights may also

aord some security, either to individuals or, more oten, to individuals within a group or community

context.

Some countries are coping with rapid urbanisation by providing temporary occupation rights (2-10 years)

or by adopting anti-eviction laws. Some countries have strong squatter rights or adverse possessionlegislation. Tese enable people to transorm their occupancy rights into legally recognized land rights

ater a set period o time, usually ater between 5 and 20 years o uncontested, continuous occupation.

Figure 2 Range o Land Rights or Continuum o Tenure

Registeredree hold

Group tenureAnti evictionCustomary

Perceived tenureapproaches Occupancy

Adversepossesioion Losses

Inormalland rights

FormalLand right

Source: UN-HABITAT (2008)


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A range o group rights also exist, including community rights, cooperatives and, in some countries,condominium arrangements. Long-term leases and individual reehold tenure represent the most secure

orms o tenure and oten represent the main tenure types within the statutory system.

Dierent types o tenure, however, have dierent strengths and weaknesses. able 1 below summarizes the

strengths and weaknesses o a select group o tenure types.

An important point to note is that while reehold tenure oers the greatest security, reedom o use,

collateralization and potential to realize value increases, it is rarely a sustainable option or Governmentsor an aordable option or the urban poor. Applied in dysunctional land markets in a project ormat

targeting individuals, there are risks o gentrication and downward raiding by wealthier income groups.Intermediate orms o tenure and group tenures, on the other hand, have proven more appropriate to the

progressive building practice o lower-income communities.

Understanding land issues at the country level also requires an appreciation o howinormal and ormallandmarkets operate. Broadly speaking, the land market enables people to buy and sell (transact) andconvert land rom one use to another. Te actors aecting land market operation are, simply put, theorces o supply and demand, which aect households and developers dierently.

On the demand side, population growth, urbanisation rates and household ormation rates are majordrivers o housing demand. Household choice is aected by several actors including price, access

to nance, location (perceived tenure security, proximity to livelihoods, community etc.), access to

inormation regarding land availability and purchase options and transportation costs.

Housing quality and its location relative to natural or other hazards are oten o secondary importance

to lower- and moderate-income households. Observance o zoning by-laws and building codes is lessimportant. For many low-income households, rental is the most appropriate orm o tenure, though

many households may also opt or various non-ormal types o tenure, including squatting. Other

orms are normally too expensive and not an option.

In terms o supply, land markets are shaped by Government and developer activity. In general,

developing country Governments have ailed to supply a sucient quantity o adequate land to matchthe demand across the income groups. While ormal sector developers have catered or the middle- and

upper-income groups, inormal sector developers cater to lower- and moderate-income groups.

Te actors aecting supply include land availability; Government spending on inrastructure and

services; access to development nance at aordable interest rates; planning and land-use regulations(mostly or ormal developers); administrative costs (ormal land transactions); cost and availability o

building materials and labour; and the potential or prot.


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Table 1: Tenure Systems and their CharacteristicsTenure System Characteristics Advantages Limitations

Freehold Ownership in perpetuity High security; reedom touse, dispose, inherit; use ascollateral or loan; maximizescommercial value and enablesholder to capture value-increases.

Expensive to access. Requireshigh technical standards,strong Government capacityto administer, clear incentivesto register transactions. Risko gentrication i appliedpiecemeal.

RegisteredLeasehold

Ownership or aspecied period (up to999 years).

Almost as secure as reehold,however, time-bound.

Requires legal ramework andcosts o access generally high.

Rental (Public orPrivate)

Two options (i) Public:occupation o state-owned land or house;

(ii) Private.

Both have good security,however, legally enorceablecontract more importantor private rental. Mobilitydepends on supply, which isoten better in private.

Public can be limited in supplyand poorly located. Private maybe open to abuse. Both havemaintenance issues.

Cooperative Ownership vested incooperative or groupo which residents areco-owners. Variation isCondominium.

Good security; maintainsgroup cohesion; advantagesor group repayment ohousing loans.

Legal ramework required;restrictions may reduce incentiveto invest; double registrationrequired land and association.

Customary/Traditional

Ownership vested inamily, community,group or tribe. Landmanaged by leaders onbehal o community.Variation is religioustenure.

Wide acceptance and practicein certain parts o the world.Simple to administer. Socialcohesion maintained.

Under pressure rom rising landvalues and commercializationo land. Accountability otraditional authorities may beweak.

Intermediate

tenures (eg.

certicates,

permits,

licences, etc.)

Pragmatic

arrangements,

oten o short-

term nature

(eg. certicates,

occupation

permits, etc.)

Provide reasonable

security, while protecting

long-term public interest

and options or change

o land-use.

Government becomes

liable or compensation

in event o relocation;

this may inhibit

redevelopment.

Non-ormal tenureSquatting, unauthorized sub-divisions, unocial rental, etc.Oten a response to ailure

o public land allocation;may operate with elementsrom ormal system (eg.contracts).

Risk o eviction; exposure tocorrupt practices; hazardouslocation; inadequate shelter;

Source: Adapted rom UN-HABITAT (2008)


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It is important to recognize that the land market operates across the continuum o tenure and that landand housing prices are aected signicantly by the type o tenure. Weaker orms o tenure will likely

be priced lower than more secure orms o tenure in the same area. Similarly, tenure type also tendsto correlate with the type o services available, with weaker orms o tenure ound in relatively poorly

serviced locations. In such cases, it is interesting to note, the land price constitutes the vast majority o

the house cost. Tere is almost no cost or access to inrastructure and services as none are provided.Labour costs and building material costs are minimal as people tend to sel-build with locally available

materials and techniques. Zoning and planning regulation compliance costs, thereore, are minimal, as

are transaction costs because they tend to occur outside the ormal land administration system.

As the land market is shaped by the range o land rights that exist in a country, so too are theinstitutions established to regulate land relations and land markets. In terms o the statutory system,

the main elements include the ollowing:

land policies, to determine the broad goals and objectives regarding access to land and land use;

land laws and regulations, to create a legal ramework or implementing land policies; and;

and administration, including land inormation systems, cadastres, etc. as the tools or

implementing land policies and laws.

Tere are currently three main statutory systems or recording rights in, and transers o, land: the

deeds registration system; the title registration system and private conveyancing system. Tese aredescribed in Box 1 below and one vision o their geographic distribution is presented in Figure 3.

While useul conceptually, the statutory model oten breaks down in practice. Some o the commonchallenges include:

Institutional ragmentation: the responsibilities or land are divided between multipleGovernment ministries and departments (land registry, tax, mapping, sectoral ministries such

as agriculture, housing, etc.). Te institutional ragmentation is oten mirrored by policy

ragmentation. As a result, land sector coordination is oten weak.

Exclusion o traditional or religious institutions: the model does recognize customary orreligious institutions, structures or processes, despite the act that these are powerul orces that

aect who has what rights over land. Nor does this model recognize that in many countries,

hybrid land institutions have evolved (particularly in land markets), borrowing elements romthe statutory system (eg. inormal documents stamped by Government representatives) as well

as customary or religious systems (vesting authority or land allocation in traditional leaders or

chies).


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Limited coverage and gender bias: it is estimated that only some 30 percent o the land areao developing countries is covered by the cadastre the legal tool or recording land rights.

Moreover, this 30 percent is concentrated in high-value urban areas inormal settlementsare rarely included. Te result is insecurity o tenure, uncertainty in land markets, the limited

reach o mortgage nance and poor inormation or urban planning and management. A

related point regarding land registry coverage is that only 2 percent o the recorded land rightsare registered in the name o women.

Box 1 Types o Land Registration Systems

Deeds registration system records the documents o transer (sales documents, mortgages).Copies o land records and transactions are traditionally kept in a government oce, otena courthouse. Tis system was introduced to the developing world during the colonial eraand thus is the most common orm o registration in most developing countries. In manydeeds systems, however, registration o deeds is not compulsory. o ascertain that a deed isclear o claims, the chain o title, or history o transactions, is reviewed. Te main problemencountered with the deeds system is that it is a system or recording legal documents, notor registering title to land. Simply put, a deed does not prove who owns the land rights,

only what transactions have taken place involving that piece o land. Many data entry errorsare possible and the inormation in the registry may not tally exactly with the acts on theground. It should be noted that deeds registration systems, where well-maintained, areusually supported by detailed surveys that dene the parcel concerned. In many countries,title insurance is also available, by which a private company agrees to underwrite any loss ithe title is proved to be deective.

Title registration system. By contrast, this system is parcel based, rather than documentbased, and the register itsel is the legal evidence o rights in land. Te register is dividedinto three parts: property (in which the boundaries are dened), proprietorship (in which thename and address o the owner is recorded); and encumbrances (in which any restrictions

regarding use are listed). Signicantly, the inormation on the register is guaranteed by theGovernment and, in the event o inaccuracies, compensation is provided. Over the pastthree to our decades, there has been a trend in the international community to promote theupdating o deeds registration systems to title registration systems. While preerred by manydonors, titling programmes are not without their pitalls. Tey are expensive, may producea land administration system that is ultimately unsustainable, do not automatically lead toincreased access to credit or the poor, may result in increasing the insecurity o the poorthrough gentrication, may undermine the social integrity o groups and communities, andoten require a capacity to manage that is beyond the reach o that available in developingcountries. In short, many o the potential benets o titling may be achieved by using

other, intermediate orms o tenure, and the potential risks undermine the useulness o thisapproach.


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Box 1 Continuation.......Types o Land Registration Systems

Private conveyancing system. While the deeds registration system is most common indeveloping countries, most transactions are not registered with the Government. Rather,private conveyancing, in which the records and transers o land are handled by privatearrangement, is common. As Dale and McLaughlin note, With private conveyancing,the ull cost o transerring the title to the land is borne by the land owner. Agents suchas notaries or solicitors may be paid to oversee any dealings in land, and private surveyorsmay be employed to mark out and record the spatial limits o any property. Security o title

comes rom the integrity o the proessionals involved. Dale and McLaughlin go on to listthe faws and risks inherent in the private conveyancing system: duplication o eortexpensive, requently slow and inecient, and provide little or no access to the inormationby the state. Tey are also open to raud; a vendor may sell his land to several dierentpurchasers without knowing until too late that the vendor no longer has a right to sell. Teuncertainty o a deeds registration system is mitigated by the provision o title insurance, orthose who can aord it.

Source: Dale and McLaughlin (1988, p. 19-24); Farvacque and McAuslan (1992), pp. 56-7

Figure 3 Range o Land Rights or Continuum o Tenure

Deeds System (French): A register o owners; the transaction is recorded not the title.

Title System (German, English, Torrens): A register o properties; the title is recorded and guaranteed.

Diagonal lines in Figure 2 indicate mixed systems.

Source: Enemark (2008)


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Land Inormation is oten not up-to-date: Developing countries oten lack the human,technical and nancial capacity to maintain land records to a high degree o accuracy.

Bureaucratic procedures, corruption and tax liabilities create urther disincentives to recordland transactions. Oten, vested interests o proessionals or bureaucrats conspire to perpetuate

opaqueness in the system.

Te nal element in the ramework or understanding land issues at the country level is the governance

perspective. Land is an important source o political and nancial power, and thereore a critical

governance issue. As Quan (2007, p. 23) has noted, in many societies, land provides a means oaccumulating and allocating both political and economic power the poor governance o land may

be linked to social and political confict and as well to economic development problems Improvingthe governance o land at dierent levels is thereore a critical dimension in improving the overall

governance environment.

UN-HABIA and FAO dene land governance as the rules, processes and organizations through

which decisions are made about access to land and its use, the manner in which the decisions are

implemented, and the way that competing interests in land are managed. It encompasses statutory,customary and religious institutions. It includes state structures such as land agencies, courts and

ministries responsible or land, as well as non-statutory actors such as traditional bodies. A land

governance perspective acilitates critical insights into the stakeholders, their interests, their sources oinfuence and their constraints. Tis perspective can be useul to understand and manage the vested

interests o stakeholders when negotiating complex nancing packages or slum upgrading.

Land-based Strategies or Slum Upgrading

When examining the Slum Upgrading Facility country experience, it is useul to contextualize the types

o approaches being used. Listed below is a summary o ve common land-based strategies presented

by UNESCAP/UN-HABIA (2008) that are being used to support slum upgrading initiatives. Teyshould not be seen as stand-alone approaches, but rather as options to be used in the most appropriate

combination or a specic country context.

Land Sharing. Government or private sector owners negotiate with residents o inormal

settlements to prepare a joint strategy to develop public or private land occupied extra-legally.Te community obtains rights to a portion o the land to be used or in situ upgrading, while

the Government or developer uses a portion or commercial purposes. Te developer avoids

eviction or court and can prot rom the development, while the communitys land rights aremade secure; in some cases, relocation or some members and/or inrastructure investments can

also be unded. Te key to land sharing, however, is a context o rising land values.

Land Readjustment (also called reblocking). Several adjacent pieces o land are joined,

property boundaries are eliminated and a new development is planned and implemented, with


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the original holders receiving a pro-rata share o their original land in the new development. Inaddition, services and amenities may also be provided as part o the scheme.

Regularization. Regularization varies in implementation. However, it generally involves the

granting o legal land rights to inormal settlement occupants. On private land, regularization

involves negotiating a purchase price/lease price or some or all the land. On Governmentland, long-term leases are usually granted. In both cases, individuals or communities may be

the beneciaries.

Simplied land-use and planning regulations. Many well-intentioned zoning and land-use

regulations intended to benet the poor may have the opposite eect. Tey can drive pricesout o the reach o lower- and moderate-income households. Locally-developed and fexible

regulations can acilitate investment by communities and increase the supply o aordable land.

Tese can include: use o multi-story or row housing models; reducing road size requirements;allowing or local materials and techniques, etc.

Improved land valuation and taxation. Many local authorities are not able to collect the landtax to which they are legally entitled, let alone to appropriately value properties. Improving

valuation and collection can create a reliable revenue fow that will enable local authorities to

create multi-year investment plans, including, where possible, accessing capital markets.


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2 Slum Upgrading Facilityexperiences rom a land-inance perspective

Te Slum Upgrading Facility pilot projects underway now in Ghana, Indonesia, Sri Lanka and anzania

provide a good opportunity to bring real experience and theory together, as a means o understanding

land and nance issues and considering the practical and policy implications. Tis section looks atSlum Upgrading Facility in-country experiences, identiying the range o land rights that operate in

these countries, security o tenure, the operation o the land market and the impacts o the institutional

ramework or land on housing nance or slum and settlement upgrading activities.

A short overview o some o the current Slum Upgrading Facility pilot projects in the our countries is

provided below.

In Ghana, two projects are being assessed

Amui Djor. Located in Ashaiman Municipality, the project aims to build multi-storey mixed

use acilities to accommodate 40 households (240 people) and some commercial shopsin a well-located market area. Te project has been conceived as a trust-building pilot to

demonstrate the approach and acilitate the scaling-up to serve the entire settlements needs.

Te settlement is relatively well served with water supply, public latrines and electricity. Teproject is situated on traditional stool land (vested in the state) and is to be transerred rom

the ema Development Corporation to ema raditional Council to the project. 60 percent o

residents are renters; owners have purchase receipts or land allocation documents (indentures)as proo o land rights. Te total project cost is currently estimated at USD 130,000 and the

loan is to be nanced rom a blend o several sources including community savings and theUrban Poor Fund. Currently, the nancial easibility o dierent construction options is being

discussed with the community. Building materials and construction costs, infation (18.9%),

and interest rates (27-30%) are the main aordability issues. Project partners include: Peoples

Notallprojectsreferredtointhefollowingnarrativehavebeensummarized:somewereunderstudy,whileothershavesincebeendeterminedtobeunfeasible.

SomeoftheprojectscurrentlydescribedmaynotevolvetobeimplementedbytheSlumUpgradingFacility


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Dialogue; Amui Djor Housing Cooperative Society, Ghana Homeless Federation, AMSUF(the Local Finance Facility), Ashaiman Municipality, and the ema raditional Council.

Sekondi akoradi Metropolitan Assembly (SMA) Citywide Settlement Upgrading Fund. Te

project aims to secure a loan or a Build-Operate-ranser partnership between the Kojokrom

Market Womens Association and the Sekondi akoradi Metropolitan Assembly to completeconstruction and rent out six market sheds. Te revenue stream will enable them to build

a strong capital base beore building or improving their homes. Te site sits on stool land

that has been purchased by the Municipality and occupants have land allocation documents(indentures) or leases. Some 70 percent o the residents are owners and the settlement is

relatively well served with water supply, public toilets and electricity access. Te total loancost or the six sheds is USD300,000 and an initial loan o USD50,000 is to be taken to

complete the rst shed. Aordability issues include infation and interests rates, as mentioned

above. Project partners include: Kojokrom Market Womens Association; SMA SUF (theLocal Finance Facility); Municipality o Sekondi akoradi Metropolitan Assembly; the non-

governmental organisation Arican Womens International.

Locals in Amui Djor discussing on slum upgrading project, Ghana. Photo Ruth McLeod.


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In Indonesia, our projects are at varying stages o development/appraisal

Karatonan, Surakarta (Solo City). Te project is a multi-stakeholder partnership to provide

housing and inrastructure or 11 houses (35 people). Despite its relatively small size, theproject has been an important demonstration o the Slum Upgrading Facility approach. In

return or transerring the land to the occupants (individual reehold with contracted limits

or re-sale), the community was required to improve their housing and settlement conditions.While the plots varied in size, the community agreed to a land-consolidation scheme by

which they re-planned the community, dividing the available land equally among themselves,

while reserving some land or a park and uture public toilets. Based on the Slum UpgradingFacility commitment additional investments were mobilized, including rom the water

company to improve the public toilet, making electricity connections legal and improved

Women in Solo Indonesia,preparing roofng materials

or upgrading their housing,Inonesia Photo Ruth McLeod.


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sanitation. Residents now pay service ees to access utilities. A USD 222 Municipal grant wascombined with a USD 750 loan taken or a 36 month term with an eective interest rate o

25 percent, using the titles as collateral. Te average cost o a house is USD 1000 or 15 m2,with a monthly repayment o USD 30/month. An internal cross-subsidy scheme has been

implemented to ensure that the lowest income houses can also participate.

Kean (Ketelan), Surakarta (Solo City). Ketelan is a riverbank settlement that sits on reserved

land along the edge o a canal. Te land is unregistered public land and the municipality

has arranged or the transer o the land through individual titles to the 44 low-incomehouseholds that occupy the houses. Unlike the Karatonan case, the titles were issued beore

a compromise was agreed to equally share the land, making compromise on the distributiono the land impossible. Nevertheless, the community has reduced its encroachment onto the

reserve area and is increasing the density o their settlement. Te Municipality has negotiated

the contribution o an additional 15 m2 o privately-owned land to accommodate additionalowners. As yet, the three renter-amilies have not been accommodated. Individual home

improvement loans have been approved by a saving and loan cooperative; all are unsecured.

Te loan size is varied as the need and design o the upgrading is dierent rom one house tothe other.

Stabelan (Setabelan). Setabelan is a riverbank settlement adjacent to Ketelan. Te land wasalso unregistered public land that then had been transerred to the existing dwellers or 48

eligible homeowners. Similar to Ketelan, Setabelan was granted reehold land without land

consolidation. Tree homeowners have taken commercial construction loans rom localcommercial banks or their house upgrading secured by the newly granted reehold land. Te

loan size is also varied according to the homeowners upgrading plan.

In Yogyakarta, the Slum Upgrading Facility is exploring a development intended to take place

on land owned by the Sultan sultan ground. Te community rents the Sultan ground rom

the Sultans land oce (Panitikismo). Tere is no secure land tenure or the existing dwellerseven i they pay rent to the Sultan as at any time the land can be transerred to another party

without permission or consultation rom the existing dwellers. Tere are several historical cases

where the Sultan granted his land to the existing dwellers. But in recent years, many similarland transer application have been turned down as the Sultan ground becomes strategic and

increasingly commercially valuable. A recent development in this situation is that the NationalLand Authority believes that i existing dwellers submit an application to convert the land as

long as they have paid in ull the land and building taxes and dwelled more than 5 years then

these applicants have a right to the land. Te oce o Sultan land has a dierent opinionon this, however, and this is something that Slum Upgrading Facility supported projects will

attempt to resolve.


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In Sri Lanka, three projects have been under development

Moratuwa, Colombo. A land-sharing scheme was proposed in Moratuwa by which two

dierent communities would consolidate their existing residences, while a portion o the landwould be set aside or commercial development. Te land is located adjacent to the court

house and was believed to have been vested in the local authority by the national government.

It was agreed that a portion would be transerred to the community in return or thecommercial development. Ater signicant delays, it was discovered that the land had not been

vested in the municipality. Te land relating to this settlement is in the relatively lower-value

suburbs o Colombo and or this reason the project was unable to nd a buyer or the land inorder to make this land sharing process work. However, the Municipality along with the Slum

Upgrading Facility, continues to try to nd a buyer.

Kuriniyawatta, Kolonnawa Municipal Corporation. Tis project will combine housing

improvement, improved security o tenure, inrastructure improvements and food mitigationin a community o 67 households and a population o approximately 235 people. Te number

o beneciaries is 52 households or 214 people. Te community is supported by the Womens

Bank o Sri Lanka. Te land is public land, however, the community has occupied the land orsome 10 years. Most o the Orgodawatta community had been resettled in this land with no

legal documents to claim the rights. It is reported that these people had built their dwellings

Credit Guarantee signing & Kirulapona project launch Sri Lanka Photo SUF Sri Lanka


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overnight due to the ear o any kind o interruption rom members o the opposition party inparliament. At the beginning the dwellers used public water lines, but were without electricity.

During the election period the settlers had been able to demand water (2001) and electricity

(2003) rom dierent politicians. However, due to their illegal occupation o the land, the

National Electricity Board and the National Water Board had given the amenities only witha letter stating that the settlers would not ask or any compensation in the event o a orced

eviction. Without proper documentation, over the past 10 years these people had been livingin this piece o land with minimum disturbance and interruptions. With this project the

beneciaries will obtain the collective ownership o the land title as a cooperative through the

Womens Bank, who will retain the title until the loan is repaid by the community. HattonNational Bank is providing a loan o LKR 11 million (or approximately USD 96,000).

Wallauwatta, Galle District. Walluawatta is a settlement o 45 households or 170 people.About 20% o the houses in the settlement are threatened by landslips rom the steep hillocks

surrounding the settlement. Te slopes became unstable ollowing the tsunami in December2004. Te housing in the settlement is a mixture o semi-permanent and permanent. About

20% o the houses within the settlement do not have toilet acilities, 10% o the houses do not

have water supply. Tere are no mains sewers and the existing storm drains in the settlementare prone to fooding, due to a lack o maintenance. Te land that the settlement is built on

is owned by Galle Municipal Council. Te settlement is dense and there is little open public

space. Te road that passes through the settlement is perceived as congested as it is used as ashort-cut.

In Tanzania, three projects are under preparation:

Chamazi Project, Kurasini Ward, Temeke, Dar es Salaam. Kurasini Ward is located closeto the port and the land occupied by eight mostly inormal settlements has come under

redevelopment pressure. Te land is not under private lease arrangements and the Government

has exercised its authority to relocate some communities to make way or private investment.An eviction o 1000 households was carried out in 2006. In this process the government

decided to compensate structure owners, but renters, who comprise up to 70 percent o the

population, have not been compensated. Te implication o this is that the majority o tenantshave relocated in other unplanned settlements, which only moves the problem elsewhere.

Te Centre or Community Initiative has mobilized the aected community to start their

savings scheme (ederation). Trough this ederation, they were able to purchase o 30 acreso land at Chamazi area or USD 24,000 rom a private landlord occupying unsurveyed land.

Te purchased land has been vested in a cooperative under cooperative laws. A project iscurrently being developed that will include the ollowing components: new house construction,

surveying o the land, issuing o land lease, the development o rental housing and markets.

wo types o houses have been agreed by the community which will include single and doublestorey houses. Adoption o incremental construction will be considered in order to address

the aordability o the community which ranges rom US $1000 US $ 5000 or houses sizes

ranging rom 20sqm 60sqm. Discussions with emeke Municipality have indicated theirwillingness to support inrastructure services such as water services and roads although such

support will depend on und availability. A cross subsidy arrangement which will include


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provision o rental houses, a market stalls, and light industrials is also being considered toensure that the needs o the poor are considered.

Temeke Mwisho, Dar es Salaam. emeke Mwisho is a colonial era settlement scheme

occupying a large land area. Te old urban quarters is comprised o 257 households omedium density located in a prime area o emeke Municipality. Te owner o the land is

emeke Municipality, who wish to redevelop the area by demolishing the old urban quarters

as an integral part o the redevelopment plan o emeke Central Business District. emekeMunicipality has accepted the need to involve the tenants in the redevelopment process,

many o whom some have stayed in the area or more than 40 years. An enumeration study

conducted by the Centre or Community Initiatives shows that the houses at emeke Mwishoare critically dilapidated with poor water and sanitation services. Currently the project is

being conceptualized to consider cross-subsidy rom the business centers to support housing

construction or the urban poor. Te success o the emeke Mwisho project has some potentialto infuence redevelopment o similar settlements in other two Municipalities o Ilala and

Kinondoni in Dar-es-Salaam who are also acing similar situations.

Te anzania Women Land Access rust (AWLA) is a nancial intermediation platorm

through which poor women in urban areas are organised into housing cooperatives in orderto access aordable institutional mortgage nance. Te anzania Women Land Access rust

has purchased land located in Kinondoni District about 6 kilometers rom Dar es Salaam city

centre. Service inrastructure available includes a muram service road, a pipe line or cleanwater supply and a three phase electric power line. Te pilot project is an apartment block

o 32 residential fats o ve storey height expected to house a minimum o 48 amilies and

Locals o Chamazi, with drawings o a housing plan Ghana Photo Ruth McLeod.


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including commercial areas or cross subsidy. In this case, the land was purchased in advanceand support was provided rom the Government o anzania in terms o amalgamation o

plots o originally two plots into one, under a single title deed; extension o lease period rom

thirty three years to ninety nine years; change o use o land rom single dwelling into multiple

dwellings; and issuance o tax exemption which allow the project to enjoy waving o ValueAdded ax, Import duty and other related taxes as well as issuance o a building permit. When

the construction is complete, members o the AWLA Cooperative will buy their units, andthe cost o the land will be built into the price.

With this overview o some o the potential SUF projects, this section now turns to an assessment o theland-nance situation using the ramework developed in Section 1.

Access to housing fnance

Community members rom across the Slum Upgrading Facility pilot countries do not have access

to aordable housing nance. No member rom a Slum Upgrading pilot project, or example, has

access to mortgage nance. Te principle mechanisms or obtaining nance include personal savings,community-based savings schemes, or relatives, whether in-country or working overseas.

Indonesia

Few, i any, local banks in Yogyakarta and Surakarta, Indonesia, provide housing loans or the poor.Tey are amiliar with nancing micro businesses but the loans involved are quite dierent rom those

required or housing improvement and area upgrading. Banks are relatively unenthusiastic about the

idea o providing loans or housing or low income groups because they see the risk o non-perormingloans as high given the low repayment power o the low income borrowers and the land status o slum

settlements.

In general, state-owned banks in Indonesia will lend to the poor without collateral, but in the context

o micro and small businesses, not housing upgrading or construction. Land tenure aects the nal

decision o banks in lending. When very small land lots are used as collateral or mortgage nance,the unction o the land as collateral is not to recover a non-perorming loan but rather to discipline

borrowers discipline to repay their loan. Te land value and the cost or oreclosure may exceed the

loan size and the cost or recovery. Local banks instead tend to assess home loan applications orsmall lot housing development based on the applicants household cash fow. Although the cash fow

shows high capacity to repay banks, they may still ask or xed assets as collateral and to encourage thediscipline or repayment. Te result is that in many cases, loans end up being over-collateralized.

Tanzania

In anzania, there is progress towards aordable housing nance with two Mortgage Finance Actspassed by Parliament in 2008, which will open opportunities or lending and borrowing. Signicant

debate took place regarding the issue o oreclosure. Initially it was proposed that ownership o a


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mortgaged property should remain with the borrower, not the bank, as is the usual practice. Tenancial sector lobbied eectively and currently mortgaged land is legally owned by the nancial

institution oering the loan.

Te Government o anzania is also revising the 1999 Land Act to acilitate oreclosure ondeaulting borrowers, without necessarily going through the legal system. Te Business Environment

Strengthening in anzania programme, unded by the World Bank, the Governments o Denmark andthe United Kingdom (DANIDA, and DFID) and others is supporting the Ministry o Land to develop

a residency licensing system, as a temporary solution to the lack o proper land tenure. Residential

Licences are being provided or two years, with a potential ve year extension, are being issued byteams rom the Ministry o Land.

As in many countries, the mortgage market does not meet the needs o the poor, who oten do nothave secure land rights. One o the aims o the anzanian Governments 2004 introduction o the

programme o residential licences (short term occupancy rights) was to provide sucient security otenure to encourage nancial institutions to lend to low-income groups. o date, however, very ew

nancial institutions have expressed an interest in oering loans against these licences due in part to

their to their short term nature. Another part o the answer, however, lies in a more general reluctanceo lower-income groups to take on asset-based debt. Several recent studies have demonstrated that

many nancial products are not suitable to the needs o the poor: loans are over-collateralized and

repayment periods o 10 years are perceived to be too long or people who perceive their tenure asinsecure and whose income streams are irregular or variable.

Sri Lanka

In Sri Lanka, housing loan access is largely available only or the middle and upper income households.Low-income households are oten excluded rom housing nance by the ormal nancial institutions.

Further, most o the micro-nance institutions that are involved in providing loans assist the low

income sector in providing nance or small business, not housing. Tere are organisations like RealEstate Exchange (Pvt) Ltd (REEL) and Arunonada, which will oer housing nance but these institutes

are most o the time tied up with a grant. Tere is a gap, then, in the opportunities or housing nance

assistance or the low income settlers in Sri Lanka.

Ghana

In 1992 in Ghana, there was an initial attempt to introduce commercially viable mortgage operationsthat led to the establishment o Home Finance Company Limited. Tis was initially established as a

secondary mortgage mechanism and later evolved into a primary mortgage origination and servicing

entity. However, since then, little progress has been made in supporting low-income households obtainaordable housing nance.

Te establishment o the Home Finance Company Ltd., which was accompanied by the passage othe Home Mortgage Finance Law PNDCL 329, essentially looked to protect nanciers rather than

consumers. Mortgage activities have since then been marginal and have supported middle- to high-


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income ormally employed households. In spite o much talk about providing aordable housingnance or low income households, such pronouncements have turned out to be more rhetoric than

substantive as the details provided to support these claims have proven technically and nancially

unsustainable.

A National Shelter Strategy review initiated in 2005 also elaborated the states intention to develop

innovative housing nance instruments responsive to down market demand. Good intentionsnotwithstanding, nothing has emerged rom the Shelter Strategy to improve access to housing nance

or the poor in Ghana.

Relative improvements in the general macro-economic environment between 2003 and 2006 led to

a rapid rise in the launch o micro nance institutions. All o these institutions, with the exception

o one, are primarily oering small enterprise loans. Te Home Finance Company wholly ownedsubsidiary Boao Micronance Services Limited provides specic housing micro-nance loans in

addition to micro-enterprise credit. However, the current global and local nancial climate has osteredunaordable rates, making it dicult or low-income borrowers.

Virtually all the banks and micro-nance institutions in Ghana require legal land title as collateral,or in lieu o that a substantial xed asset, or any transaction. One critical condition or satisying

the account opening requirement prior to the provision o loans by micro-nance institutions is the

provision o utility bills in the name o the prospective borrower. Since most o the Slum UpgradingFacility clients are renters, this is a very dicult requirement (renters rarely have their name on the bills

and in some cases they are illegally connected anyway).

Although the availability o a utility bill oers some comort, it is not enough to grant either a business

or home improvement loan. Most micro-nance institutions demand a mandatory savings programme

with their institution or prospective borrowers. Savings perormance is a major actor, and a loanis given as a multiplier o the quantum o savings. Most oten, micro-nance institutions deal with

individuals rather than groups, with ew examples o group lending. One o those examples is the

Peoples Dialogue or Human Settlements, a non-governmental organisation, which was able to accessthe governments micro-credit unds at a more subsidized rate and terms or some members o its

groups.

Range o land rights

Te SUF pilot countries demonstrate a rich and varied tapestry o land tenure, heavily infuenced by the

countries history, geography, politics, religion and culture. Tis section describes the general countrycontext and highlights the specic types o tenure encountered.

In Sri Lanka, urban land tenure is regulated by our dierent sets o laws, ranging rom RomanDutch Law (regulating private lands, held on a ee simple reehold basis) to the Muslim Sharia

Law (regulating succession o properties owned by members o the Muslim community) (Asian

Development Bank, 2000). Modern land tenure policy dates rom the Land Development Ordinanceo 1935, which orbade the transer o crown lands or purposes o cultivation except to enlarge the

landholdings o near-landless or landless peasants. Te intent o this ordinance was to help small


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armers whose livelihood was seen to be at risk rom the exploitation by rich landowners. Te LandReorm Law o 1972 imposed a ceiling o twenty hectares on privately owned land and sought to

distribute lands in excess o the ceiling or the benet o landless peasants. Because o the ceiling on

Housing Property Law all the urban slum landlords had to give away the excess houses above the ceiling

to be vested with the government or eventual transer o ownership to the occupants.

In Ghana, there are essentially our main orms o land ownership. Tey are: (i) stool/skin lands, wherethe chies/skins hold land in trust or the community; (ii) amily lands, where the amily holds land in

trust or the amily members; (iii) state lands, where the government has acquired lands rom stool or

amily or public interest, and; (iv) private land, which is individually held under reehold arrangements.An estimated 80 percent o the land area is held under customary tenure and is administered by

traditional authorities on behal o their communities (Wily and Hammond 2001, pg. 27). Use

rights to customary land, or stool land so called in reerence to the carved wooden stool which isbelieved to contain the souls o ancestors and is a traditional symbol o chietanship have been given

traditionally to members o the community or arming or building purposes (Ubink 2006, pg 4).

In Indonesia, land is divided into land which is the responsibility o the National Land Agency, which

is about 30 percent o the land and which is administered according to the Basic Agrarian Law o 1960;and land which is under the responsibility o the Ministry o Forestry, which is about 70 percent o the

land and which is administered according to the Basic Forest Law o 1967. Under Basic Agrarian Law

and the Basic Forestry Law the state does not have ownership o the state land. Instead the peopleown the land. Te state thereore only allocated use rights when it titles the land. In eect the state

completely controls state land.

Indonesia has some 17 types o land tenure including the ollowing: Hak Milik, the strongest right

in Indonesia, is in perpetuity and is like reehold in that it includes most o the bundle o rights but

without ownership; Hak Milik Adat is customary tenure protected under Basic Agrarian Law but inreality people can lose their land and it is not always considered a strong right. Tere are a range o

local rules or adat tenure which varies across communities and adat is common both in rural and

urban areas; Hak Garap is adat tenure not considered by the National Land Agency to have a legal basisand is considered to be something like squatting on state land. Prior to 1960 people were considered

to have land rights i they were paying land tax and the tax receipt was the evidence o girik rights.

Ater 1960, girik was no longer considered to be a legal right, but people oten still think they have suchrights because they pay land tax. Other orms o tenure include: Hak Guna Bangunan also known as

Right o Building; Hak Guna Hutan also known as Land use permits; and Hak Pakai (Right to use).

In anzania, all land is owned by the public, but is vested in the President who unctions as the trustee.

Te 1999 Land Act denes three broad categories o land: village land, reserve land (land reserved ororests, parks, inrastructure, etc.) and general land. Urban land alls under the heading o general

land. Tree tenure types are recognized: statutory tenures (mainly long-term leases); customary

tenures (traditionally held clan land); and inormal tenures, which are not dened but are intended toencompass all individuated land rights that are neither statutory nor customary. In urban areas, the

Government approach to tenure has been contentious.

Even as late as 1998, or example, the Court o Appeals ruled that no person has the right to own

urban land under customary law [and that] anyone who owns land in an urban area without a granted


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right o occupancy was a squatter without title (Kironde and Lusugga, 2009). Tis eectively madethe majority o urban land-owners squatters and overlooked the act that de acto urban boundaries

had expanded over time to occupy land traditionally held under customary law. In Dar es Salaam,

or example, only an estimated 30 percent o the municipal area is legally recognized as planned; the

remaining 70 percent is inormal.

Te 1999 Land Act in anzania addressed issues o inormality by creating a mechanism to acilitatethe issuance o Residential Licences temporary occupation licences issued by a local authority or a

minimum o six months and a maximum o two years (renewable). Te Land Act also provided or the

large scale regularization o unplanned areas with the intention to acilitate the recording, adjudication,classication and registration o the occupation and use o land by those persons living and working in

the area with the ultimate aim o issuing them certicates o occupancy (Kironde 2009: 21). Te

residential licence project was initiated in 2004 with the aim to provide short-term security o tenurewhile settlements were upgraded. It was envisioned that within 6 years all areas would be upgraded and

longer-term leases (33 years or more) would replace the licences. Tis time horizon or upgrading hassince proved to be unrealistic and the Government is reviewing options to extend the certicates rom

2 years to 5 years. Te licensing process would be the rst stage towards issuing longer term (30 years)

certicates o occupancy, although the programme has yet to reach this stage. It was envisioned that400,000 households would have been issued with residential licences; some 270,000 have been issued as

o 2008.

Te ollowing range o land rights have been encountered in Slum Upgrading Facility project work:

Squatting/Inormal Land Rights: Land or housing that has been occupied in the absence o anyormal agreement with the legal owner. In Sri Lanka, squatting and adverse possession have become

quite common methods o land delivery. Te Government has proved relatively tolerant to inormal

settlements and community members can use evidence o utility bill payment or property tax paymentto assert their land rights. At present most o the slum dwellers do not have ormal security o tenure,

although about 40% o them have a lease certicate which gives them the right to occupy the land.

Tey have been given a household enumeration card by the National Housing Development Authorityo Sri Lanka. With this card, ownership can be transerred to a descendant or sold by transerring the

name in this card.

Interestingly, in the Slum Upgrading Facility settlement areas in Sri Lanka, people have elt relatively

secure on their land, even without legal documentation. (Sri Lanka CPIP June 2007). In Solo,

Indonesia, residents use tax and property receipts to assert their land rights.

Adverse Possession: In some cases people may have lived as squatters or many years, and their rightto occupy the land in question may never have been challenged. In Indonesia, according to the Basic

Agrarian Law, i a person is inormed that they are squatting on state land they can apply to the

courts or ownership rights i they can demonstrate that they have been in occupation or 10 years. InSri Lanka, at Bombay Castle, the private land owner has not appeared or over thirty years and steps

are now being taken or the community to be able to legally claim the land under adverse possession.

In anzania, adverse possession is legally recognized on private land ater 12 years o uncontestedoccupation; adverse possession is not legally recognized on Government land. Nevertheless, recent


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trends suggest that the Government will provide compensation even in cases in which squatters arerequired to relocate rom Government land.

Rental: In many low income and inormal settlements in Slum Upgrading Facility pilot countries,

renters make up a signicant proportion o the communities in which SUF is active. In anzania, theKurasini community is 70 percent renters, while in emeke Mwisho, it is 99% percent, as the land and

houses are owned by the Municipality. In Ghana, some 60 percent o the occupants o Amui Djor arerenters. In Indonesia, by contrast, the majority o the project sites are owner-occupied: all beneciaries

in Kratonan, and all but three beneciaries in Katelan. In Sri Lanka, there are a ew houses in the pilot

projects where the owners have rented their houses or even rooms. Tis is an additional income earningmethod or these communities. As these settlements are located near city centres, the demand or rental

accommodation is high and houses can be rented out at signicantly high prices.

In many o the pilot countries, houses or even single rooms are rented out. Te owner may live in the

same structure, or in another structure in the same settlement, or be an absentee landlord living outsidethe area altogether. In many countries rent must be paid or one or two years in advance in order to

secure the space in question. In Ghana, or example, it is standard practice to pay at least 12 months

rent in advance. In anzania, tenants can be expected to pay up to two years in advance. Tis is a basicmeans o using property to release capital.

Customary/Traditional/Religious Tenure: raditional chies play a critical role in land delivery inGhana, while sultan land is being discussed in Indonesia. In Ghana, the chies have been responsible

traditionally or land management on behal o the entire community; however, with rising land values

and the increasing commercialization o land, this is changing. In anzania, customary land is beingconverted to residential licences on a pilot basis in Dar es Salaam. In Sri Lanka, there is no recognized

customary land in the Colombo area. In Indonesia, as illustrated above, customary orms o tenure are

widespread and in some cases overlap with royal principalities.

Intermediate forms of tenure: In anzania, the Government has initiated a programme o residential

licences or a period o up to 5 years with the intention that these land rights would be upgraded andmade more secure over time. In Solo, Indonesia, where the Slum Upgrading Facility is supporting a

home improvement programme, the Municipality has granted households land certicates or those

dwellers who occupy unregistered public land (land that has not been registered in the Municipalitysnancial balance sheet). Te land occupiers send a request letter asking the Municipality to grant

them the unregistered land as they have been dwelling there more than ve years. Te Municipality,

through a mayoral decree, approves the request or the land ownership transer rom public land intoree-hold land, but only or eligible low income amilies.

I there is a amily living in the area not eligible because o their higher income, the Solo Municipality

asks them to buy the land at market value. Upon providing the approval letter, the Municipality

requests the land occupiers to improve the quality o their houses and settlement. With the approvalletter in hand, the occupiers register their request and pay ocial processing ees or land transer to

the National Land Authority. Along the way, the Municipality assigns a sub-district administrator to

provide assistance until the ree-hold land certicate is issued by the National Land Authority localbranch. Tis secure land tenure motivates the community to improve their homes and settlements and

can be used as collateral or housing loan rom local banks or cooperatives.


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Security o tenure

As can be seen rom the range o land rights ound in Slum Upgrading Facility Pilot Countries, the

majority o members o Slum Upgrading Facility pilot project communities do not have ormal

individual title to their land. In act, most residents o pilot project communities do not have ormalsecurity o tenure. Simply put, they do not have legally recognized land rights and, as a result, are at

some risk o eviction. In many cases, the risk is due to rising land values that put development pressure

on the land they occupy. Tey have, nevertheless, made investments in their homes. In some cases,such as Sri Lanka, these investments have been signicant. A conclusion rom the Slum Upgrading

Facility experience is that intermediate orms o tenure, or even the perception o security o tenure, issucient to catalyze individual investment in homes.

In Indonesia, illegal slum dwellers in the Pringgolayan area o Suryakarta (Solo) have no proo oownership. Very ew o them pay land and building taxes (Pajak Bumi dan Bangunan), but those that

do receive a receipt or paid taxes. In many cases these receipts are perceived by the receipt-holders as

evidence o land ownership. In act, the receipts have no legal value in terms o claim on the land. Inreality the security that the slum dwellers have over their occupied land is through building up their

social bargaining power and selling their votes to support the ruling party in the hope o protection.

Te bigger the number o slum dwellers in an area, the higher their perception o security and the lowertheir ear o being evicted. However, ear o orced eviction or slum dwellers is still prevalent where

households are occupying railway company land or individual land.

Slum Upgrading Facility pilot projects, however, are providing an opportunity to ormally recognize

land rights. In the case o anzania, or example, residents have been relocated rom a site allocated or

Port development at Kurasini. Te rst relocations were carried out with structure owners receivingcompensation rom Government based on the value o their property and the length o time that

they were there. One major issue, however, was that 70 percent o the occupants were not owners,

but tenants. As tenants, however, they were not eligible or compensation and had to nd alternativesolutions. In general, tenants are simply orced to nd accommodation elsewhere, oten expanding

other inormal settlements. With the support o the Centre or Community Initiatives, the members

o the Kurasini scheme managed to buy land to develop in an area called Chamasi. Te tenantscollectively identied a site twenty kilometres away that they believed to be suitable or resettlement and

development. As a result, they negotiated the collective purchase o 30 acres o land at Chamasi undercooperative law. Te community is now planning to develop the land with support rom the Slum

Upgrading Facility.

Another project in Dar es Salaam also involves potential relocation. A large area o land owned by

the emeke Municipality is in an ideal location or major development. Te 1940s rental housing

stock on the land is in bad condition and needs replacing, but there is also sucient space to considera range o social and commercial building options, including relocation o existing residents to new

housing located on the existing site. Te rst step in exploring development options in this case is a ull


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survey o the structures currently there and a ull socio economic survey to determine who lives in thestructures. Te anzanian Federation o the Urban Poor and their support organisation, the Centre or

Community Initiatives, will also help people living there to orm savings groups and to orm the kindo organisational base that is needed or a successul negotiated solution to emerge rom discussions

between the Municipality and the residents.

In the Kirulapona settlemen

Documents

24848766 the UN HABITAT Slum Upgrading Facility SUF Working Paper 10