Working with the Market : Approach to Reducing Urban Slums in India

This paper examines the policy options
for India as it seeks to improve living conditions of the
poor on a large scale and reduce the population in slums.
Addressing the problem requires first a diagnosis of the
market at the city level and a recognition that government
interventions, rather than thwarting the operations of the
market, should seek to make it operate better. This can
substantially reduce the subsidies required to assist low
income households to attain decent living standards. The
authors show that government programs that directly provide
housing would cost, in conservative estimates, about of 20
to 30 percent of GDP, and cannot solve a problem on the
scale of India's. Using two case studies, for Mumbai
and Ahmedabad, the paper offers a critical examination of
government policies that shape the real estate market and
make formal housing unaffordable for a large part of the
population. It illustrates how simple city level market
diagnostics can be used to identify policy changes and
design smaller assistance programs that can reach the poor.
The linkage between chronic infrastructure backlogs and
policies makes housing unnecessarily expensive. Increasing
the carrying capacity of cities is essential for gaining
acceptance of real estate policies suited to Indian cities.
The authors propose approaches for funding major investments
to achieve this.