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The Million Houses Programme in Sri Lanka


07 / 1994

The Million Houses Programme (MHP)was the result of a critical consideration of the earlier programmes, in particular the Hundred Thousand Houses Programme (HTHP)(1972-1982). In reality a change in orientation was already observed in 1978.

The policy applied between 1971 and 1977 was based on the principles of the operation of readjustment and of construction by the State, granting of loans to small builders and of land to private groups, but a "less friendly towards developers" attitude could be noted, producing very important results in Colombo.

The HTPH started from the principle, which the State had established : "a separate process for the public housing sector" through the offer of new housing to low-income households. Rural housing comprised 40 % of the programme, through aid to self-help construction, and 15 % through direct construction in cities ; the loans to builders grew to cover a little over 30 OOO units.

Many criticisms were expressed later : the sites and services and improvement programmes had escaped the scope of the programme ; the improvement of the slums had not received the attention it deserved ; the falling price of direct construction costs was neglected ; there was little dialogue with the people concerned with housing.

The Million Houses Programme (MHP)was initially planned for the period 1984-1993 and subsequently reduced to 1984-1989. The approach is different from that of HTPH : instead of directly building the houses, the State proposed to assist families in the building of their houses. It relies on the need to : generate basic solutions for the majority of people and not a series of specific solutions for a minority, develop links with the local government who should intervene directly and actively in the formulation and application of programmes, move away from the link between housing and poverty, emphasize the different forms of popular expression, develop a proper programme for Sri Lanka and not simply copy and adopt programmes coming from abroad, allow for the links between housing and cultural standards.

What is ingrained in the programme is to encourage close collaboration between administrators, politicians and the people and to anticipate a feed-back with regular revisions following concrete information and discussion with the people.

In the MHP, the focus is on : (a)very small loans, the average loan is $ 178 per family ; (b)a large participation by the households, in the form of work or money, this participation represents 60 to 90 % of the total value of the accommodation built ; (c)and absence of strict technical standards ; (d)technical assistance from the administration and a control of how the loans are used ; (e)a wide range of loans for improvement, building of new accommodation, sites and services, water supply, sewage and drainage, etc. ; (f)a policy for improving slums in Colombo and in other towns ; (g)a land policy to facilitate land access in urban areas, beneficiaries occupying public land acquire ownership without land expenses ; if the land is privately owned, the State undertakes to purchase it and only part of the price is counted in the loan granted to the household ; (h)a subsidy policy, interest rates are below those of the market, infrastructures are financed without repayment, administrative costs are not taken into consideration in the cost of the loan. The National Housing Development Authority (NHDA)is responsible for managing the programme and granting loans.

The implementation of the MHP came up against the difficulties specific to this type of programme (selection of beneficiaries, lack of flexibility in the guarentee system, heavy administration, complex repayment systems).

Following a local pilot project in Kandy, NHDA has decided to include the cooperatives systematically in the programme. Financing goes through primary cooperatives in association with a District Cooperative Union (DCU). The DCU receives from the NHDA loans at 2 % and passes them on to the cooperatives at a rate of 4 % ; the loans are granted by the primary cooperatives to beneficiaries at a rate of 6 %. At present, 40 % of the loans in rural areas go through the cooperatives, in towns, the participation of the cooperatives is still only 10 %. The rate of repayment of loans by cooperatives is 80 to 85 % whereas for the NHDA it was at a maximum of 50 to 60 %. Evaluation of the MHP is not easy, only a set of works which serve as reference for particular programmes is available [as of the date of this writing].

Out of a total of 249 004 loans for housing, 87,3 % correspond to the rural areas and only 12 % to the cities. However, these figures only serve as a starting point for a complete evaluation of the MHP. The gap between loans granted and the loans used, and the figures in terms of monetary value and not only in terms of beneficiary families must be taken into account. On an average, each loan of the private sector is 30 times higher than those of the rural and urban programmes. Many discussions are open in the MHP on certain specific aspects such as the proportion between loans and value of houses built, housing quality and building materials, the role of the cooperatives, volume of subsidies and the effect on the national and local economies.

The Million Houses Programme is an initiative of the greatest interest regarding housing finance, both by its size and its characteristics. It is an innovation in the way housing policies can be conceived in the Asia and Pacific Region.

Key words

housing, role of the State, housing financing, credit, urban planning, cooperative

, Sri Lanka


This is a summarized version of the case study by Mr Sirivardan which appeared in : Guidelines on Community-Based Housing Finance and Innovative Credit Systems for Low-Income Households, Bangkok, ESCAP, 1990. Translated into French (following card).




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