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PRESENTS
“Let’s take the Capital Market
HOME
to The People ”
Dr DARIN GUNESEKERAOf
Capital Markets for the Marginalized (CMM)
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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.
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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?
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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
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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
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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.
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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
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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.
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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
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Project Results
BEFORE AFTER
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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
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The People’s Stock Exchange
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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
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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
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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)
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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.
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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.
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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
[email protected]+94716659957 (call/ SMS)