Housing Policy: Most important sector neglected

The main factor in the current Housing Policy is “Houses to be provided to those in need through easy payment plans based on the income of the purchaser”. There is no mention of free housing. But the “easy payment based on income” would be a problem. Therefore the provision of public housing in the past needs to be looked into – Pic by Shehan Gunasekara 

The President’s Housing Policy in ‘Vistas of Prosperity and Splendour’ is indicated as “Houses will be provided to those in need through easy payment plans based on the income of the purchaser in housing complexes, built under public-private partnership arrangements. Land will be provided at reasonable prices for housing construction companies so as to encourage investors to build reasonably priced apartments for middle-income earners. Arrangements will be implemented island wide to enable young couples to purchase a house from an urban area on long-term easy payment plans.”

The Budget 2021 under ‘Urban Townships’ claims: “Expansion of housing complexes and associated social facilities required by the emerging workforce over the next 5-10 years through urban development activities of the expansion of the Colombo Port, urban development zone, Colombo and suburbs as well as in the island’s major cities will be a key component of our development program. The Urban Development Authority has already commenced construction of fully fledged housing complexes amounting to 50,000 houses for low and middle level income earners. I propose to implement a loan scheme with an annual interest of 6.25 percent with a payback period of 25 years to facilitate the acquisition of these houses.”

Thus the main factor in the current Housing Policy is “Houses to be provided to those in need through easy payment plans based on the income of the purchaser”. There is no mention of free housing. But the “easy payment based on income” would be a problem. Therefore the provision of public housing in the past needs to be looked into.

Public housing in the past

The earliest housing scheme in the country was in Wellawatta Spinning & Weaving Mills, a section still existing and the Bogala Flats on Havelock Road for the company staff during the pre-independence era. Bambalapitiya Flats was constructed during the mid-1950s for middle-class families. In addition, early public housing is scattered throughout Colombo for the lower and middle class, as Police Flats in Thimbirigasyaya, Anderson Golf Links (Narahenpita), Maligawatte and Soysapura in Moratuwa. Almost all above are storeyed units not exceeding four floors.

Unlike freehold property, owners of flats or apartments face a time ceiling on the ownership, beyond which the residency lapses. The basis being buildings have a lifespan, beyond which maintenance would be uneconomical. But we have not witnessed in even a single apartment block owned by the Government, the residents being evicted after the lapse of the time ceiling or being demolished when buildings become unsuitable for habitation.

Rental charged and inflation

Bambalapitiya flats meant for middle class were rented out for a 49-year period, when the dollar was around Rs. 10.50. With continuous depreciation of the rupee the rental payments failed to cover even the maintenance costs and the Housing Department was forced to sell the houses to occupants keeping the 49-year limit. Now, around 65 years later, the descendants are still in occupation.

When the UDA proposed acquisition of valuable property for construction of tall apartments, current occupants demand that they be awarded with free apartments from the new developments. Even today, none of the housing/apartments rented out include a clause for rent revision based on inflation, although salaries are revised upwards keeping with inflation.

Housing costs and rental

A few years ago UDA proposed families from low-level housing (slums) be provided with a house worth Rs. 7 million and the prospective occupiers to pay only Rs. 1 million, with an advance payment of Rs. 50,000 and balance in Rs. 3,960.00 monthly payments over the next 20 years. They were also expected to pay the Rs. 50,000 in three instalments towards a fund for the maintenance of the apartment complex.

The interest from the one-time payment of Rs. 50,000 cannot possibly pay for the maintenance of buildings, especially with inflation. Providing a Rs. 7 million house for Rs. 1 million plus maintenance costs would be a burden to the country.

Maintenance of apartments

The apartment complexes, especially high-rise, have their own maintenance issues, including electricity costs for lifts, lighting of public areas and stairs, maintenance of lifts and buildings, also salaries of maintenance and security staff. As water pressure from supply mains cannot reach every apartment, water is stored in a ground tank and pumped into smaller tanks at different levels. The water cost to each tenant would include additional costs of pumping and maintenance.

The Maligawatte housing complex, consisting of 1,520 housing units was expected to shelter poor from the area, but today most houses have been sold by recipients to businessmen in the area. Current occupants are influential and few years ago NHDA spent Rs. 280 million in modernisation of the housing complex. The recovery of expenditure was not even discussed.

Housing and the country’s finances

According to the Budget, the UDA will construct 50,000 houses for low and middle level income earners, to be purchased with low interest bank loans. But can the country afford to spend such expenditure?

In late September Moody’s downgraded Sri Lanka’s long-term foreign currency ratings from B2 to Caa1, just one step above being bankrupt, raising concerns on the country’s debt payment affordability. The 50,000 houses with each house averaging Rs. 10 million would cost Rs. 500 billion, in addition the cost of lands. Can the country afford such expenditure and what will be the return to the country?

Moody’s commented on 2021 Budget as “Economic boost from the Budget will be limited. The Budget includes large allocations for domestically financed infrastructure development, incentives for domestic production, support for small and medium-sized enterprises, and upgrading Sri Lanka’s rural road networks. The benefits will be limited by the magnitude of the pandemic-driven hit to demand for Sri Lankan exports and the collapse in tourism activity. Domestic demand is also likely to remain sluggish given still-subdued business and consumer confidence, and ongoing import restrictions affecting industries such as construction and manufacturing.”

A few weeks ago politicians laid foundation stones for a number of new housing schemes. A MP boasted in public that the construction of almost 10,000 houses had already started. They were not for poor nor for sale to middle class as indicated in the Budget proposals. They are meant for political supporters as in previous years. The housing policies in the past have been a major contributor to negative finances of the country. The current housing program would increase Government debt without returns, thus the system needs modification to bring long-term benefits to the country with the ability to repay the loans obtained.

Housing needs of the garment sector

The country’s apparel sector earned a record $ 5.3 billion in 2019, accounting for around half the country’s total exports, while employing 15% of the country’s workforce. But what has the nation done to the industry and the workforce in return?

With the first lockdown of the country due to the corona epidemic early this year, the plight of the garment and other workers employed in various factories came to light. With closing down of factories, employees were deprived of an income, some house owners practically threw the workers out, where they were boarded.

The garment factory employees include machine operators, helpers, trainees, supervisors as well as junior and senior management, arriving at the factory from far and near. While factories generally provide transport up to 30 km, those from far away are boarded in nearby houses, some few kms away. Some supervisors and junior managers travel by motorcycles, senior managers travel from homes with their motor vehicles sometimes 50 kms away. Thus the transport costs of garment factory staff amount to a substantial sum, a waste of country’s finances, also time of employees.

Housing needs of garment workers

Thus provision of accommodation for garment workers and staff need be considered as an urgent requirement, which would help factory workers as well as staff.

The female staff could be provided with sharing accommodation similar to hostels in Peradeniya University i.e. the accommodation in four-storey buildings, with around 12 rooms on either side of a corridor, each room accommodating four girls. Thus each floor will accommodate nearly 100 girls. On either end of the corridor would be a row of wash-basins, toilets and showers. The building could house a staff of nearly 400. In addition, the staff need be provided with a canteen supplying meals.

The supervisory staff could be allocated with rooms shared by two persons with an attached toilet. Junior staff with single rooms with toilets, all in a separate building.

The married staff, both husband and wife employed, without children could be offered a large room with attached toilet and those with children be offered apartments, size of the apartment depending on the level of employment and the ability to pay. In addition facilities need to be provided to care for children while parents are at work.

Above could be constructed by the Government, based on requirement ascertained by the factory owners and each building allocated to a single garment factory for managing. They will pay a rental and recover same or a part from their staff as decided by the management.

With number of factories in the same locality, apartment buildings could be collected together giving rise to a small community, with a small school, dispensary, shopping areas etc.

Similar arrangements could be made for industrial estates spread throughout the country, modified as per needs. The companies in industrial estates could get together and organise to supply accommodation to their staff. The UDA could construct the accommodation and the rentals would be paid by the companies, thereby saving UDA of the hassle of rent collection and maintenance.

Advantages of staff accommodation 

The immediate benefit of accommodation would be the factory workers, living within walking distance to the factory, thereby saving transport costs and time that could be used as additional over-time, bringing in extra income to workers and increased production to the factory.

The married accommodation would be expensive per worker, but most advantageous to the country, as the family will move away from their current residence, thereby reducing demand for land in rural areas, helping a major problem.

When senior staff reside nearby, in an apartment owned by the factory, it will save large sums spent on travelling and time, saving the country fuel costs and vehicles would last longer.

Corona affected the world

When the corona epidemic hit the world, the buyers stopped garment purchases and the garment sector worldwide was seriously affected. Bangladesh, ranking next to China as the highest supplier of clothes to Western countries, relies on the garment industry for 80% of its exports, with some 4,000 factories employing around four million people, mostly women. When European buyers cancelled over 50% of $3.18 billion worth of orders, garment industry in Bangladesh was seriously affected.

Victoria’s Secret is the best-known and largest lingerie retailer in the US since the 1990s. When the corona epidemic stopped the public purchasing garments, Victoria’s Secret crashed. Sri Lanka’s MAS Holdings, a major supplier to Victoria’s Secret, was seriously affected

Garment sector recovers from corona

In Sri Lanka, the garment sector is the largest foreign exchange earner and the largest employer of the country. It was seriously affected by the reductions of buyers’ demands. But contrary to expectations, our garment sector headed by MAS Holdings moved away from routine manufacture and switched over to personal protective clothing used in the healthcare sector and continued to earn practically the same foreign exchange.

The recovery of the garment sector from the collapse was led by MAS Holdings and was admired by the industry. The appreciation was highlighted a couple of weeks ago, at the annual ‘Derwent Top 100 Global Innovators’ Innovation Forum conducted by Clarivate, Sri Lanka’s MAS Holdings was judged once again as the ‘Most Influential Innovator’ in South and South East Asia.

After the corona-resulted turmoil, by mid-May, Sri Lanka’s apparel industry attracted over $ 500 million dollars’ worth of orders for the production of Personal Protective Equipment. The garment sector’s resistance, development of high level products and earning highest foreign exchange are only possible with massive contribution by the skilled workforce and the management, who are unappreciated and sometimes working girls are ridiculed by the public.

Unfortunately, the fantastic performance of our garment sector under trying circumstances failed to be appreciated by the President, Prime Minister and Ministers. Apparently they have expected the garment sector to deliver irrespective of conditions. Meanwhile, the armed forces who won the war continue to be held in high esteem.

Government’s assistance

Production of personal protective clothing required different materials previously unused in the industry. As imports take time, the new requirements had to be produced locally with available facilities.

Over the past years, BOI had been proposing a fabric park in Eravur, in eastern Sri Lanka to manufacture raw material needed for the apparel industry. It is claimed four companies have already agreed to establish factories. But physical work on the park is yet to begin.

Next to the garment sector, the highest foreign exchange earner to the country are the workers employed abroad. But with corona epidemic affecting most countries, added with natural disasters, some countries/companies were forced to discontinue workers, resulting in some of our workers being helpless without employment and an income and they appealed to the Government to bring them back. But the Government turned a blind eye or is extremely slow and helpless workers continue to suffer.  

Allegations against the sector

When the corona epidemic second round emerged, major garment manufacturer Brandix was labelled as responsible, brought to the country by its returning staff from India. The new coronavirus was found to be different from the previous, but similar to that found in Europe. Social media pointed out that a staff member from a European airline found positive for corona was quarantined in a hotel, with hotel staff travelling from their homes, could be responsible. But the Government failed to conduct a proper investigation and allowed Brandix to be conveniently blamed for the epidemic.

Discussion  

While the country undergoes serious financial issues, the Government wishes to construct houses in massive numbers, spending billions, adding to existing problems.

During a discussion with members of the construction industry, the President promised them construction projects as housing. But the Government’s proposal to award construction projects to contractors needs to be modified towards providing accommodation to workers in garment factories as well as industrial estates. UDA could organise low-cost bank loans and offer housing complexes to garment factories, saving the companies the hassle of organising construction. The companies would take over the buildings and pay a reasonable rental which could be recovered from the occupants.

Currently, the country is surviving on the innovative ability of the garment companies and hard-working workforce, delivering nearly 50% of country’s foreign exchange earnings, in addition to providing employment to large numbers of rural workforce. However, the Government allowed garment factories to continue operations during the lockdown.

The President and the Prime Minister have failed to appreciate the contribution of the garment sector.

The President could show his appreciation of the garment sector by redirecting the proposed house construction to the most deserving sector of the society, the employees in the garment industry. The factory girls are being ridiculed by society; providing accommodation to garment sector staff would change the public attitude towards workers. With decent accommodation, the garment sector would sure to show their gratitude with greater efficiency, improving production and raising exports to new heights, continuing to promote brand Sri Lanka in the world market.