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GENERAL BUSINESS DEVELOPMENT STRATEGY

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AFFORDABLE HOUSING CASE STUDY
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EXPENDITURES FOR TRACTEBEL

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 Reasons for housing shortage in Yangon : supply side

▪ So far, developers have mostly catered to the upper

middle class and to expats with about 7000-9000
units/year, focusing on well located older (pre-
1960’s) townships and avoiding informal settlements
(land ownership and eviction issues, distance to
downtown). However, this is a limited market and
sales are not as successful as planned (1)

▪ DUHD (Department of Urban Housing and

Development) builds about 9000 affordable
units/year, while demand is for 100 000 units/year
(2). Myanmar, even with loans from development
agencies (JICA, ADB…) and help from UN Habitat,
doesn’t have money to finance enough housing for
the poor Planned Polo Club Residences in Tamwe Township, Yangon

(1) https://www.mingalarrealestateconversation.com/news/2019/03/19/colliers-myanmar-predict-lower-tier-modern-apartments-and-
condominiums-will-witness
(2) https://www.adb.org/sites/default/files/publication/504671/financing-affordable-housing-yangon.pdf
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Reasons for housing shortage in Yangon : demand side

▪ Slum dwellers don’t have enough money to

get a loan

▪ The middle class also doesn’t have access

to a robust mortgage market, housing is
mostly bought with own money

▪ The greatest part of the demand on the

Yangon real estate market is thus currently
not addressed. As a result, in 2030, there
will be an estimated output shortage of 1,3
million housing units in Yangon

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Urban poor in Yangon

▪ Urban poor comprise 35-40% of Yangon

population (2-2.5 out of 6 million
inhabitants)

▪ They mostly live in satellite towns URBAN POOR

developed in the 1950’s and 1990’s as well
as suburban development since the 60’s
which include informal settlements (slums)
URBAN POOR URBAN POOR
without basic infrastructure. This is where
most industries are also located.

▪ Eviction of urban poor to more remote

location will result in urban sprawl, urban
congestion and loss of economic
opportunities for these poor residents

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Informal settlements : an opportunity?

▪ Slum land could be densified with mid-

rise buildings (7 stories high) to create
sufficient affordable housing both for
new residents (who could pay) and for
existing slum dwellers (who would pay
an affordable rent used for
maintenance and for financing
homeownership)

▪ This scenario relies on two hypotheses:

1. Existing slum land can be sufficiently

densified to create enough market rate
units
2. Even with the additional cost of
providing free units, the price of
regular units for sale can be kept at
market rate for the average Yangon
resident
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Case study: Hlaing Thar Yar

• Township area : 67,4 km2

• Informal settlements area : 24 km2

• Population : 700 000 residents

• Density : 29 000 residents/km2

Industrial area

Informal settlements

Industrial area

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 Higher density masterplan

▪ Theoretical masterplan with 104m x 84m blocks

and 7F residential buildings

▪ Public transportation node, park, school and other

amenities reached in 5-7 min on foot

▪ Ground floor can be used for small retail along

main streets Park School
M
▪ Open courtyards with large streets, public Retail + Other
Office facility
transportation, bicycle and walking as priority

7F 7F

7F 7F 7F 400 m / 5 min on foot

7F 7F

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 Higher density masterplan

▪ GLA : 1,392,000 m2

▪ Average housing unit size : 45 m2

▪ Number of new housing units/km2 : 30,900

▪ Average household size in 2017 : 4.5 people

(decreasing)

▪ New density : 139,000 inhabitants/km2 *

▪ % of relocated slum dwellers : 29,000/139,000 =

20,8 %

* Of course, if this new density is deemed too high, a slightly more extensive and
less dense development could be created
45 m2 corner unit for 4.5 people (1 master bedroom, 1 children bedroom
for 2 or 3 children, living room can also be used for 1 child or a guest).
Similar to DUDH housing units size (as seen in Table 2 p. 6 in JICA report
http://open_jicareport.jica.go.jp/pdf/12305769.pdf)

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Financial feasibility

▪ In 2018, 25% Yangon inhabitants can pay Yangon Hlaing Thar Yar (in
Household financial information
between 25 and 50 million MMK for housing, (in MMK) (1) MMK) (2)
43 % between 10 and 25 million MMK (1) Median household monthly income 500,000 290,000

Median household monthly spending 290,000 290,000

▪ The acceptable monthly loan payment
Median household monthly savings 200,000 0
currently is 100,000 to 150,000 MMK (see loan
capacity on the right and 3)), over 15 years this Loan capacity over 15 years 100-150,000 0
means a 18 to 27 million MMK loan, over 20
1) http://open_jicareport.jica.go.jp/pdf/12305769.pdf
years a 24 to 36 million MMK loan, with 10% 2) https://www.researchgate.net/publication/317175708_Poverty_among_house
interest rate this means that average housing holds_living_in_slum_area_of_Hlaing_Tharyar_Township_Yangon_City_Myanm
ar
should cost between 16 million MMK and 32 3) Of course, residents will be able to make larger down payments as their own
million MMK income increase with economic development

▪ Here, assuming free land (which belongs to the

government) and special tax relief, we can see
how much new housing would cost and how
many affordable housing units it could finance

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 Benefits

Cost (regular unit) Unit Qty Total Cost (affordable unit) Unit Qty Total
Land Free 0 Land Free 0
Land development 20,000/m2 45 900,000 Land development 20,000/m2 45 900,000
Construction cost (RC) 400,000/m2 45 18,000,000 Construction cost (RC) 382,000/m2 45 17,200,000
Design fees (arch + eng) 6% cons.costs 1,000,000 Design fees (arch + eng) 6% cons.costs 1,000,000
Construction supervision 2% cons. costs 360,000 Construction supervision 2% cons. costs 360,000
Project management 2% revenue 360,000 Project management 3% revenue 540,000
Developer’s management fee 5% revenue 1,200,000 Taxes 10 % revenue Tax relief 0
Taxes 10 % revenue Tax relief 0 Total 20,000,000
Bank interest rate 5% 1,000,000
Developer’s profit 10% revenue 2,000,000
Funding/unit
Low cost housing contribution 10% revenue 2,500,000 Housing units # % Total funding
(M MMK)
Total 27,320,000
Private market 4 80 2,5 generated 10 generated
▪ Construction costs estimates (various sources). In order to lower costs + develop
green transportation modes, no underground parking is built Affordable
1 20 20 required 10 paid
▪ Potential pollution and geotechnical issues not taken into account. housing
▪ Bank interest rate : depends on various conditions

With 10% loan : total market price = 30 million MMK

With a 20 years loan, monthly loan repayment = 125 000 MMK (and since income is
steadily increasing this could be converted into a 15 years loan in the future)
Conclusion : market rate housing could finance 50% of
all affordable housing created (with a 80/20 ratio), and
all existing slum dwellers could be relocated in situ in
affordable units without excessive urban density 14
 Business development strategy

1. Check interest 2. Partner with 3. Find additional 4. Start land and 5. Analyze
from local developers and financing from property feedback,
authorities investors + development development improve and
(politicians and other partners agencies (if possible) process duplicate
civil servants)

→ If this works, the same model could be applied to other countries such as Philippines and Indonesia.
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International case studies : the past

Near the Singapore river, 1948 Paris suburb, around 1960 Vienna suburbs, 1920’s

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International case studies : the present
80% of Singaporeans live in public housing.
90% own their apartment, which are
available with a 10% downpayment to the
Housing and Development Authority. These
inclusive neighbourhoods include gardens,
hawker centers, high quality transport and
education. Mid-rise seems however
preferable for Yangon: less expensive to build,
more enjoyable to live in, and yet with a high
density
In France, at least 25% of newly built housing
units must be affordable housing with below
market prices. While previous affordable
housing were secluded from regular housing
and were rife with crime and unemployment,
new neighbourhoods are inclusive, mixed-use
and better connected to public transportation
and also strive to provide job opportunities.
Vienna, one of the most livable cities in the
world, has been building affordable housing
since the 1920’s. Today, about 62% of Vienna’s
citizens live in social housing, which is aimed
both at lower income residents and at the
broader middle class and amounts to 1/3 of
the new housing units built each year. Social
housing is funded by income tax, corporate tax
and a housing-specific contribution made by
all employed citizens. 17