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Affordable Houses - The Right of the Poor
By M. Hanif Lakdawala
A large section of the Muslim population in India resides in slums. Learning from International experiments, Indian Muslim business organisations can launch affordable housing schemes for the poor.
Rapid migration to cities in many developing countries has led to the formation of informally built slums where people are living in pathetic conditions.
In major cities of India, a large population of Muslims live in slums with no one to care for their plight. Though free markets unleash productivity and innovation, they are still bound by economic laws. Because half of every population is below median income, market-quality housing commands market prices. As a result, markets alone will never satisfactorily house a nation’s poorest citizens.
So whether people buy or rent, housing is typically affordable to only half of the population. Those citizens who flood the world’s growing metropolian areas, are overwhelmingly poor: they arrive in cities that were built for smaller populations and whose formal-sector housing producers can only build housing that these urban immigrants cannot afford.
Left alone in the marketplace, the impoverished create and inhabit slums because that is their only available and economically sensible option. Slums are a reflection not of market failure, but of societal failure.
Increased income for the upper middle class and the rich has led to a decrease of affordable housing for the poor in urban areas. Working families are among the hardest hit by the housing crisis. One in three families with children who cannot find housing or live in “severely distressed” accommodations work full -time or part-time at or above the minimum wage. Despite working two or more jobs, many families still must pay out more than half their income for housing, or live in sub-standard conditions.
Who will help them? Government and official agencies need to be pressurized. Many of the official schemes for affordable housing are hijacked by politicians themselves in collaboration with builders.
Muslim social and welfare organisations should take up the issue with the government and the official agencies. A large chunk of Muslims cannot find a decent accommodation. Unlike other communities, they cannot approach banks because of the interest element in the loans.
It is the role of the community to help house the poorest of poor. There are many Muslim business houses and professionals who have the resources and expertise to launch affordable housing scheme in major cities. In the past, number of such ventures were successful. Millat Nagar in Mumbai is a good example.
Another option is that the community should interact with the Reserve Bank of India and other banks to offer customized financial products to the Muslims whose housing need comes from a strict adherence to Islam and the prohibition against receiving or paying interest.
We can learn from international experiments. There are International Islamic Finance models that allow for a home purchase in Muslim nations like Egypt, Indonesia, and even by the Islamic Bank of Britain. The Global Islamic Finance industry is estimated at $200 - $300 billion. Even in the U.S., new regulatory changes have taken place to allow for models of compliant home purchase options.
There are a number of models available in the international market which caters to Muslim population. One such model is used by the Bahrain Islamic Bank, and its new scheme ‘Ijara Muntahia Betamleek”. The new scheme provides customers with mortgage finance with a repayment period extending up to 20 years. The new product is a mortgage finance facility for buying property to be used as a private residence regardless of the type of such property, whether it is a plot of land, a readily available completed house or still under construction, an apartment or even a property mortgaged with other banks.
For all such purposes, Bahrain Islamic Bank will buy the property and following its acquisition, it will be leased to the customer, who is the applicant, against soft-term installments over an extended term. The finance method used is called ‘Ijara Muntahia Betamleek”. To be eligible for mortgage finance, a customer must pay no less than 20 per cent of the property’s value and his age should not be more than 60 on the date of ownership.
Affordable housing is one of the basic rights. The community needs to give priority to the issue. Decent housing is very essential for any Muslim to observe the basic teachings of Islam. Just imagine the plight of a Muslim housewife or a Muslim girl living in slums and her struggle to comply with the Islamic injunction of Hijab.
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