Blended Finance Mechanisms, Mis-Aligned Incentives and Risk Allocation in Housing for the Economically Weaker Section

Since India liberalised its economy in 1991, national schemes incrementally employed Public-Private Partnerships and joint ventures to address paucity of funds in slum rehabilitation. The results are uneven and fragmented given the scale of the challenge involving 65 million urban slum dwellers (Census of India, 2011). A pressing need is to build robust mechanisms for integrating public funding and private sector investments. The Pradhanmantri Awas Yojana in India offers multiple mechanisms involving complex, hybrid contractual agreements between public authorities and private developers. Affordable Housing in Partnership, In-situ slum redevelopment through private developers' participation, affordable rental housing complexes, and financial services from private banks and housing finance companies are new instruments the scheme advances. However, a critique of its performance reveals a mix of remarkable achievements and persistent challenges. The challenge is that hybrid mechanisms such as Public-Private Partnerships involving long-term contracts between public and private sector parties are often laden with risks such as quality concerns, land disputes, project cost escalations, and delayed access to infrastructure. In complex, hybrid finance arrangements, both parties tend to hedge risks, since they are inherently divergent in their goals and interests. Who then bears the social cost of these risks- public and private sectors, the tax payer or the urban poor? How are the risks allocated in hybrid finance mechanisms? This panel by Urban School SciencesPo Paris, Entrepreneurship and Partnerships Lab, Bengaluru and Centre for Policy Research Delhi, brings together housing finance experts from the Global North and South, including government, academia, private sector and research spheres, to share insights from their work on logics of design, risk allocation, mitigation and implementation of blended finance mechanisms for slum rehabilitation and housing for low-income groups. Discussions on incremental process innovations, regulation and incentives inform ecosystem capacity for effective housing policy design. Drawing young and experienced minds the panel reinforces intergenerational knowledge exchange. The session is in two parts: 50 minutes: Presentations by panelists on blended finance models, risk allocation and mitigation: cases from Ahmedabad- India, Nairobi- Kenya, Bogota- Colombia, Sao Paolo- Brazil, Paris- France. 40 minutes: Moderated discussion