ESF/N-AERUS International Workshop Leuven and Brussels, Belgium, 23-26 May 2001 COPING WITH INFORMALITY AND ILLEGALITY IN HUMAN SETTLEMENTS IN DEVELOPING CITIES WORKSHOP PAPERS

Ashna S. Mathema

Housing and land markets in Kathmandu, Nepal

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ABSTRACT

The dramatic growth of cities of the developing world has become something of a cliché. Between 1950 and 1990, the world's urban population more than trebled, from 730 million to 2.3 billion. Between 1990 and 2020, it is likely to double again, to over 4.6 billion. A staggering 93 per cent of this increase will occur in the developing world. That means more than 2.2 billion people will be added to the already burgeoning cities of the Third World - an increase of 160 percent.

Increase in demand for urban housing in the latter half of this century had led to the emergence of housing as a priority sector for many national governments and public authorities around the globe. The Global Report on Human Settlements 1986 (UNCHS) indicates that 40-50 percent of the population lives in slums and informal settlements in many cities of the developing world. While not all informal settlements provide unsatisfactory living conditions, they are usually inadequately served with essential infrastructure. Extremely high population densities and room occupancy rates, although not proof of unsatisfactory housing conditions, usually do indicate an inadequate supply of housing. Even as the fairly recent attitude of "slum eradication" is slowly transforming to "slum upgradation", the very fact that they need to be 'upgraded' implies that they are lacking, or atleast considered so by the authorities.

Nepal, however, presents a striking paradox to this universal phenomenon. Despite the fact that it is among the poorest countries in the world, its capital and predominant urban center, Kathmandu, does not face the problem of slums to the extent prevalent in other third world cities. Although the quality of housing is low for a vast majority of the population, the incidence of extremely poor living conditions is fairly limited. Even more impressive is the fact that there are virtually no public sector housing programs or comprehensive/consolidated land development schemes that have facilitated access to housing or land to any class of people, rich or poor. What then explains this anomalous behavior of the housing market? Is it to do with:

• the country's relatively small size and population;
• the fragmented nature of land-ownership, resulting in a high percentage of people who own land;
• the common practice of constructing surplus housing units for rental income;
• the comparatively 'relaxed' nature of housing and land regulations and standards (or, for that matter, poor administration and implementation by the state);
• the fact that something is inherently right or appropriate about the existing policies and patterns of land development? It might well be argued that the non-interventionist attitude of the government and policymakers has led to a competitive market for land and housing that does not constrain supply.

The first section of this paper provides a background of Nepal and highlights the importance of Kathmandu Valley as its primary urban center. It then goes on to explain the housing scenario in prevalent Kathmandu, debating the positive and negative aspects of these trends, followed by an explanation of the basic microeconomic principles of housing markets. The next section deals with implications of government policies on the demand and supply of housing, understanding what policies (or absence thereof) could be directly (or indirectly) responsible for the self-sufficiency of the housing stock in Kathmandu. The conclusions provide a general overview of the importance of informal housing in today's urbanizing third-world cities, based primarily on the views of Rakodi, Turner, Dowall and Peattie. The last section contains an outline of the scope for future research that could help substantiate the evidence documented in this paper.

This paper poses two major questions:

1. Can the absence of slums/squatters be attributed to the fragmented land ownership pattern prevalent in Kathmandu, reinforced by the minimal government intervention in the housing/land market, resulting in a competitive housing market and an elastic supply of housing stock? If so, are there lessons that can be usefully incorporated into policies of other developing countries that see slums and squatters as a stigma to their society?

2. Or is it due to the fact that Nepal is still in the embryonic stages of urbanization, and that with the passage of time, demand for housing will exceed the supply, leading to the formation of slums/squatters by migrants/poor people. If so, is there scope for the future housing problem to be tackled, and how?

N-AERUS: Network-Association of European Researchers on Urbanisation in the South
http://www.naerus.net