NEW PROSPECTS IN HOUSING DEVELOPMENT THROUGH HDA's INNOVATIVE FINANCIAL AND TECHNICAL MECHANISMS

HOUSING PRODUCTION ON HDA'S LANDS FOR THE LOW AND MIDDLE INCOME GROUPS:

During twenty years of its existence, HDA has been instrumental in providing affordable housing for the poor through innovative financial mechanisms. Being the foremost government agency concerned with housing in Turkey, HDA has accumulated considerable knowledge and experience in implementing different modes of finance of housing.

For its mass housing projects produced on its own land, HDA has the target group of low and middle-income families, who are not able to own a housing unit within the existing market conditions in Turkey. As a governmental agency, HDA has adopted a model -providing mortgage loans- with long maturities and low yield for the beneficiaries of the projects.

Through this method, the selling of the housing units takes place before the construction period. The cost of the houses is determined after receiving the quotations of the contractors. The sales price of each housing unit is then finalized, taking into account the cost of land, off-site and plot infrastructure, social facilities and technical services. 1 0%-40% of the cost of the house is initially collected as a down payment, depending on the affordability of the target population and the rest of the cost is spread over a maturity ranging from 75-240 months. Monthly repayments are indexed to the wage increase in the public sector in every six months.

The projects serve the low and middle-income families who are not homeowners. After the required down payment is paid, the beneficiaries take the single-index, semi annual payment plan. The index is determined by HDA, due to the wage increase in the public sector.

In fact in this system, theoretically, HDA is using a kind of "dual-indexed" credit system. The nominal balance is indexed to the nominal interest rate and the repayments are indexed to the wage increase. As the rate of real interest is considered to be "zero", the nominal balance of HDA's credits are indexed to inflation, i.e. nominal interest rate is equated to the rate of inflation. To avoid facing with the problems, which may arise if incomes (repaid amounts) increase less than inflation, HDA equated the nominal interest to the rise in repayments. Thus the method provides a constant load on the buyers' household income, unlike the bank credits that provide a constant payment all through the maturity.

The repayments are under guarantee as the property right of the housing units remain on HDA till the end of the maturity. That is; HDA is acting as a "guarantor" for the repayments of the project.

The housing units are insured by the contractors for the period of construction. As the construction period ends, they are insured by HDA. That means, the investment is under assurance all through the construction period as well as after the construction.

HDA completes the construction of housing units in 14 months.

The housing units produced are in size between 80-120m2, with m2 cost of 180-200$, including infrastructure costs, but excluding land costs.

Furthermore, in big cities, metropolitan municipalities have similar mass housing implementations, with similar construction, provision and repayment schemes.

Every citizen who does not own a house has a right to apply for social housing. However, in general workers and civil servants benefit mostly from these houses. Until today, among the mass houses provided by HDA, 31% of the housing credits has been used by workers, 30% of the housing credits has been used by civil servants, 7% by retired, 13% by middle tradesmen and 19% by others. Housing units are given to the applicants through elections made by notary public.

Again, due to the 59th Government's Program, in 2005, housing production is planned especially for the low income groups who are considered to be in the range of %20-%40 of the income distribution. Through this context, social type of small houses will be produced, which will have 45-55 m2 and 65-75m2 of housing areas. Repayment conditions will be arranged by HDA, due to the target groups' income and saving patterns. Target groups of the project will have the chance of having long re-payment maturities with 20-25 years and affordable monthly payment alternatives. The project is planned to serve the best through HDA's mission of "providing adequate housing for all" .

HOUSING PRODUCTION ON HDA'S LANDS FOR THE LOW AND MIDDLE INCOME GROUPS