Source: Asia Development Bank
Project Result / Case Study | 29 December 2020
- A third of Mongolia’s population live in urban ger areas where poor sanitation, solid waste management, electricity and water supplies pose health and environmental hazards.
- The Government of Mongolia and ADB are implementing a $570.1 million project, including about $410 million in private sector investment, to turn Ulaanbaatar’s ger areas into affordable, low-carbon, climate-resilient, and livable eco-districts.
- Ulaanbaatar Green Affordable Housing and Resilient Urban Renewal Sector Project will build 10,000 homes in 20 new environmentally friendly eco-districts with good services, green spaces, and access to shops and jobs.
When temperatures plummet in the Mongolian winter and households pile more coal onto their stoves to keep warm, Oyun-Erdene Navganjav’s concern grows for herself and her family.
“It gets very cold and very smoky. There’s much more pollution and I worry about how much it is damaging the children’s health,” says the 30-year-old mother of three from her three-room brick home in the Bayankhoshuu subcenter on the southern outskirts of the Mongolian capital of Ulaanbaatar.
Oyun-Erdene is one of around 840,000 people who live in one of Mongolia’s so-called ger districts, unplanned neighborhoods where brick houses or traditional Mongolian tents perch in small family plots allotted by the government. These neighborhoods have expanded rapidly in recent years with migrants from the countryside unable to find or afford high-priced homes in developed parts of the city.
The ger areas lack key infrastructure such as connection to the electric grid, necessitating the use of coal. With no water or sanitation pipes to her home, Oyun-Erdene also collects water from a water kiosk or cart and the family relies on a pit latrine built next to the gate to her 231-square-meter plot. Outside the gate, mud roads around the neighborhood are rutted and come spring, melting snow and heavy rain mean the roads flood easily.
Sustainability and livability
Homes with access to utilities, public services, and greenspaces, commonplace in the city center, are beyond the means of most, given that banks demand downpayments of 10%-20% of the house value while mortgage interest rates are typically around 15%-16% per year.
“Hard-working families like Oyun-Erdene’s are struggling because homes with proper utilities and services are beyond their income,” said Arnaud Heckman, Principal Urban Specialist in the Asian Development Bank’s (ADB) Mongolia office. “But making these houses and neighborhoods cleaner and greener is crucial if we want to make Mongolia’s cities livable and productive.”
ADB’s Ulaanbaatar Green Affordable Housing and Resilient Urban Renewal Sector Project aims to do both by establishing new eco-districts in the ger areas that are gentler on the environment, provide better services, and provide reasonably priced homes.
The project is financed with $80 million from ADB and $148 million in cofinancing from the Green Climate Fund (GCF) and the High-Level Technology Fund. GCF was set up in 2010 by 194 countries to help developing countries cut climate emissions and become more climate-resilient. Meanwhile, the High-Level Technology Fund financed by the Government of Japan, set up in 2017 and managed by ADB promotes the use of technologies to address development issues in ADB projects.
Testing voluntary land swapping
The project will ultimately establish 20 eco-districts of around 5 hectares each – starting with one eco-district within Bayankhoshuu, and another in the Selbe subcenter around seven kilometers away.
The 500 or so homes to be built in each eco-district will comprise 15% for rent or rent-to-own homes, 55% low-cost homes, and 30% homes sold at a market rate to ensure all families can continue to live in the neighborhood. Plus, the eco-districts will be developed with district heating systems, solar panels, insulated buildings, and parks that will reduce carbon emissions and air pollution. Water and sewerage pipes will improve sanitation and cut soil pollution.
Under an innovative voluntary land swapping mechanism, those who now live on the land identified for development into an eco-district will be asked if they would like to exchange their houses for new low-rise apartments or townhouses in the planned eco-district. Unanimous agreement is required for the eco-district development to go ahead. The responses have been positive so far.
70-year-old Chulunzagd Purevjav has lived in Bayankhoshuu for 12 years with his wife, on an MNT300,00-400,000 ($110-145) monthly income that only covers expenses. Now retired, he is keen to swap their house and plot for a fully serviced apartment since, he says, it would give them more time with their granddaughter who lives with them and mean parks for her to play in outside.
“It would certainly be more comfortable and convenient in an apartment,” he said. “It’s hard work to fetch coal and water every day.”
Setting the course for the private sector
Those like Chulunzagd who are living in the designated eco-district area will have new homes – townhouses or low-rise apartments – to live in straight away. Additional homes built under the project will be available to families living in other parts of the ger areas at prices that are lower than similar houses elsewhere. Mortgage downpayments will be smaller and mortgage interest rates will be capped at 8%.
ADB’s hope is that the exercise will pave the way for similar developments by the private sector.
Almost $76 million of the GCF cofinancing under the project will be channeled into a fund managed by the Asset Management Company of the Development Bank of Mongolia (AMC-DBM), a subsidiary of the Mongolian government-owned Development Bank of Mongolia. The fund will enable Mongolian banks to provide finance to property developers to build low-carbon houses and to provide affordable mortgages under the project.
In doing so, the project will showcase the business case for building and lending for affordable, environmentally friendly homes and help establish green financing standards for the whole country.
Karen Lane is a Director of Knowledge Support Division in ADB’s Department of Communications. Gantuya Ganzorig is an External Relations Officer at ADB’s Mongolia Resident Mission. Learn more about ADB’s work in Mongolia.