Climate Finance | April 12, 2023

India’s urban slums have become a testbed for climate solutions. Investors are welcome to take a look

Shefali Anand
Guest Author

Shefali Anand

ImpactAlpha, April 12 – The Sanjaynagar slum in Ahmednagar, about 150 miles from Mumbai, was a desolate piece of marshland about the size of a baseball field until about 40 years ago. It is now home to 900 people living in tiny metal shacks. There’s a common toilet block for the community, but because it’s frequently in disrepair, many residents instead use the open fields nearby. 

One afternoon in 2018, while children played in Sanjaynagar’s narrow lanes alongside a herd of goats, Sandhya Naidu Janardhan and her team at Community Design Agency met with the slum’s residents to discuss a plan to co-design new of homes for the community. The goal: house people in permanent structures that would shield them from the region’s increasingly intense heat waves and floods, offer running water and better sanitation, and give locals a greater sense of social empowerment. 

“To tap into the existing social fabric is very important because that’s what makes the community resilient,” Janardhan says. 

The project is one of a handful of efforts underway in India to build climate-resilient housing for the more than half of urban residents who live in slums. In such vulnerable areas, deaths from floods, droughts, storms and other extreme weather events are 15-times greater than in wealthier areas, according to the recent report of the Intergovernmental Panel on Climate Change. 

Worldwide more than a billion people live in slums, which have evolved and spread as people have migrated to cities in search of economic opportunities but then struggle to find affordable housing. Christopher Trisos, one of the IPCC report authors, says that some of the greatest gains in wellbeing “could come from prioritizing climate risk reduction for low-income and marginalized communities including people living in informal settlements.”

Quest for funding

There are many practical challenges to improving and fortifying slum developments however, as Community Design Agency encountered in Sanjaynagar. Resident distrust is one.

“It wasn’t like people were lining up to say we will move” into the new homes, says Shashank Mittal, who leads CDA’s partnerships and development. Residents feared the development initiative was a guise for pushing them out of their homes.

In India—and elsewhere—that skepticism is not unfounded. India’s government has largely relied on the private sector to replace informal housing with better low-cost housing. It incentivizes builders to make new homes for slum dwellers for free, in exchange for the right to build additional real estate in a more lucrative area. But in such developments, builders tend to cut costs, and the result is shoebox-style buildings with little social infrastructure. 

A second problem: lack of funding mechanisms to finance such work. There is almost no private capital available to help slum dwellers acquire better accommodations. Some impact investors, like LeapFrog Investments, have backed companies that support home ownership for low-income families, but these don’t typically reach the poorest of the poor. Microfinance institutions, which could offer smaller loans, are limited to loan-terms of less than five years—too short for a mortgage. 

As a result, funding for projects like the one in Sanjaynagar largely depend on philanthropic capital, or grants from multilateral banks and development agencies. 

“These are things where impact people are needed,” says Meera Siva of Habitat for Humanity International’s Shelter Venture Fund, which invests in businesses improving living conditions for people living in slums and poor-quality housing. “Nobody is going to do this work if the impact world doesn’t do it.”

Such investment is increasingly urgent in light of the climate crisis. A well-designed slum home reduces heat, and also the amount of stale air or carbon dioxide that otherwise gets trapped inside non-ventilated slums. 

Organizations like Habitat for Humanity International are figuring out stopgap measures. Habitat’s Shelter fund has invested in ReMaterials India, a company that makes low-cost, interlocking roofing panels for example.

“It’s five degrees [Celsius] cooler, it lasts 10 years, and it doesn’t leak,” Siva says of the new roofs. 

The organization is also working with a microfinance lender in areas of southern India that are facing frequent storms and heavier annual rains. The lender finances roofing solutions and technical assistance on how to select and install a suitable roof, she says. 

The Mahila Housing SEWA Trust, in the city of Ahmedabad, has worked with thousands of slum residents to help them counter heat stress and bring them cooling technologies, like cool roofs and shading devices. In the western Indian city of Surat, where temperatures can reach 118 Fahrenheit, these technologies can lower temperatures by more than 40 degrees.

In February, SEWA launched a $50 million climate fund in partnership with the Clinton Global Initiative, the Council for Inclusive Capitalism and others to buffer low-income people, particularly women, from heat waves and other climate impacts.

Janardhan’s team at Community Design Agency is exploring whether it could potentially issue a type of carbon credit for slum redevelopment. 

“For it to really happen at the scale that we want, in a timely manner, we need multiple [financial] players,” Janardhan says. 

Community design

For now, the work Community Design Agency is undertaking is Sanjaynagar is being paid for with a combination of philanthropic capital from U.S.-based Curry Stone Foundation, local government home-building funds, and contributions from residents themselves. 

The organization has worked diligently to secure community buy-in and ensure that the new homes meet their needs. With help from Snehalaya, a nonprofit that has worked in the area for nearly 20 years, community representatives were elected to share residents’ concerns about the project and co-design the new housing models, including mapping the new development in line with residents’ preferences for ground-floor housing (residents all wanted their new home to be on the ground floor because of their deep attachment to the land.) 

The community eventually agreed to a plan for eight three-story buildings. Each family would be given a 300-square-foot home with a living room, bedroom, kitchen, bathroom and toilet, and a balcony. Residents also weighed in on the buildings’ and homes’ design features, logging preferences for cross-ventilation and natural light to conserve energy, as well as common spaces so neighbors could continue to interact as easily with each other. 

The first of the eight buildings, which can house 33 families, was completed last year. Residents named the building “Swapnapurti”, a Hindi word meaning “fulfillment of dreams”.  

Sanjaynagar residents who have moved into their new homes will be better prepared for the intense heat waves expected in the coming months. One new home-owner, Nagesh Ganpat Atak, says he is happy he doesn’t have to worry about their roof being blown away in a strong wind, or water flooding the inside of the home during the rainy season. 

There is also less fear of disease. Atak, who lived in a shack for 35 years with his wife and two sons, says their old floor was made of cow dung and had a persistent ant problem. The household was constantly afraid of getting sick. “Now, there’s no tension,” he says.

His wife, Padma, is happy to have running water and a toilet. “My life has started,” she says. 

The concrete building has provided more than just physical safety; it has helped elevate the status of Sanjaynagar residents. 

Rutik Balasaheb Lokhande, a 23-year-old youth representative of the community, says that when he was younger, his classmates in the local government school used to taunt him and make him sit at the back of the class because he hailed from a slum. Now, people outside Sanjaynagar treat them differently. 

“Our reputation has increased since the new building has been made,” he says. “We’ve got respect.”