Do neighbourhood facilities matter for slum housing? Evidence from Indian slum clusters

Saudamini Das, Arup Mitra and Rajnish Kumar

Institute of Economic Growth, Delhi, India

http://usj.sagepub.com/content/early/2016/03/04/0042098016634578.abstract

Slum dwellers in developing countries reside in inhuman conditions with meagre access to basic amenities. There is a strong possibility that drinking water becomes contaminated by sewerage or general garbage. Why is it so? Is it because they do not care about living in a clean environment or is it simply because they cannot afford to do so?

We examine these questions in the context of the registered slum clusters of four Indian cities--Mathura, Ujjain, Jaipur, and Ludhiana. Mathura and Ujjain are located in central part of the country and are predominantly religious cities whereas Jaipure and Ludhiana, located in western part of the country are more developed with wide spread business and industrial clusters. Thus, all the four cities witness large scale migration from rural areas in search of livelihood.  Most migrants end up residing in slums.

A primary survey was conducted by some of the authors in the year 2006-07 in these cities under a project on urban poverty sponsored jointly by the United Nations Development Programme and the Government of India. The detailed data on demography, income, health, housing, neighborhood, migration, etc. of the slum dwellers were collected.  We analyzed the house prices of the owned residential sample units using a reduced form hedonic equation to find out which features determine the prices of residential units in slums, and in particular whether neighborhood cleanliness plays any role or not?

The hedonic price theory is an extension of the theory of attributes. It assumes that commodity prices are functions of the attributes that the commodities possess and thus, by studying the changes in the price of a product with respect to marginal change in the attribute it possesses, one can find out the premium the consumer pays for the attribute. In other words, by differentiating the price function with respect to a characteristic, one can derive the consumer’s marginal willingness to pay for that characteristic. Using this logic, house prices are considered to be a function of structural, neighborhood and environmental features of the house, and residents’ willingness to pay for each feature is derived from the differential of the estimated hedonic house price equation. We conducted such analysis of slum house prices using a set of structural, neighborhood, environmental and legal features of the respective houses. Slums being illegal structures in many places, features like demolition threat, whether the slum is situated in public or private land, etc. are likely to affect house prices.We categorized these variables as legal features. We included two features – presence of flowing open drain in the neighborhood and presence of chocked open drain in the neighborhood as two neighborhood cleanliness variables. First we estimated the reduced form hedonic equation of house prices and then using the differential of house prices with respect to features having significant effect on house prices, we calculated slum residents’ marginal willingness to pay for the specific feature. The significant features reflect the slum dwellers’ preferred attributes in house selection.

 We find house prices varying consistently with many structural variables – built up area, number of rooms, if having brick wall,concrete roof, separate kitchen, attached bath and toilet, attached balcony and courtyard, piped water connection, etc. Temporary window and doors had strong negative effect on house prices. But only few of the neighborhood features—proximity to central business district, presence of streetlight and  house being connected tosewage facility from government showed significant positive effect on house prices. Such results were consistent across cities. Most of the other neighborhood variables like provision of water, garbage collection, presence of healthcare etc including presence of open drain, both chocked and flowing, in the neighborhood showed insignificant effect on house prices. Demolition threat had a significant negative effect on house prices.

These results indicate that house selection by slum dwellers is mostly being guided by features related to house quality, availability of facilities inside the house and some basic amenities like provision of street light or sewage system provided by the local authority. However, they seem to be paying high prices for a good quality house even if it is situated next to an open drain. Such results have strong implication for Indian cities, especially with the Swachh Bharat Campaign of the Government of India. First slum dwellers need to be better informed concerning the importance of  cleanliness through campaigns which create awareness.

Slum dwellers expect public provisioning of most of the neighborhood facilities, but they are very willing to pay for features like government supported sewage, street lights, and for being permitted to reside within the city. Thus, cost sharing is possible in order to provide these facilities and the revenue generated can be used for information campaigns to inform residents of the importance of cleanliness.