As Bhutan urbanizes, its farmers become landlords

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New construction in Southern Thimphu.
New construction in Southern Thimphu. Photo: David Mason/World Bank

Under traditional Bhutanese architectural practices, houses are remarkably space-efficient.  

Typical structures hold supplies and livestock on the ground floor and use two or three upper floors and attic for living spaces, guest areas, religious purposes, and additional storage  

Even roofs are put to work; the ubiquitous red chilis, common in Bhutanese cuisine, are placed on them for drying.    

As Bhutan has urbanized, demand for land and housing has intensified.   

Thimphu, a city that runs north-south at the bottom of a steep valley, has grown in built-up area from 7.1km2 in 1990 to 26.5km2 in 2008 and continues to expand to accommodate new migrants.   

Driving through the city today, it is hard not to spot bamboo scaffolding, bouquets of rebar and busy laborers working to secure bricks and concrete. 

The limited amount of urban land and the high cost of construction have made adequate housing an increasingly large expense for low- and middle-income groups.

While Bhutanese cities have grown quickly, they—for the most part—do not have large informal slum-like settlements usually found in other countries with similar urbanization rates.  

Still, the limited amount of urban land and the high cost of construction have made adequate housing an increasingly large expense for low- and middle-income groups.   

The challenge is to reduce the cost of supplying housing while also balancing the need to ensure that new units are close to the jobs and services that residents need.   

With support from the World Bank’s recently completed Second Bhutan Urban Development Project, Thimphu municipality utilized a land pooling approach to implementing its Local Area Plans in Taba, Dechencholing, and Lanjopakha to convert farmlands to residential developments.   

Through a  land pooling program, 778 landowners agreed to give up a specific portion of their plots (a total of 564 acres) in exchange for roads, drainage, water, street lights, and community facilities. These plots were then re-planned based on the contribution amount and proximity to the trunk infrastructure. 

Owners benefited from the increased market value of these slightly smaller plots and had the option of continuing to farm.  

However, many chose to either sell their plots or developed multi-story apartment buildings for rentals; increasing the supply of urban housing for the city.    

The challenge is to reduce the cost of supplying housing while also balancing the need to ensure that new units are close to the jobs and services that residents need.  

While the case is a successful example of increasing the supply and density of urban housing units, affordability remains a crucial issue.  

Rents can range between Nu 4,000-7,000 ( $55-$97) per month which come close to worldwide standard measures of housing affordability for the median household.  

The high cost results in part from the scarcity of finance for developers and consumers, the high cost of importing materials, and the lack of mechanization which limits the speed and consistency of construction.    

The government’s Draft National Housing Policy identifies affordability as a major challenge. It outlines a framework for action to reduce the cost of housing production and provide support for low-income residents with the introduction of a National Housing Authority.  

This is a step in the right direction, but additional research and policy dialogue is needed to support the implementation of the Policy to ensure greater access to safe, affordable housing. 

Authors

David Mason

Urban Development Specialist

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