As the sound of thunder warns of another torrential downpour, Izidro Pereira worries about his family.
It’s October and the rainy season has just begun in Dili, bringing with it heavy showers that seem to arrive like clockwork in Timor-Leste’s capital at about the same time every afternoon.
The 4x6 meter room Pereira and his family – his wife and three children - share with his brother offers little respite when the weather turns foul. It’s cramped at the best of times and on a day like this, the walls seem even closer.
“It’s very uncomfortable. It’s noisy. There are six of us living in a room for one person,” said Pereira, a public servant with the Timor-Leste Health Department.
Added to his concerns is the impact of climate change, which has made extreme weather events more frequent and more ferocious. In 2021 Dili was hit by the worst flooding it’s seen in 50 years.
“To have a home means to be safe but because of the housing situation in Dili, we don’t have a choice,” said Pereira. “We have money. But we cannot find land. We cannot find a home,” he said.
Dili resident Izidro Pereira and his family have been impacted by the housing shortage in the city. Photo: Alberto Nunes / IFC.
Two decades since Timor-Leste regained independence, the growing pains for the one of the world’s youngest nations and Southeast Asia’s smallest economy are obvious. While it’s renowned for its stunning beaches and world class diving, this natural beauty is yet to translate into tourism dollars. Almost half of its very young population live below the poverty line.
The country was once one of the most oil-dependent economies in the world. A national sovereign wealth fund – the Petroleum Fund – financed a significant portion of government spending in 2022. The fund is well managed, but oil and gas production are coming to an end and prospects for new developments are a work in progress. Government analysis shows that the Petroleum Fund could be exhausted by 2035, placing the country in an extremely difficult position.
There are signs of significant economic progress. New hotels, restaurants and shopping centers are springing up while a new deep-water port, the biggest single investment in the young nation’s history outside of the oil and gas sector, has opened a gateway to some of the world’s busiest shipping lanes.
But as the population in Dili swells amid a constant influx of people wanting a share of these opportunities and growing prosperity, so too does the demand for housing.For Pereira and his family, who count themselves among Timor-Leste’s burgeoning middle class, the lack of supply and high demand threatens to put home ownership out of reach. “Dili is getting small because many people are coming here,” he said.
This rapid urbanization has also led to a sharp rise in unregulated housing construction creating informal settlements, many of which have very limited basic services such as power, water, and sanitation.
“There are quite a few challenges,” said Timor-Leste’s Finance Minister Rui Augusto Gomes. “We are still at an early stage in implementing land laws so most land has not been titled. Because of this, we don’t have formal markets for land or housing and banks are not able to provide mortgages,” he said. “All of this makes it harder to build good housing and as a result many people live in quite poor-quality housing.”Added to the legal and regulatory issues, there is the high cost of construction and a limited number of developers. Low-income levels mean most people can’t afford housing, and there are no residential home mortgage products offered by banks to help bridge the affordability gap.
There are solutions. With better access to housing a major policy priority for the government, work is now underway to kick-start the market for green and climate resilient affordable housing through one model – a pilot public-private partnership (PPP) on 20 hectares of land made available by the government.
Tom Lubeck, IFC’s Regional Manager for Public Private Partnerships (PPP), said a PPP approach would unlock government land, leverage government and private sector financing and enable the development of housing loan products that altogether establishes a model for large-scale housing development which can be replicated to reduce the growth of the city’s informal settlements.
He said Timor-Leste had clearly made progress with its PPP program, as shown by the Tibar Bay Port and the redevelopment of the Presidente Nicolau Lobato International Airport. “We also see this as the right model to kickstart affordable housing, as it will deliver affordable housing that’s also environmentally friendly,” Lubeck said. “It will use EDGE, a green building certification system created by IFC that helps reduce energy and water usage, as well as building material costs.”
Beyond the pilot, IFC is also working on a clear roadmap to further develop a viable housing market in Timor-Leste with key regulatory, industry and financial sector players, drawing on its experience in other developing nations like Bangladesh. A key focus is helping to ensure mortgage finance products for people to buy homes. “With the right reforms and regulations in place, we know from our experience that there are innovative ways to support banks to be able to offer affordable housing loans to people wanting to fulfil their dreams of home ownership,” said Allen Forlemu, Regional Industry Director, Financial Institutions Group, Asia and the Pacific. “Affordable, green and resilient housing is a must for a country like Timor-Leste.”
For Santina Moniz and her husband Olderico da Silva, the increased frequency and ferocity of extreme weather events caused by climate change has convinced them that whatever plans are put in place to solve the housing crisis must be green.
Timor-Leste’s economy is recovering from the economic slump caused by COVID-19 and devastating impacts of Cyclone Seroja, which killed hundreds of people in Timor-Leste and neighboring Indonesia when it hit in April 2021, leaving behind a damage bill that ran into hundreds of millions of dollars. The flooding caused by the cyclone – described by the United Nations as the worst Timor-Leste had seen in 50 years – destroyed thousands of homes.
“With the weather, things that didn’t happen in the past, they are happing now,” Moniz said.
The government is committed to helping people own their own home, the country’s finance minister said. “We see good quality housing as a basic human right and as a fundamental starting point for the health and wellbeing of our citizens,” he said.
Published in April 2023