1. The purpose of this study is to analyse the role of public sector investment
in housing in Ceylon, with the objective of achieving a solution to the
Since there exists a distinct difference between the urban and rural areas,
the study was narrowed down to the urban sector.
Housing in its entirety covers the residential environment, and hence the
field of analysis was narrowed down to the net residential area, hereafter
called the direct development of housing.
Thus the title of this thesis 'Public sector investment in the direct,
development of urban housing in Ceylon,
2. This study sets out to answer three basic questions. They are - (1) should
the public sector invest in the direct development of urban housing in
Ceylon? (2) If the public sector is to invest in the direct development of
urban housing in Ceylon, what should be its objectives ? And (3) how can
these objectives be achieved?
3. In order to answer the three questions posed the study was divided into four
Part I is divided into two chapters. Chapter 1 defines terminology a3 will
be understood in this study. This ohapter is of importance in understanding
the subsequent chapters, and in clearing the ambiguity that may exist between
the terms used in this study and in the field of pure economics. Chapter 2
is of vital importance, since it is on this chapter that the rest of the study
In a mixed economy like Ceylon one is faced with the basic question - can
the private sector achieve the level of Investment both in monetary and
physical terms to provide adequate housing for the population, or is it
necessary for the public sector to step in. The answer follows logically
that if the private sector cannot do it, then the public sector must step in.
Hence the need to develop a method of analysis, which is referred to in
Part II, Chapter 3.
The second part of Chapter 2 deals with the objectives of public sector
investment. Three basic objectives were set out. They were - (1) to
solve the housing problem: (2) to do so at minimum physical costs, and
(3) to maximise economic growth via the investment.
The analysis in this chapter leads to the conclusions that the housing
problem is one of two parts, a physical problem defined by a set of standards,
and a social problem that arises due to the unsuitability of this particular
set of stan ards. Hence solving the housing problem meant defining
standards which were related to the social, economic and cultural values
of the population. The second objective was thus achieved since the
standards defined were the minimum required. However, the costs involved
had to be reduced within the limits of technology. An analysis of the third
objective showed that the maximisation of economic growth in Ceylon via
investment in housing could be achieved by maximising the marginal rate
of employment generation, and minimising the rate of foreign exchange
Using this detailed analysis it was thus possible to approach Parts II,
III and IV of the study.
4. Part n is divided into two chapters. In Chapter 3 a method of analysis was
developed, which explained variation in invootmont patterns by the public and
private sectors, both in the urban and rural areas, with reference to
national policy from the year 1967 onwards. Using these trends it was
possible to predict future investment patterns, and thus conclude that public
sector investment was absolutely necessary. The method of analysis developed
should be of immense use for other developing countries, since it is com¬
prehensive and inoludoa the contribution of oolf help housing in achieving tho
national targets set out.
Chapter 4 uses the conclusions drawn in Chapter 3 as a basis on which a
model for financing the direct development of housing both urban and rural
is developed. The conclusion reached showed that by diverting private
sector resources in the form of savings such as compulsory savings, and
provident funds, the level of investment could be achieved, and even the
5. Part III of the study is divided into two chapters. Chapter 5 deals with
achieving the objective of maximising economic "growth by maximising
marginal employment generation, and minimising the marginal rate of
foreign exchange consumption. The whole problem is analysed via a
theoretical model, and is then applied to Ceylon.
The main conclusion showed that though aided self help housing may help
in solving the housing problem, it can have detrimental effects on employ¬
ment generation. In Ceylon this can be disastrous where unemployment is
about 15% of the labour force. Hence self help housing should bo used with
great care and is most suitable for areas of high employment, and where the
ratio of housing to income is high.
In Chapter 6 the analysis sets out to define a concept for solving the housing
problem at minimum physical costs. A theoretical analysis baaed on the
principles of costs and benefits showed that if a housing programme is based
on social, economic and cultural oharacteristics of a population, this objective
could be achieved.
The main conclusion was that the concept of "housing need " did not achieve
a solution at minimum physical costs, and thus the concept of "housing
demand" was proposed which formed the basis on which public sector invest¬
ment should view the problem at the urban scale.
6, Part IV uses the concept of demand to achieve the objectives at the urban
scale. In Chapter 7, which is theoretical in its approach, a detailed model
for guiding public sector investment at the urban scale is developed. This
model is applicable to all developing countries, with slight modifications,
and describes for the first time a mathematically integrated approach of
viewing the costs and benefits of housing to the consumer.
This model was calibrated using original data obtained by surveying
approximately 1200 households in the city of Colombo, and collecting hitherto
unpublished data regarding the housing construction industry in Ceylon.
Chapter 8 is devoted to developing standards. This is the first time any
reasonable set of standards has been developed exclusively for Ceylon.
Chapter 8 is devoted to an analysis of the costs of housing and uses data
obtained in Ceylon for developing models that can be used for evaluating
the different types of housing, at different locations. A most startling
revelation was that it is cheaper to house larger households than smaller
ones, and that flats are absolutely out of the question for urban Ceylon, cost
Chapter 10 analyses the ability of a household to pay for housing, and
is used in conjunction with the conclusions of Chapter 9 to define
residential belts, which become basic information for the preparation
of an urban plan.
Deviations from the theoretical predictions explained therein are quite
Overall the purpose of Chapters 8, 9 and 10, are to test the validity
of the theoretical model, and set the base for future research. Chapter
11 describes briefly how this model can be of practical use in guiding
public sector investment.
7. In conclusion the simple thesis that evolves quite conclusively from
this study is that 'The public sector must play a major role in the
direct development of uxban housing in Ceylon, and to achieve its
objective it must define the parameters of a programme on the social,
economic and cultural characteristics of its population, i. e. ruse the
concept of housing demand.
There are numerous sub theses that come out of this study, which it
is hoped will be of use to the developing countries in general.