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Russia, India and China: defining similarities and contrasts Russia, India and China have their own specific economic problems and particularities, andwhile the differences might be significant, these three countries exhibit many common economic andinstitutional similarities. In terms of indicators of underdevelopment, such as housing stock, incomes andurbanization, China andInd ia share the needfor overcoming the legacy of the constraints of the previous system, such as state provision of housing services andproperty rights. Russia andChina have a common background in the sphere of politico-regulatory environment. There are certain commonalities between Russia and India as well. Part of the motivation for studying these three nations as a group is the potential for 'economies of scope' in research, andthe potential for drawing policy lessons that might be appropriate for each other. The overall combination of inadequate housing, ill-defined property rights, public housing, state-ownedland , information asymmetries, incomplete financial markets andother hold-overs from the previous systems create a complex, challenging andfascinating object of study. The combined urban populations of Russia, India and China constitute more than one billion people, comprising approximately 250 million households. At a conservative estimate, the current shortfall in urban housing is about 100 million units, abstracting from future expectedgrowth. The average weightedprojectedgrowth rate for the urban population in these three countries for the next decade is expected to be about 3%.4 In 2000, China andInd ia had38 and24 million-strong cities, respectively, andalthough the Russian population is projectedto decrease, the urban share is slatedto rise due to reform in the countryside. The combined urban population of India and China alone is more than 850 million with approximately 200 million households. The potential home-owning populations in India and China typically have high savings rates,6 but low income-to-house price ratios, anda generally heightenedsociocultural preference for homeownership Lack of credible alternative investment channels and riskier returns on stock markets have sometimes resultedin hoarding of precious metals (e.g., goldin case of India), and other unproductive activities. The creation of the mortgage markets may release these unproductive savings, free up lagged pent-up demandandgive a boost to the economy at large. At the present stage of economic reform, both India and China are well on their way towards a system of housing financing that is increasingly dependent upon private capital, particularly through the channel of lifelong savings. Ill-defined property rights, incomplete real estate markets and competing forms of private-public supply, together with lack of long-term finance, have been the defining obstacles for homeownership, especially for the lower stratum of the middle class in many of these countries. A comprehensive reform in the housing finance sector, among other things, would involve further development of individual mortgages for home purchases. Property rights are a smaller impediment in the case of India, where the inefficiencies in the housing market arise primarily from the inefficiencies of the housing finance system; this has resultedin a significant under-serving of the population, particularly when one takes into account the highly developed banking system in the country. India now has a set of financial institutions, which are spearheading the drive for development of a modern housing finance system - the Housing Development Finance Corporation (HDFC) andthe National Housing Bank (NHB).9 Nevertheless, the major impediment has been the inadequate availability of long-term financial resources andthe tepidmobilization of domestic funds. The existing stock of housing in Russia andChina has undergone privatization in fits and starts; both countries possess a relatively underdeveloped housing finance system. India has had a traditionally complex public-private sector in the housing andfinancing arenas. The respective housing finance systems are in their infancy, with considerable institutional and regulatory bottlenecks. Severe housing shortages combinedwith privatization, andthe non-involvement of the state, have left in their wake a severe supply side problem, and, above all else, a shortfall in the provision of housing finance. A common legacy of all three countries has been the major role played by the state in the financial andhousing sector, particularly in Russia and China. In these plannedeconomies, the entire gamut of the housing supply chain, from building materials, construction, repairs and distribution, were state controlled. Administrative fiat, price and rent controls, subsidies and plan allocations were the levers utilizedto manage the 'market'. Housing finance, andfinance, more generally, playeda restricted, accounting role, and did not serve as an allocation device for signalling relative prices, scarcities andvalues; the main role of the financial system was to 'control', rather than be an active instrument of resource allocation. At the same time, the banking system basically performedan auditing role. Both in Russia and China, the cradle-to-grave economic welfare system included the housing sector as a vital component.
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