Ulaanbaatar Green Affordable Housing and Resilient Urban Renewal Sector Project The project will deliver sustainable and comprehensive solutions to transform the substandard, climate-vulnerable, and heavily polluting ger areas of Ulaanbaatar city into affordable, low carbon, climate-resilient, and livable eco-districts. It will leverage private sector investment to (i) deliver 10,000 affordable green housing units; and (ii) redevelop 100 hectares of ger areas into eco-districts. 

The project is aligned with the following impacts: living conditions in Mongolia improved; and Ulaanbaatar is a safe, healthy, and green city that is resilient to climate change, and provides a livable environment for its residents. The project will have the following outcome: access to low-carbon and climate-resilient eco-districts and green affordable housing in Ulaanbaatar ger areas increased. The project is consistent with ADB's country partnership strategy for Mongolia, 2017-2020, and with the core themes of green, competitive, and inclusive cities of ADB's Urban Operational Plan.

The project will have three outputs: (i) resilient urban infrastructure, public facilities, and social housing units in ger areas constructed (public sector component);  (ii) long-term financing to developers for low-carbon affordable housing, market rate housing, and economic facilities in ger areas and to households for green mortgages increased (financial intermediation loan [FIL] component); and (iii) sector policy reforms implemented and capacity strengthened. Output 1 will deliver (i) green social housing units with climate adaptation and mitigation features; and (ii) resilient infrastructure, public space, and public facilities. Under output 2, up to $75.7 million of the GCF loan will be made available under the proposed FIL to enable an eco-district and affordable housing fund (EDAF) to provide long-term debt financing (denominated in local currency) to eligible commercial banks to support real estate developers' participation in the low-carbon housing market, and produce affordable green mortgages. Output 3 will support (i) project implementation; (ii) eco-district feasibility and development, policy improvement on climate change adaptation and mitigation, and improved supply and access to affordable green housing units; (iii) detailed design and supervision; and (iv) sustainable green housing finance.

Eco-district parameters. The project eco-districts will be low-carbon, climate-resilient, mixed-income, and mixed-use areas with approximately 30% public space. The project's five phases will deliver about 20 eco-districts or subprojects, with each covering an average of 5 ha. Phase 1 include two core subprojects (10 ha) in Bayankhoshuu and Selbe subcenters, phases 2-3 will have 8 subprojects (40 ha), and phases 4-5 will have 10 subprojects (50 ha). Each subproject should be completed within 5 years.  Phases 2-5 will identify and prepare a batch of subprojects to be appraised based on eligibility and selection criteria, including financial and physical parameters, formulated from the feasibility study of the two core subprojects.  A detailed infrastructure and architectural design produced for each subproject will ensure (i) adequate ratio for social (15%), affordable (55%), and market rate (30%) housing units; (ii) balance between public space and amenities, commercial areas, and residential units; and (iii) financial viability and rentability to allow private sector participation. The redevelopment process and housing construction will be undertaken onsite, and will be demand-driven.

Sector lending with financial intermediation loan component modality. The sector lending modality was deemed the most appropriate modality to achieve the project objectives because (i) a large number of subprojects in the sector are to be financed; (ii) the government and MUB have sector development plans (SDPs) to ensure the priority development needs of the cross sectoral policy improvement plan are met, and to guide project implementation; (iii) sector and institutional capacity analyses  have shown that the government and MUB have adequate institutional capacity to implement the SDPs and the project; and (iv) policies applicable to the sector are deemed appropriate and will be improved, if warranted. The project will support the government and MUB in translating their SDPs into implementable investments, and coordinated policies, actions, and institutional improvement.   

Financial and institutional arrangements will facilitate the application of a blended finance strategy using the FIL modality. The FIL modality will leverage private resources through the EDAF to be established and managed by the Asset Management Company of DBM (AMC-DBM) on behalf of the Ministry of Finance.  The EDAF will be established as a private investment fund structured as a revolving fund, and will be used to onlend a portion of the GCF loan to participating commercial banks. Based on eligibility and selection criteria, commercial banks will use the GCF loan proceeds to support housing supply and demand: (i) for supply, the EDAF will provide medium-term loans to selected private developers, which will be combined with the developers' equities and additional loans by DBM and participating commercial banks to implement output 2; and (ii) for demand, the loan proceeds will be converted into low-cost long-term mortgages to home buyers for purchases of the affordable housing and market rate housing units.