Tunisia - Third Urban Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 3 917 -TUN STAFF APPRAISAL REPORT REPUBLIC OF TUNISIA THIRD URBAN DEVELOPMENT PROJECT November 15, 1982 EMENA Region Urban Projects Division This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS The exchange rates for the Tunisian Dinars is floating. The rates used in this Report are; I Tunisian Dinar (TD) = US$ 2.00 1 US Dollar = TD 0.500 MEASURES AND EQUIVALENTS I meter (m) = 39.37 inches (in) I square meter (m2) = 10.9 square feet (sq ft) I kilometer (km) = 0.62 mile (mi) I bectare (ha) - 10,000 m2 or 2.471 acres I acre = 4,047 m2 or 0.405 ha 1 kilogram (kg) = 2.2 pounds (lbs) 1 pound (lb) = 0.454 kg I tonne (metric) = 2,205 lbs or 1,000 kgs ABBREVIATIONS AND ACRONYMS AFH - Agence Fonciere d'Habitation (Land Development Agency) ARRU - Agence pour la Rehabilitation et la Renovation Urbaine (Urban Upgrading and Renewal Agency) ASM - Association pour la Sauvegarde de la Medina (Association for the Safeguard of Medina) BCT - Banque Centrale de Tunisie (Central Bank of Tunisia) BDET - Banque de Developpement Economique de Tunisie (Economic Development Bank) CNEL - Caisse Nationale d'Epargne - Logement (National Housing and Savings Fund) CPSCL - Caisse de Prets et de Soutien des Collectivit6s Locales (Local Communities Support Fund) FOPROLOS - Fonds Social pour la Promotion du Logement des Salaries (Workers' Housing Fund) MOE Ministere de I'Equipement (Ministry of Equipment) MOH - Ministere de l'Habitat (Ministry of Housing) MOINT - Ministere de l'Interieur (Ministry of Interior) MOPF - Ministere du Plan et des Finances (Ministry of Planning and Finance) MTC - Ministere de Transport et Communications (Ministry of and Communications) ONAS - Office National d'Assainissement (National Sewerage Authority) SNIT - Societe Nationale Immobiliere de Tunisie (National Real Estate Company) SONEDE - Socift6 Nationale d'Exploitation et de Distribution des Eaux (National Water Production and Distribution Company) SPROLS - Socifte de Promotion des Logements Sociaux (Social Housing Company) STEG - Socift4 Tunisienne d'Electricit4 et de Gaz (Public Electricity and Gas Company) USAID - US Agency for International Development FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY REPUBLIC OF TUNISIA THIRD URBAN DEVELOPMENT PROJECT Table of Contents Page No. I. BACKGROUND . . . . . . , . . . . . . . . . . . . . . . . . . I A. Urbanization Characteristics and Patterns. . . . . . . . . I B. Urban Conditions and Provision of Services . . . . . . . . I C. Government Responses to Housing Needs. . . . . . . . . . . 3 D. Bank Involvement and Strategy in the Sector. . . . . . . . 4 II. rHE PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . 6 A. Objectives . . . . . . . . . . . . . . . . . . . . . . . . 6 B. Main Features . . . . . . . . . . . . . . . . . . . . . . 6 III. PROJECT COSTS, FINANCING AND EXECUTION . . . . . . . . . . . . 9 A. Cost Estimates . . . . . . . . . . . . . . . . . . . . . . 9 B. Financing Plan . . . . . . . . . . . . . . . . . . . . . . 11 C. Execution and Maintenance . . . . . . . . . . . . . . . . 13 D. Procurement and Disbursement . . . . . . . . . . . . . . . 15 E. Accounts and Audits . . . . . . . . . . . . . . . . . . . 16 F. Monitoring and Evaluation . . . . . . . . . . . . . . . . 16 G. Supervision . . . . . . . . . . . . . . . . . . . . . . . 17 IV. COST RECOVERY, FINANCIAL TERMS, INCOME DISTRIBUTION AND AFFORDABILITY . . . . . . . . . . . . . . ... . . . . . 17 A. Cost Recovery ... . . . . . . . . . . . . . . . . . . . 17 B. Financial Terms and Conditions for Beneficiaries . . . . . 18 C. Beneficiary Selection . . . . . . . . 19 D. Income Profiles, Affordability Analysis and Urban Poverty Impact .... . . . . . . . . . . . . 19 This Report is based on the findings of an appraisal mission which visited Tunisia in February 1982. Mission members included Messrs. I. Christie (Mission leader), A. El-Tobgy, A. Peltekian, J-F. Landeau, S. Margetis and F. Amiot (consultant). A post-appraisal mission composed of Messrs. Christie and El Tobgy and Ms. N. Saad visited Tunisia in July 1982. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Page No. V. ORGANIZATION AND MANAGEMENT ... . . . . . . . . . . . . . . 21 A. Ministry of Housing (MOH) ... . . . . . . . . . . . . . 21 B. Agence pour la Rehabilitation et la Renovation Urbaine (ARRU) ... . . . . . . . . . . . . . . . . . . 21 C. Agence Fonciere d'Habitation (AFH) . . . . . . . . . 22 D. Caisse Nationale d'Epargne-Logement (CNEL) . . . . . . . . 22 E. The Municipalities ... . . . . . . . . . . . . . . . . . 23 F. Caisse des Prets et de Soutien des Collectivites Locales (CPSCL) ... . . . . . . . . . . . . . . . . . 24 VI. PROJECT BENEFITS AND RISKS ... . . . . . . . . . . . . . . . 24 A. Benefits . . . . . . . . . . . . . . . . . . . . . . . . 24 B. Economic Impact .25 C. Project Risks .25 VII. AGREEMENTS REACHED AND RECOMMENDATION . . . . . . . . . 26 ANNEXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 1. Detailed Description . . . . . . . . . . . . . . . . . . . 29 2. Detailed Cost Estimates ... . . . . . . . . . . . . . . 34 3. Sites and Services/Housing Credit Component . . . . . . . 44 4. CPSCL: Conditions of Subsidiary Loan Agreement . . . . 47 5. Project Cash Flows ... . 49 6. CNEL: Unaudited Financial Statements'. . . . . . .52 7. CPSCL: Unaudited Financial Statements . . . . . . . . . 55 8. Revitalization of Hafsia . . . . . . . . . . . . . .. . 56 9. Implementation Schedule ... . . . . . . . . . . . . . . 58 10. Estimated Schedule of Disbursement . . . . . . . . . . . . 60 11. Income Distribution Curves . . . . . . . . . . . . . . . . 61 12. Development Charges and Affordability . . . . . . . . . . 63 13. Urban Poverty Impact ... . . . . . . . . . . . . . . . . 66 14. Organization Charts - ARRU . . . . . . . . . . . . . . . . . . . . . . . 67 - AFH .68 15. Description of Costs and Benefits . . . . . . . . . . . . 69 16. Project File .71 MAPS 1. General Map of Tunisia Showing Project Cities ............. 16394 2. Ettadhamen-Douar Hicber ................... 16395 3. Hafsia in Medina ....................... 16396 4. Sidi Amor-Kram Ouest-La Goulette ............... 16397 5. Boujnah-Kram Ouest-La Goulette .. ........ . ........ 16398 6. M'Tirat-Kram Ouest-La Goulette . ............. 16399 7. Trabelsia-Jraba-Kram Ouest-La Goulette . ........... 16400 8. Sidi Chrichi in Le Kef .................. 16401 9. Zghadia in Jendouba ..................... 16402  REPUBLIC OF TUNISIA THIRD URBAN DEVELOPMENT PROJECT I. BACKGROUND A. Urbanization Characteristics and Patterns 1.01 Urban population in Tunisia has grown rapidly in the past three decades and now accounts for about 55% of the country's total 1980 population of 6.6 million. The high rate of urban population growth between 1975-1980 is due mainly to the return of migrant workers from abroad and the intensive internal rural-urban migration which has since 1976 accounted for about half of the urban population growth. The prime destinations of these migratory flows in the early 1970s were Tunis and the large cities along the eastern coast. More recent settlement patterns indicate, however, a major shift towards large urban clusters in the interior, particularly the Northwest where the urban population in the governorates of Jendouba and Le Kef has been growing, while all other regions, except Greater Tunis, have experienced a relative decline in their urban growth rate. The high rate of population growth, and of family formation, together with the migratory flows have all resulted in great pressure on urban housing and bave led to a deterioration of the urban environment in the outskirts of cities and within the crowded traditional quarters (Medinas) of many cities. B. Urban Conditions and Provision of Services 1.02 Housing. The 1980 urban housing stock, representing 53% of total dwelling units in the country, was estimated at 605,500 units. The housing stock grew by 30% between 1975 and 1980 but still failed to keep pace with demand. During that same period, one-room units increased from 17% to 26% of all urban dwellings thus lowering the median size of dwelling from 2 to 1.7 rooms and occupancy rates rose from 2.2 persons per room and 1.2 nuclear families per dwelling in 1975 to 2.4 persons per room and 1.5 nuclear families per dwelling in 1980. 1.03 The demand for housing bas outpaced the ability of the public sector to control urbanization. About 52% of urban dwellings built during 1975-1980 bypassed urban development regulations and much of it was in squatter settle- ments. Most of these dwellings were built by the informal sector which relies on self-help, low-cost construction methods. Although about 90% of this construction is of good quality and of permanent materials, it is mostly built in areas lacking infrastructure and community facilities. 1.04 Table I provides data on urban investments in housing and production costs between 1975 and 1980. Investments in the sector accounted for about 15% of gross fixed capital formation, which is in line with experience in similar countries. Unit costs per dwelling vary widely with the informal sector constructing dwelling units at an average cost of TD 1,500 and state financed "low cost" housing costing an average of TD 7,000. Rental programs (public or private) are of less importance, except for subleasing within private dwellings; owner occupied dwellings account for about 79% of all housing in Tunisia.  -2- 1.05 Table 1 also highlights clearly the relative importance of the public and private sectors. The public sector accounted for 18% of units built and the private sector for 82%; in terms of investment, the public sector accounted for 34% and the private sector for 61%. Clearly, the ability of the private sector to finance housing construction through savings and other direct contributions is substantial. Equally clear is that, for the median urban family with income of the order of TD 110 per month, most housing provided by the public sector is beyond its reach. One of the objectives of the proposed project is to reach the lower income groups and be more responsive to their needs. Table 1: Urban Housing Investment 1975-80 (in Millions of 1980 TD's) Relative Share (%) Housing Cost Total of of Type Number per Unit Investment Construction Investment Public (18.0) (34.2) SNIT/' Suburban 14,310 4,200 60.1 7.4 8.9 Low-cost 15,860 7,000 111.0 8.2 16.4 Luxury 2,440 16,000 39.0 1.3 5.7 CNRPS/2 Rental 1,070 13,000 13.9 0.6 2.1 SPROLS/3 Rental 950 8,000 7.6 0.5 1.1 Licensed Developers Various 3,700 9,000 33.3 1.9 4.9 Private Sector (80.1) (60.9) Legal Various 58,265 4,600 268.0 30.2 39.6 Informal Various 96,425 1,500 144.6 49.9 21.3 Total 193,020 14 677.5 100.0 100.0 1.06 Infrastructure. Access of dwellings to basic utility services has improved considerably in recent years (Table 2) although service on the outskirts of cities remains poor. The Societ4 Tunisienne d'Electricite et de Gaz (STEG) and the Societ4 Nationale d' Exploitation et de Distribution des Eaux (SONEDE), the two national companies responsible for providing electricity and water, have pursued aggressive programs and are catching up with the backlog of unserviced urban households. The Office National d'Assainissement (ONAS), the national company responsible for sewerage, being a more recent organization, has been unable to keep pace with urban growth, despite accelerated efforts. The gap between water and sewerage services has further aggravated existing environmental problems as the daily production of waste water has increased following the general improvement in water supply. /1 SNIT, Societe Nationale Immobiliere de Tunisie /2 CNRPS, Caisse Nationale de Retraite et de Prevoyance Sociale. /3 SPROLS, Societe de Promotion des Logements Sociaux. /4 Plus 121,000 rural units valued at TD 118 million.  - 3 - Table 2: Percentage of Dwellings Connected To Utilities Urban dwellings Greater Tunis 1975 1980 1975 1980 Water 54 71 71 81 Electricity 68 85 82 93 Sewerage 43 51 65 76 Solid waste collection and disposal is funded by the Ministry of the Interior (MOINT) and carried out by governorates and municipalities. Collection and disposal are adequate outside Tunis and less satisfactory in the City. 1.07 Urban Poverty. About 15% of the country's urban population have incomes below the Bank defined absolute urban poverty threshold, estimated in 1981 at TD 60/household/month. This percentage represents a considerable improvement over the 1978 level of 20%, estimated under the Second Urban Development Project (Loan 1705-TUN). Compared to middle income countries with similar characteristics, the magnitude of Tunisia's urban poverty problem is modest and problems related to housing the existing urban poor are containable. In 1975, 26% of dwellings were substandard, in 1980 only 8% remained substandard. The main challenge rests in upgrading the existing substandard settlements, catering to new demand and providing developed sites and urban services in a coordinated fashion. The proposed project addresses all of these main issues. C. Government Responses to Housing Needs 1.08 Responsibility for managing urban growth is mostly shared among the Ministries of Housing (MOH), Equipment (MOE), National Economy (MNE), and Interior (MOINT). Urban planning goals are established after extensive consultation among the public and semi-public organizations directly involved in urban matters. In practice, however, the intricate division of responsibility between the above ministries and the lack of coordination among them have often led to confusion in programming and implementing urban development schemes. 1.09 Until the mid-1970s, the government's response to shelter needs was limite to its reliance on the programs of its national real estate company, the Societe Nationale Immobiliere de Tunisie (SNIT), which consisted mainly of turnkey housing projects. Those highly subsidised projects, most of which were aimed at rehousing families displaced by slum clearance projects, were heavily concentrated in Tunis. In the mid-1970s, housing policy began to place more emphasis on towns of the interior. These programs incurred frequent delays in execution and their financial and social costs remained high.  1.10 In 1973, a land development agency, the Agence Fonciere d'Habitation (AFH) was established followed by a national housing and savings fund, the Caisse Nationale d'Epargne Logement (CNEL) in 1974. AFH purchases and provides serviced sites. Between 1974 and 1981 it developed about 400 ha. Its policy of charging individuals 100% in advance as well as its high standards (200-400 m2 plots) have resulted in its plots being affordable only to middle-income families. CNEL's role is to mobilize domestic savings via contractual savings plans channeled to housing construction. It has been very successful in mobilizing resources up to 1980 when two of its savings plans designed for lower income families ran into trouble as inflation pushed the cost of housing beyond many savers' means. In 1978, a national fund managed by CNEL, the Fonds Social pour la Promotion du Logement des Salaries (FOPROLOS) was created, to grant loans to a category of wage earners with salaries up to one and a half times the legal minimum wage and which are not covered by other CNEL programs. Both CNEL and FORPROLOS programs exclude those who cannot demonstrate regular incomes; in practice, this means that only salaried individuals can benefit from these programs. Both agencies are aware that their current programs benefit only middle and upper income salaried families and are examining alternative programs with the Bank which would make them more responsive to lower income housing needs: CNEL by moving in the direction of a more flexible lending program and AFH by developing low cost sites and services projects. Both these approaches would be tested in the proposed project. The cooperation between CNEL and AFH would introduce a much needed link which will improve the coordination within the urban sector. 1.11 Recently, as a result of efforts made through the Bank financed Second Urban Project and USAID suppo'rted projects, the government has accepted the concepts of (i) upgrading instead of demolishing squatter settlements; (ii) developing low cost sites and services projects; and (iii) recovery of costs of infrastructure and improvements. Policies for the upgrading of existing settlements and the development of sites and services based on affordable infrastructure networks and small plot sizes are now evolving. Also, a new policy for sites and services consisting only of demarcating roads and plot boundaries as a first phase is emerging. This approach helps guide the development of subdivisions and facilitates the provision of affordable services at a later stage. The Urban Upgrading and Renewal Agency, Agence pour la Rehabilitation et la Renovation Urbaine (ARRU), was created in August 1981 to implement such policies and projects and will play a major role in the implementation of the proposed project. D. Bank Involvement and Strategy in the Sector 1.12 Bank Involvement. Since 1966, the Bank has maintained a close dialogue with the Tunisian authorities on urban sector policies through a variety of operations including six water supply projects, a tourism infrastructure project, two urban sewerage projects, three power projects, and two urban development projects. These projects have helped create Tunisia's public utility companies and improved urban services in at least 26 municipalities. 1.13 The First Bank Urban Development project (Tunis District Urban Planning and Public Transport Project) was a transport project completed in March 1982. It was instrumental in (i) establishing the District of Tunis, the first regional planning authority in Tunisia, (ii) addressing the public  transport needs of Greater Tunis through the renewal and expansion of the bus fleet owned by the Societe Nationale des Transports (SNT) and the construction of a bus maintenance facility, (iii) renovating the Tunis-la Goulette-la Marsa (TGM) suburban railway, (iv) improving traffic conditions in the center of Tunis, and (v) preparing studies for the second urban development project. 1.14 Performance under this project was mixed. The District of Tunis has not been fully successful in becoming the capital region's driving force for urban planning; however, it was influential in guiding policy in such sectors as low income housing, small scale enterprises, and spatial patterns of development in Greater Tunis. It has also contributed in the preparation of the proposed third project. SNT expanded its network, met its targets and improved its cost control considerably. The municipality of Tunis implemented improvements to its traffic management program, and launched a program significantly larger than planned at appraisal and with marked success. 1.15 The Second Urban Development Project, which includes upgrading, sites and services, improvement of solid waste collection and disposal, and a line of credit for small scale business was approved in May 1979 and is currently being implemented. Civil works under the project and particularly infrastructure, are advancing well, implementation in Tunis has incurred some cost overruns and delays due to site conditions and poor coordination. The remaining core housing is to be constructed by beneficiaries through self-help techniques which is more cost efficient and caters better to their needs. The solid waste component has suffered delays in establishing an agency to manage the collection and transport of solid wastes in Greater Tunis. However, the Government is presently in the process of identifying such an authority. The availability of loans from a national fund instituted during project implementation at more attractive rates for small scale business than those under the project led to the under utilization of the line of credit for small scale business. The component therefore was recently cancelled and the funds reallocated to technical assistance and civil works. The channeling of project funds through the Caisse de Prets et de Soutien des Collectivites Locales (CPSCL), an agency that lends to municipalities for financing community facilities and infrastructure, has proven efficient, and the technical assistance component financed by UNDP is advancing well. The Central Project Unit for the project was recently transferred to the MOH and has been renamed the Department for Upgrading and Urban Renewal (para. 5.02). It is continuing its coordinating activities under the second project and prepared the tbird project in cooperation witb ARRU whicb will be the main executing agency. 1.16 The Bank, in cooperation with MOH, recently completed a housing sector study (green cover dated September 17, 1982) whose findings indicate that some of the main bottlenecks in the sector are: (i) unavailability of sufficient and affordable serviced land for housing; (ii) institutional complexities; (iii) inadequacy of existing financing and savings plans for housing; (iv) failure of public housing programs to reach families in the lowest third of the national income curve; and (v) insufficient attention given to spatial implications in housing planning. The sector study coincided with the preparation of Tunisia's Sixth Development Plan (1982-86) and was used as a major input for the formulation of housing policy. The proposed project is designed to resolve some of the problems identified in the sector study, particularly the bottleneck in serviced land, the unavailability of credit for housing for low income families, and the insufficient coordi- nation between the various housing agencies concerned.  1.17 Urban Strategy; One of the main objectives of the Sixth Development Plan is to reduce social and regional disparities. The housing plan is expected to play a leading role towards achieving this objective. Preliminary figures indicate that housing will absorb about 12.2% of investments under the Sixth Plan, or at least TD one billion in current prices for 160,000 units. This is an ambitious program which puts great pressure on both the public and private sectors but which is justified and responsive to sectoral priorities. 1.18 The Bank's strategy for the sector would build on the successes of earlier work. For the 1980s, the Bank should continue to focus on shelter, urban transportl! and assist in resolving the key issues mentioned in para. 1.16. The proposed project is site oriented like the second urban project. It moreover makes use of and strengthens the MOH and its agencies (ARRU, CNEL and AFH) and improves interagency coordination to address the sectoral and national urban programs. Future lending in the sector would tend towards a "sectoral" or "institutional" approach, that is, loans to specific institutions on the basis of agreed national urban programs. Responsibility for the formulation of programs and for projects preparation would rest with the Ministry of Housing and its specialized agencies, CNEL, AFH and ARRU. This approach would strengthen existing institutions rather than create new ones and would lend itself well to cofinancing arrangements. II. THE PROJECT A. Objectives 2.01 The proposed project, identified in June 1981 and appraised in February 1982, is in line with government priorities and Bank strategy. Its objectives are to assist the Tunisian authorities to: - design and implement projects providing better shelter and improved urban services for low-income populations; - redress inequities in housing policy by reaching low income families which currently cannot afford housing with adequate urban services as provided by the formal sector; - strengthen the institutional framework of agencies involved in the urban and housing sectors, and ensure better coordination between them; and - encourage a national approach to housing planning and policy formulation. B. Main Features Project Cities and Sites 2.02 The First and Second Urban Development Projects concentrated on the two largest cities of the country, Tunis and Sfax. To extend the benefits of urban upgrading to deprived areas outside the large cities and to provide a 1/ Yellow cover urban transport review report dated August 23, 1982.  rational basis for site selection, a study to identify priority squatter settlements requiring upgrading was commissioned by MOINT with financial assistance from USAID and released in April 1981. 2.03 Field visits by Bank missions to many of the sites proposed in the above study indicated that the most pressing problems are still in Tunis, followed by the interior of the country, particularly the Northwest. Accordingly, eight sites were identified and studied; of those five were selected for financing under the proposed project. The selection criteria were (i) physical conditions of the settlements; (ii) lack of infrastructure, especially sewerage and roads; (iii) level of overcrowding; and (iv) income levels. Future operations would replicate the project in the other sites identified in the MOINT/USAID study. 2.04 Three of the sites are located in Greater Tunis (Kram Ouest, Hafsia, and Ettadhamen) and two in the northwest region (Zghadia and Sidi Chrichi). Detailed information on the five sites is given in Annex 1. Kram Ouest with a population of about 4,400 is located east of Tunis in the coastal community of la Goulette. Hafsia in the Medina occupies an area of 13.5 ha in the center of Tunis and has a population of about 4,000. Ettadhameni/ in the northwest of the Tunis District has an area of about 700 ha and a population of about 55,000. Zghadia in Jendouba occupies an area of 26 ha and has a population of about 4,300 inhabitants. Sidi Chrichi in Le Kef occupies an area of 18 ha and has a population of about 3,400 inhabitants. 2.05 The project sites represent three different aspects of low-income settlements in Tunisia. Ettadhamen is a poor to middle-income, rapidly growing, low density area mainly inhabited by people moving out of Tunis. It is characterized by the lack of infrastructure and the illegality of most of its land tenure. The project at Ettadhamen is preventative in nature rather than curative and is designed to ensure that the area does not develop haphazardly. A system of infrastructure would upgrade the area and would control and guide the direction of its growth. Kram Ouest, Sidi Chrichi, and Zghadia are squatter settlements lacking suitable infrastructure, and inhabited by low-income settlers. In these settlements, the objective is to improve living conditions wbich have deteriorated rapidly. Hafsia is structured like an old Arab city with intricate narrow winding roads and houses built around interior courts. It is inhabited mainly by poor rural immigrants and is characterized by excessive overcrowding, especially in large, old mansions which have been subdivided (oukalas), and the advanced stage of deterioration of its buildings and infrastructure. The objective here is to revitalize and renovate the area, and demonstrate the feasibility of upgrading medinas without displacing populations and by associating the private sector in the development process. Components 2.06 A detailed description of the components is sbown in Annex 1 and summarized below. (a) The upgrading component in Ettadhamen, Kram Ouest, Zghadia and Sidi Chrichi consists of (i) improvement and extension of 1/ Wherever reference is made to Ettadhamen, it refers to Ettadhamen/Douar Hicher.  -8- infrastructure networks including road and footpaths, water, sewerage, storm water drainage, electricity as well as connections to utility networks, (ii) providing community facilities, (iii) providing loans through CNEL for home extension and for construction of about 400 houses on vacant plots between buildings (infill plots). (b) The Sites and Services and Housing Credit component consists of a line of credit under which beneficiaries would be offered a single package enabling them to purchase a developed site and obtain a loan for construction of a dwelling. This linking of the purchase of a serviced plot and the financing of construction in a single package through AFH and CNEL constitutes an innovation in housing policy in Tunisia. The scheme would comprise a total of about 1,600 new serviced plots at Ettadhamen, Zghadia, and Sidi Chrichi. About 600 of the plots would be for rehousing families displaced to reduce overcrowding (dedensification) or as a result of necessary demolition in the project areas, and about 1,000 plots would be to satisfy new demand. Serviced plots would range from 60m2 to 120m2 and would be provided with water, electricity and sewerage connections. Construction on the plots would range from 12m2 to 40m2. Technical advice and architectural plans to assist the beneficiaries would also be provided through ARRU. c) Revitalization of Hafsia Hafsia is a well defined neighborhood in the Medina which consists of a large vacant central space surrounded by low income housing in a very poor state. The revitalization of Hafsia is a pilot program which could eventually be replicated elsewhere in Tunisia or abroad. It comprises the following: (i) improvement of infrastructure including roads, water supply, sewerage, electricity, telecommunications, and gas networks throughout the area; (ii) construction of some commercial buildings and housing units on part of the vacant land by the municipality to set standards and patterns for development of the whole area; (iii) sale of the remaining serviced land by the municipality to developers who would build small hotels, dwellings and commercial buildings. Profit from the sales would be used to supplement the funds needed for upgrading of the low income sections of Hafsia (para. 4.05); (iv) upgrading of about 47,000 m2 housing in the low income areas and construction of about 135 new houses on infill plots and additional floors on existing buildings where possible. About 610 of the 620 families affected by the dedensification program of Hafsia would be rehoused in the same area; the rest would be  - 9 - compensated and offered plots in other project sites in the Tunis area. A public relations program would also be included to explain the upgrading concept and encourage participation in the project. d) Technical Assistance and Consultant Engineering Services Technical assistance (Annex I, page 5) would be provided to strengthen project institutions, particularly the Ministry of Housing, ARRU, the Ministry of Transport and Communications, and the Municipalities. It is designed to improve the Tunisian authorities' capability to design, prepare procurement and bid dc->