Eco Village Project in Khoroo 19 Bayanzurkh District, Ulaanbaatar/Mongolia Preliminary Study July 2018

2

Contents Contents .............................................................................................................................. 2 List of Abbreviations .............................................................................................................. 3 Exchange Rate ..................................................................................................................... 3 1. Executive Summary .................................................................................................. 4 2. Problem Analysis (Rationale) ..................................................................................... 5 3. Ger Area Development Strategies ............................................................................. 7 4. Ger Zone Development Approach ............................................................................. 7 5. Introduction to the project area (survey results) ......................................................... 8 5.1 Current situation in the project site ............................................................................. 8 6. Land use pattern ...................................................................................................... 10 8. Urban Development assessment of the project area ................................................ 12 8.1 Justification for the development of the project ........................................................ 12 8.2 Objectives and targets of the planning ..................................................................... 13 8.3 Expected project results: ......................................................................................... 13 9. Urban Planning Challenges ..................................................................................... 14 9.1 Planning documents ................................................................................................ 14 9.2 Negotiations with owner of land and dwellings ......................................................... 15 9.3 Financial Analysis and financing mechanisms ......................................................... 16 9.4 Physical infrastructure development ........................................................................ 16 9.4.1 Heating supply details .............................................................................................. 17 9.5 Housing designs ...................................................................................................... 19 9.6 Next Steps ............................................................................................................... 19 Annex 1 Former Local plan comprising mostly of middle rise apartment buildings ............................ 20 Annex 2 Property information ............................................................................................................ 21 Annex 3 Willingness mapping (showing the location of households .................................................. 22 Annex 4 Business activity/Land use .................................................................................................. 23 Annex 5 Land plots rented out .......................................................................................................... 24 Annex 6 Location of newly built houses and facilities ........................................................................ 25 Annex 7 Planned new main road ...................................................................................................... 26 Annex 8 Master plan 2030 for Ulaanbaatar with Sub district 17 ........................................................ 27 Annex 9 Row House Type ................................................................................................................ 28 Annex 10 Apartment House Type A .................................................................................................... 29 Annex 11 Apartment House Type B .................................................................................................... 30

3

List of Abbreviations ADB Asian Development Bank BMZ Bundesministerium für Wirtschaftliche Zusammenarbeit und Entwicklung CAPEX Capital Expenditure CSC Consumers Service Center (former Housing companies) ERC Energy Regulatory Commission ESCO Energy Service Company EUR EURO GASI General Agency for Specialized Inspection GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit

German International Cooperation GCF Green Climate Fund HPUA Housing and Public Utility Authority HOB Heat Only Boiler ICLEI SEA Local Governments for Sustainability - South East Asia ICLEI SA Local Governments for Sustainability - South Asia IMF International Monetary Fund JICA Japanese International Cooperation Agency KfW Kreditanstalt für Wiederaufbau German Bank for Reconstruction Khashaa Plot of land in Ger districts, normally with yurt and/or fixed structures on it MES Ministry of Education & Science MET Ministry of Environment and Tourism MNT Mongolian National Tugrik MCUD Ministry of Construction & Urban Development ME Ministry of Energy NOSK Housing Corporation of the Capital City OPEX Operational Expenditure PIU Project Implementation Unit UB Ulaanbaatar UNESCAP United Nations Economic and Social Commission for Asia and the Pacific Exchange Rate Exchange rate: 1 EUR = 2970 MNT (as of March 2018) 1 USD = 2400 MNT (as of March 2018)

4

1. Executive Summary This study has been elaborated within the Regional GIZ Project "lntegrated Resource Management in Asian Cities: the urban Nexus", financed by the German Federal Ministry of Economic Cooperation & Development (BMZ). The GIZ project promotes the practical implementation of planning and management approaches for an integrated urban resource management for the sectors of energy, water and food security in 12 selected Asian cities in 7 countries in South and South East Asia (China, India, Indonesia, Mongolia, Philippines, Thailand, andVietnam). The Political partner of the Project is the Economic and Social Commission of the United Nations for Asia and the Pacific (UNESCAP) located in Bangkok. Local Governments for Sustainability (ICLEI) South Asia (SA) and -South-East Asia (SEA) are the implementation partners in some of the countries mentioned above. In the frame work of this project a community driven land re-adjustment project in Ger areas of Ulaanbaatar (UB), the Capital City of Mongolia, is envisaged. The “Eco village” in Khoroo No.19 (Khoroo- smallest administrative unit in the City) is located in Bayanzurkh district (part of the 17th sub-district of Bayanzurkh district, most eastern district of UB City) besides the “Tsaiz” wood market. This is one of the eight locations selected for the implementation of land re-adjustment as alternative to redevelopment within the UB City Housing program adopted in May 2014. With the formation of the new City Government after the Parliament election in 2016 a new “Housing and infrastructure development sub program” has been adopted by UB City Council in 28 Feb, 2018 including measures for the land re-adjustment (objective 6) in Ger districts of UB City. For the land re-adjustment activities the Ger Area Infrastructure Authority will act as the main executing agency. The Housing Corporation of the Capital City (“NOSK”) will support the Ger Districts Infrastructure Department of UB to implement the sub-program. The Eco village project encompasses around 176 households occupying nearly 12 hectares of land with altogether 876 persons. A cooperative of landlords among others has been created to join the efforts and communicate with the UB City and other stakeholders. Eco village project site is located in the east of the City, about 5.2 km from the City Center. According to the Master plan of UB1 the location of the Khoroo 19 is envisaged as zone with low and middle story housing development.2 One of the features of the Eco village is its vicinity to the “Tsaiz” wood market, where some people from this Khoroo are employed. The Khoroo 19 lacks sufficient social infrastructure. Only one kindergarten is located in this Khoroo being completely overloaded. There are some small shops. The area is quite flat and disposes of many trees. In order to implement the Eco village (mainly consisting of detached and town houses) project a Memorandum of Understanding (MoU) has been signed between the Housing Corporation of the Capital City, EREL LLC, ARIG Bank, Eco village cooperative of land owners and GIZ Urban Nexus project on 30 March, 2018. According to the MoU the GIZ Urban Nexus project will elaborate a revised draft Local plan design and the pre-feasibility study for the Eco village project. The GIZ Urban Nexus project will also provide advisory service to EREL LLC regarding the energy efficient housing design. GIZ’s consultants have been working at the

1 Master plan for the development of UB City until 2020 and developments perspectives until 2030” adopted by the Resolution No.23 of Parliament of Mongolia from 08 Feb, 2013. 2 Two to five story buildings

5

Housing Corporation since March 2018 to provide support to the planning and implementation of the Eco village project in Khoroo 19. Moreover, a household’s survey has been conducted in Khoroo 19 between May-June 2018 to identify the willingness of landowners to participate in the Eco village project. Target groups of the project are residents of this Khoroo, architects, engineers, contractors, banks as well as decision-makers and the population of Ulaanbaatar. This project has a high scaling up potential for other parts of the Ger area. Ulaanbaatar City (Housing Corporation of Capital City “NOSK”3) will be responsible for project implementation, especially for the project financing regarding infrastructure. Other key stakeholders are the Ger Districts Infrastructure Department of UB City4, the Urban and General Planning Department of UB City and relevant utilities. It is intended that other Mongolian Partner organizations such as the Ministry of Construction and Urban Development (MCUD), the Ministry of Education and Science (MES), the Ministry of Environment and Tourism (MET) and the General Authority for Specialized Inspection (GASI) will contribute through supporting the issuing of relevant documents for example building permits and facilitating relevant administrative procedures. Within the project the GIZ Urban Nexus will provide technical assistance regarding community development, introduction of energy efficient and environmentally friendly technologies and training (e.g. solar heating system etc), elaboration of energy efficient housing designs and neighbourhood planning as well as support in mobilizing finance and respective networking. A community-based land re-adjustment project in UB City will demonstrate how to re-adjust the Ger area settlements in an energy efficient, environmentally friendly and attractive manner including on grid and off-grid solutions. It will also showcase the usage of renewable energy and heat energy saving solutions and construction technologies. An important challenge is the self-organization of the community and finding the consensus regarding the swop of land against housing equipped with innovative engineering infrastructure. The duration of the project implementation is planned for three years in 2018-2021. The GIZ Urban Nexus will provide technical assistance up to July 2019. 2. Problem Analysis (Rationale) Ulaanbaatar, the Capital of Mongolia has over 1.35 million inhabitants. Nearly 40% of the country population (out of total 3.1 million) lives in the Capital City with considerable amount of migrants moving to UB every year (over 20,000 in 2016)5. The migrants settle down mostly in the Ger districts encompassing around 60% of the population of UB districts lacking engineering infrastructure such as piped water supply, sanitation and waste water management and district heating. This causes major environmental problems such as heavy air pollution and contamination of the soil and the groundwater. Moreover, the Ger inhabitants 3 NOSK has 25 employees 4 Agency of the Capital City with 36 employees 5 Since January 9, 2017 in-migration to UB is restricted by the Resolution A/17 issued by the Mayor of UB City. Settlers coming to UB after this date will not receive an address, i.e. they cannot register, will not receive title deeds and cannot admit their children to schools and kindergartens in UB. Moreover, the UB Masterplan postulates that the population within the area of UB in 2030 should not exceed 50,3% of the total Mongolian population.

6

- in particular children and old people - are suffering from health problems due to the contamination of their environment. The environmental situation is aggravated by unemployment, poverty and crime occurring more frequently in the Ger areas posing a challenge to sustainable development of the entire City. The residents of Ger districts are mostly owners of their plots (with legal title deed) and many of them want to live in detached houses with basic infrastructure connections. Ger districts are still dominated by single-family houses and Gers (traditional felt housing). The existing houses are mostly inadequate due to poor construction quality, non-existent maintenance, and insufficient insulation. Existing utility capacities and urban public services cannot comply with the ever-growing demand for physical infrastructural provisions. Due to the capacity shortage decentralized solutions especially for heating and wastewater management are required, however, they are more costly than conventional solutions. Moreover, there is a strong need for community development in the Ger districts of UB in order to improve the capacity of the Ger dwellers to solve their problems and participate pro-actively in the development of their own neighbourhoods. According to an ADB study6 the government and the Municipality of Ulaanbaatar (MUB) have initiated a series of policies and actions to support housing development and to supply affordable housing units from 2013 onward. The objective of these combined programs was to deliver around 160,000 housing units through both a redevelopment process and the development of new areas. However, these efforts still cannot adequately supply affordable housing in Ulaanbaatar due to limited risk readiness of the private sector and commercial banks’ lending practices more apt for the high-end real estate market. Thus any land re-planning designs should be developed in such a manner to be competitive and attractive for potential investors or buyers. Designs for a respective neighbourhood will help the owners to raise funds required to finance their own housing improvements. The use of land titles as collateral for loans from financial institutions is seen as the main way for land owners to raise funds for the financing of their construction activities. In the past a local plan for the Tsaiz village in Khoroo 19 has been elaborated with the financial support of UB City and approved by the General Planning Department of UB City in June 2016. As can be seen from this Local plan it was intended to build mainly apartment buildings (see Annex 1). However, due to the latest housing market development7 and a large number of vacant apartments the existing strategy focusing on the construction of middle and -high rise apartment buildings foreseen in the former Local plans8 have become obsolete9. In other words these apartments would have no chance to be sold due to the increased number of apartments buildings built in other parts of UB City in more attractive locations still remaining vacant. Therefore, GIZ Urban Nexus project suggested the transformation of this village into a settlement area with prevailing 2-3 story row houses considering densification according to the UB City Master Plan.

6 ADB, Affordable Housing and Urban Renewal Project, 2017 7 The most recent housing market survey conducted by the commission of MCUD in 2018 shows there are over 5000 housing units oversupplied for upper and high income families by May 2018. 8 A Mongolian Designing Company “Nutgiin bosgo” LLC developed a Local plan for this village in 2016. 9 According to most recent information of the MCUD there are 427 housing projects for 62'339 apartments under implementation in UB. Of these 38'514 apartments will be ready in the coming three years. To date 5822 apartments are offered on the market (vacancy rate). Out of these 4622 apartments dispose of a floor area of more than 80m2. The average price for 1m2 is MNT 2,114,527.0 MNT.

7

3. Ger Area Development Strategies It is assumed that there are 216,000 households in the Ger areas which need improvement of their living conditions. Moreover, as the ger households are considered as being primarily responsible for creating the devastating air pollution in UB, it is essential to change their living condition to improve the air quality in UB. The air pollution in UB during the winter months (September to April) is in particular caused by the heating and cooking in the Ger areas done with low quality raw coal on very simple stoves not insulated and not apt for storing the heat and clean combustion.10 Health problems in particular of children and elderly people have become a serious problem in UB causing earlier death and respective costs for treatment. The national government together with UB City has hence elaborated strategies to improve the living situation on the ger areas and with this also reduce air pollution in the winter months to a considerable extent. The ger areas are the main focus of these measures. Measures to be introduced by February 2019 restricting the import of raw coal to the ger areas poses huge challenges to the decision makers as financially feasible and technically sound alternative options for heating will have to be developed. Up to now, the only alternative is to heat the ger houses with electricity. However, the electrical grid as well as the heating capacities of the power plants might not be sufficient. Moreover, safety problems can occur. 4. Ger Zone Development Approach The first zone around the formal, modern part of the city in the north are rather densely populated ger areas which are already partially connected to the central grid/networks will be completely connected to water supply lines, waste water and heating lines. In the second zone, on the northern side, Service Centers are a new approach of UB City Government to address the problem of ger areas. Up to 200 service centers are to be installed, 100 of them by 2020. For the moment, 2 service centers have been inaugurated with partially off grid and partly on grid urban infrastructure services. One service center is located in Chingeltei District, the other one in Suhkbaatar District. For wastewater, decentralized solutions have been planned and are now under construction. For the third zone, off grid solutions are envisaged grouping 5-10 families for respective innovative technological solutions. The idea is to have them as „ innovation hubs“11and learn from the technologies applied. However, this is also the area where the most recent migrants have settled and hence where poverty is most widely spread. The question of financing these off grid solutions remains unanswered at the current stage. Moreover, it is well known that off grid solutions with regards to energy efficiency require first of all highly insulated buildings. Without highly insulated buildings off grid heating solutions cannot function.

10 There have been numerous stove development programs in UB supported by MCC/MCA, ADB, GIZ Urban Development program & XAC Bank. However, the programs have finally showed little impact as locally developed highly energy efficient stoves have not been further promoted, imported stoves from Turkey were difficult to handle and highly subsidized leading to the disappearance of the majority of the imported stoves. 11 Alike „Silicon Valley“

8

Initial investment (CAPEX) on off grid solutions is higher (at least 10-20%), however, the running costs (OPEX) (life cycle costs) tend to be negligible to none. Nevertheless, functioning energy/infrastructure management systems have to be in place. The 24 redevelopment projects in place mainly take place in the first and second zone, whereas the 8 readjustment projects concentrate on the second zone. None of them has reached completion up to now. The readjustment program has not even started yet with the exception of the GIZ Urban Nexus Project in Khoroo 19 in the Subdistrict No. 17. The readjustment program is actually a program of the Democrat Party in power in UB City from 2012 to 2016, whereas the redevelopment program was initiated by the People’s Party in power in UB City from 2008 to 2012. The Service Center Program has been initiated in 2017 under the leadership of the People’s Party reign in UB starting in 2016 after the Democratic Party was defeated in elections after a landslide victory of the People’s Party in 2016 in the whole of Mongolia as well as in UB City. The responsible Authority for the implementation of the ger redevelopment as well as the ger readjustment program and the service centers is the “Ger Districts Infrastructure Department” of UB City with few exceptions.12 The ger development is strongly supported by two massive ADB programs (“Affordable Housing” and “Urban Renewal Program”)13 implemented by a Project Implementation Unit (PIU) with UB City. 5. Introduction to the project area (survey results) The Eco village project site is located in Khoroo 19 which has been established in connection with the establishment of Bayanzurkh district in 1992 by the Administration and territorial units Law of Mongolia. This Khoroo is bordered to Khoroo 22 in the west, to Khoroo 24 in the east and to Khoroo 16 in the front. The Khoroo 19 has an area of 228.79 hectares and is divided into 14 parts. The Eco village forms the Part 4. At the end of 2015 the Khoroo 19 had 2609 households and 10,404 persons. 3.2% of the Bayanzurkh district population lives there. 38.2% or 3,975 are of labor age. Of these 47.4% or 1,885 are employed, 1.1% or 45 people are unemployed. In order to identify the willingness of residents to participate in Eco village project a survey has been conducted from April to June 2018 by the GIZ Urban Nexus project with support of Arig Bank, the Housing Corporation of UB City and the cooperative. 5.1 Current situation in the project site According to the results of the survey there are at the moment 176 Khashaas (plots) from former 191 plots meaning that some landlords have more than one plot. A tendency observed is that some landlords started to buy neighboring plots and merged them with the existing own plot (see in Annex 2).

12 As for example the Eco Village Project implemented by NOSK with the support of the GIZ Urban Nexus Project. Ger Districts Infrastructure Department has completed its Feasibility Study for the Service Centers (in Mongolian language) and is working on a Feasibility Study for Zone 3 (pilot off-grid solution). 13 Both programs amount to more than USD 500 million loan with the Green Climate Fund (GCF) contributing 50 million USD as grant and 95 million USD as loan)

Current existing physical structure in Eco village site

The picture below taken from a drone shows the real situation in this location. Some areas have 4 Gers in one Khashaa for instance:

Drone picture

With regard to the population figures, the survey found out that 4.87 people on average live on a Khashaa. Altogether 876 inhabitants live in the area (176 households). It was also found out that in at least 57 cases (or 32.02% of households) there is more than one household on one plot. This is being confirmed by the picture above. One important outcome of the survey is the information on the plot sizes shown below:

Property Size (m2) Amount

Less than 350 23

350 – 450 54

450 – 550 62

more than 550 37

Property size

The total land area amounts to 11.4 hectares. With regard to the land use about 58% are residential, 18% commercial areas and 24% are road and other facilities. 6. Land use pattern Currently there are different small enterprises having their businesses in the area. These are small shops, car repair service, a printing press, furniture producer etc. and two different

11

Catholic Church communities14 as well. The existing business facilities would have to be considered in the development of a revised local plan and also have to be considered as one of the challenges regarding compensation. The location of the different businesses is shown in Annex 4. According to the survey almost 95% of land owners are living on their plots. Only about 10 landlords are renting their Khashaas to other households or have dormitories on their plots. The detailed information on the plot rental is shown in Annex 5. Regarding the building facilities there are currently 196 houses and 107 Gers (yurts) in the respective area. Besides the land value one has to consider the value of the existing building structures especially those newly built and requiring considerable compensation in case of land re-adjustment. The information about these newly built houses and building facilities is shown in Annex 6. 7. Willingness to participate in the project In total 93.4% (166) of households living in the project area has been interviewed. The willingness of residents has been surveyed with regard to:

• Improvement of the current housing/living situation • Interested to be connected to the infrastructure • Not interested The table below shows the responses of the households:

Responses Amount Percentage

Interested 149 84.65%

Only Infrastructure 14 7.95%

Not interested 3 1.7%

Missing 10 5.68

Total 176 100%

The map showing the willingness of households (to exchange/improve their plots and houses) is shown in Annex 3.

14 With large plots

12

8. Urban Development assessment of the project area 8.1 Justification for the development of the project The following policy and legislative documents and programs were taken as basis for the elaboration of planning solutions.

• “Master plan for the development of UB City until 2020 and developments perspectives until 2030” adopted by the Resolution No.23 of Parliament of Mongolia from 08 Feb, 2013;

• “Housing and infrastructure development sub program” has been adopted by UB City Council in 28 Feb, 2018;

• Action plan of the Government of Mongolia for 2016-2020; • Action plan of Mayor of UB City for 2016-2020; According to the Master plan of UB City it is foreseen to divide the territory of UB City in 8 planning areas/zones, develop a zoning system and adhere to it. As shown below a division of the City into 8 planning zones separated by streets, road access and construction borders has taken place.

Planning zones

13

8.2 Objectives and targets of the planning The objective of land re-adjustment is to improve the land usage (densification), increase the land value, develop neighbourhoods with prevailing detached and row housing disposing of innovative engineering and social infrastructure (including off-grid solutions). The living conditions of the residents is to be improved by pro-active participation in the land re-adjustment process accommodating more inhabitants within the same area. It is about “land versus housing swop”. Residents will give up part of the land they own and exchange it for an improved dwelling with innovative infrastructure (water supply, waste water and heating). The main objective of the planning for the Eco village project is the community-based land re-adjustment process considering the needs of the residents in the area. These are: • Improve the housing supply which is affordable for residents • Optimize the urban space planning (densification) • Improve the land usage and enhance its economic value • Establish and improve the basic infrastructure provisions • Improve and replace the road network • Expand existing and create new green areas and parks • Reduce the soil, water and air pollution/contamination • Improve the social infrastructure provision and access • Increase the employment • Reduce the impact of possible natural disasters by considering the landscape and

flood risks. In the context of the 2030 Agenda for Sustainable Development this will contribute to the creation of resilient cities and human settlements (SDG 11) through: • Physical infrastructure (innovative technologies & standards) (hard-ware), semi-

decentralized, cross sectoral infrastructure approach considering energy efficiency of buildings, energy savings, renewable energy

• Social infrastructure (software):

all-inclusive cities, people-centred development (“leave nobody behind”), holistic/integrated planning/system, decentralization along subsidiarity principles, empowerment of cities as “key drivers of development”

Within the framework of a: • Circular (green) economy approach /job creation/capacity building

(return/reuse/recycle/recover) 8.3 Expected project results: • A community-based land re-adjustment project in UB City showcasing how to

redevelop Ger areas into an environmentally friendly and people-centred manner. • Increase of land value in the project area. • Creating a healthy, safe and liveable environment. • Awareness creation for green development among the residents of Ger area.

14

9. Urban Planning Challenges 9.1 Planning documents Although there is an approved Master Plan for the development of UB City until 2020 and developments perspectives until 2030” adopted by the Resolution No.23 of Parliament of Mongolia on 08 Feb, 2013 and there are local plans as well as a clearly defined procedures for the approval of local plans and building permits, the planning process still lacks transparency. After checking the planning documents available at the Urban and General Planning Agency of UB City it was discovered that there are two approved local plans15 for the same area partially contradicting each other and also the Master Plan. None of the two local plans has been suspended. Moreover, the Master Plan for the area (“Eco village”) shows some high-rise buildings for which building permits have already been issued overlapping with both local plans. The Master Plan also clearly states that for the area (“Eco village”) low and middle story buildings are foreseen being defined as buildings with 2- 5 stories. However, both local plans as well as the Master Plan show some high-rise buildings for the area. As a first step, NOSK will seek clarification on the existing area (“Eco village”) to be developed under this project from the Urban and General Planning Agency of UB. Without knowing the borders of the area for which a revised, third local plan is to be elaborated, planning is obsolete. The first draft of the GIZ Urban Nexus project for an actualized local plan (see below) taking into consideration the latest developments regarding the increasing vacancy rate of newly built high-rise apartment buildings in UB City has to be revised also taking into consideration the possibly changed borders of the area, the land mergers occurred due to landlords buying adjacent plots and the results of negotiations with the land and house owners. Regarding other planning parameters on the basis of the UB Master Plan the population density in this area is supposed to reach a maximum of 47 persons/ha (brut) or 125 persons/ha (net) by 2020. The population density is not supposed to surpass these parameters. 15m2 of green/person is another planning parameter to be reached.

15 The second local plan dates back to 2016. However, it is not considered in the Master plan for the development of UB City until 2020 and developments perspectives until 2030” adopted by the Resolution No.23 of Parliament of Mongolia from 08 Feb, 2013.

15

Obsolete first draft for revised local plan 9.2 Negotiations with owner of land and dwellings The most important aspect of Ger redevelopment and ger re-adjustment is the negotiation with the dwellers to come up with solutions accepted by all parties. The financial aspect plays a very important role in this process. The redevelopment program of UB City16, implemented by the Ger Districts Infrastructure Department of UB City17 and ADB programs shows that valuation of the land is a critical factor. For this, companies selected and certified by the MCUD are contracted to come up with a “neutral” valuation of the land per m2 for the respective area according to defined criteria. In area in which ADB and their partners are undergoing this process the margin ranges from 60.000 – 80.000 MNT per m2 of land, however, the respective dwellers have not accepted this offer striving for 100.000 MNT and above.

Without a final agreement on the land selling price no further urban redevelopment or adjustment can take place. However, UB City has given the directive that in case of 70% of the concerned households agree the developer can go ahead. To reach an agreement a first negotiation takes place between the developer and the dwellers/landowners (“2 partite agreement”). Once an agreement has been achieved between them this is documented and has to be approved by the Mayor of UB (“3 partite agreement”).

16 The Redevelopment Program disposes of 24 locations within UB. In 2017, 340 apartments have been handed over to the owners in this framework, whereas in 2018 already 2000 apartments have been handed over. Altogether 35.000 families are supposed to be served by this program. 17 The Ger Districts Infrastructure Department is an Agency of the Capital City of UB.

16

9.3 Financial Analysis and financing mechanisms A financial analysis regarding the financial capabilities of the landowners has not yet been done. This will be done by Arig Bank in parallel with the negotiations to be held with the landowners to be implemented by EREL. It is planned to access the 8% mortgage loan supported by the Mongolian Government for credits to the landowners in need of affordable housing. The valuation of the land and a respective agreement on the land value will be critical factors to determine financial issues with the landowners. The GIZ Urban Nexus Program has developed a tool on the basis of excel to calculate the costs of housing for the beneficiaries taking into consideration the amount and value of their land if this is swopped against an apartment or house. Arig Bank will moreover seek for solutions to finance the infrastructure for the first bunch of up to 30 houses via green funds and other available means including CSR (a rough amount of 2 billion MNT is in discussion to be made available for green infrastructure). XAC Bank, the only accredited entity for the GCF in Mongolia, has recently received a loan of altogether 18 million USD (8 million own funds) from GCF to finance new constructing and possible also thermo-technical retrofitting of dwellings in the Ger areas. However, off-grid infrastructure solutions are a prerequisite. The loans are supposed to be disbursed from January 2019 onward. So this might be another financing option in case Arig Bank cannot manage. 9.4 Physical infrastructure development It is important to plan for infrastructure solutions (heat, water, waste water) ahead of time in order to have it in place once construction starts (at least piped water supply) and/or in parallel with the buildings getting ready. Another important aspect to be considered is that the infrastructure lines (network, grid) are placed on public land and/or underneath public roads. If infrastructure lines are built on or under private land public accessibility is not necessarily given in the long run. Up to now, infrastructure development planning and implementation has not taken place around Eco Village area. There are no main lines directly accessible with the exception of electricity. Once the revised draft local plan is available it has to be submitted to Urban and General Planning Agency of UB City for approval and as basis for the infrastructure development. The Urban and General Planning Agency then defines the “connection points”. After that the designs (work drawings) can be elaborated including cost calculations to be submitted to UB City for budgeting and to the utilities. This is a slow process and funds will not be automatically available considering the financial situation of Mongolia undergoing a strict austerity program agreed upon with the International Monetary Fund (IMF). Funds might be made available from the 500 USD loan agreed upon between UB City and South Korea to support air pollution reduction measures in UB. A water supply line is not too far away and could serve for water supply for the first cluster of up to 30 dwellings envisaged in a first step.

17

A rather limited waste water line regarding the diameter nearby could be used to discharge the overflow of a three-chamber septic tank envisaged as stand-alone wastewater solution. Regarding heating, a 5.7 km long 2Ø1000/800 mm heating transmission line from Amgalan HOB would be required if an on-grid solution is thought of. However, the detailed planning and construction of the heating supply line will take at least 3 years. So alternative off-grid solutions will have to be applied. What makes it more difficult is the fact that from February 2019 onward raw coal will not be allowed any more in the Ger areas and no green fund would finance coal-based off-grid solutions. Every none-coal heating solution, however, increases the costs (CAPEX) for heating. Off-grid energy-mix solutions are a good alternative, but in Mongolia there are still on a pilot stage and also require more sophisticated management and engineering skills. Also, the users have to develop more “green” consciousness and have to be trained in the application once they dispose of alternative renewable energy heating solutions. Energy Service Companies (ESCO) are hardly available and their service have to be contracted, not being a conventional business model up to now in Mongolia. Additionally, it has to be taken into consideration that according to the law in Mongolia every dwelling requires 2 energy sources for heating in order to guaranty survival in the cold winter months in case one source fails. Regarding roads, it has been agreed to maintain as far as possible the existing roads. However, according to the Master Plan two roads shall be enlarged (see Annex 7) cross-cutting the Eco Village vertically. Some plots will have to “sacrifice” some part of their land for road enlargement. With regard to buildings on the plots it is envisaged to maintain the newly built houses into which larger investment has been made (bigger brick buildings). In this case the owners would be advised to implement thermo-technical retrofitting measures in order to save energy. 9.4.1 Heating supply details The households in the Khoroo 19 have standalone heat only boilers and stoves using mostly raw coal which causes a lot of air pollution. The bio fuel, natural gas and other types of more environmentally friendly fuels are hardly being used. The heating period lasts for 8 months or 240 days with (designed) outside temperature of up to -39°С. There are several options for the heating supply. The first option is the connection to the centralized district heating grid. As of “Housing and infrastructure development sub program” adopted by UB City Council in 28 Feb, 2018, it is planned to build a 5.7 km long heating transmission line 2Ø1000/800 mm connecting Amgalan Heating plant with the heating transmission line No.6 and it will be laid along “Да Хүрээ” car market and “Dorj” street including 10 sub stations. This planned heating transmission line will pass the Eco village project site on the north site. In order to realize this option, the Engineering facility department of Mayor’s Office is proposing to build 5.7 km long 2Ø1000/800 mm heating transmission line with estimated cost of MNT 26.0 Billion (see picture below). The cost for the designing of this work amounting to MNT 520.0 Million will is supposed to be included in the list of works to be financed within the Air and environmental pollution reduction program of UB City for 2018-2019. The planning and construction of the heating supply line will take at least 3 years.

18

Heating transmission line for connecting of Amgalan Heating Plant with heating transmission line No.6

The second option (should be seen as interim solution) would be an energy efficient heat only boiler. But following the strict regulation of the Government of Mongolia18 to prohibit the raw coal usage in Ger areas of UB City from February 2019 onward there might be difficulties in obtaining permission for installing of a HOB there (entitled companies will be exempted). After construction of the main heating transmission lines mentioned above the heat only boiler facility will be converted to heating substation facility. The heating distribution lines will be insulated according to the Norm “Insulation of equipment and transmission pipes” /БНбД 41-04-13/ and heat conductance value of insulation material should be not above U=0.05 W/m °С, thickness of insulation not more than 30mm and covered with 2 layers of wrapping belt. In the heat only boiler building plate heat exchanger for heating and warm water supply will be installed connected parallel to the water and heat transmission unit. Heat only boiler will provide all consumers with heating energy and warm water. The heat load will be calculated based on the building heating and air circulation specific values. The heat carrier calculation temperature in the district heating: In the 1st circuit -the temperature in the heat inlet pipe is +115°С, in the outlet pipe 70(65)°С; in the 2nd circuit- in the heat inlet pipe +95°С, in the outlet pipe +70(65)°С respectively. The basic parameter for the secure operation of the heating source and heating system is the planning and installation of the automatic valves, thermostatic valves in the heating appliances and balancing valves in the heating system of building. It is required to plan a separate water heater and plate heat exchanger for warm water provision.

18 The Government resolution No.43 from 2018

19

The respective workshop drawings for the heating supply have to be elaborated based on the approved19 Local plan and technical conditions issued for the Eco village project. 9.5 Housing designs The types of housing to be offered to the beneficiaries against their land vary from 40m2 to 104m2. The housing designs elaborated so far consider densification aspects as well as energy efficiency aspects by orienting the houses towards the south to capture solar energy gains. They are designed in a modular system in order to take into account the housing needs of the inhabitants and their different financial possibilities. Due to thermal insulation they are supposed to consume a maximum of 120 kwh/m2/year. There are 2 and 3 story buildings as well as row houses (see Annex 9 - 11). This subsidized mortgage loan for affordable housing supported by the Mongolian Government only finances dwellings up to 80m2. Up to now, the GIZ Urban Nexus Project has elaborated 2 housing designs smaller than 80m2. Another one to two additional designs in the framework of a modular system making construction easier and more cost-efficient below 80m2 shall be ready by end of August 2018. With regard to buildings on the plots it is envisaged to maintain the newly built houses into which larger investment has been made (bigger brick buildings). In this case the owners would be advised to implement thermo-technical retrofitting measures in order to save energy. 9.6 Next Steps The project will follow a step by step approach. After receiving the results of land valuation by end of July 2018 the project will pre-select a group of up to 10 plots/landlords living next to each other in the square No. 27 within the Master Plan to join hands for a first readjustment effort. On these 10 plots up to 30 families should be accommodated (densification) through the land versus house process. The 20 additional families would come from outside the area and buy their apartment or row houses. Arig Bank will be responsible for the financial arrangements. The infrastructure solutions would be off grid solutions for the moment with the exception of water supply, electricity and the overflow of the three-chamber septic tank to be discharged into a nearby waste water line. Green solutions will be elaborated as off grid solutions to be financed via existing green funds possibly from Arig bank for this first module. Once the landlord group has been selected and negotiations are completed a draft local plan will be elaborated and presented to the Urban and General Planning Agency of UB City for approval.

19 Urban and General Planning department of UB City approves the Local plan.

Annex 1 Former Local plan comprising mostly of middle rise apartment buildings

21

Annex 2 Property information

22

Annex 3 Willingness mapping (showing the location of households

23

Annex 4 Business activity/Land use

24

Annex 5 Land plots rented out

25

Annex 6 Location of newly built houses and facilities

26

Annex 7 Planned new main road

27

Annex 8 Master plan 2030 for Ulaanbaatar with Sub district 17

28

Annex 9 Row House Type

29

Annex 10 Apartment House Type A

30

Annex 11 Apartment House Type B