Why no one wants to rejuvenate Mumbai’s slums

In 2006, the redevelopment of this slum, spread over Khar and Santacruz East, was handed over by the Government of Maharashtra to a joint venture of Shivalik Ventures, Rohan Lifescapes and Unitech Limited. Sixteen years later, only 5% of the project has been completed. , Unitech got embroiled in the 2G spectrum scam, which made it impossible to raise funds for the venture. Another intriguing issue is the multiple ownership of land. Once a firing range, Golibar is partly owned by the Ministry of Defence, Brihanmumbai Municipal Corporation (BMC), Maharashtra Housing and Area Development Authority and others. Shinde, for example, lives in a 40-acre defence-owned part of the slum, which has about 9,500 shanties.

Golibar is emblematic of the long, complex and messy process that has defined slum redevelopment in Mumbai. Developers often get caught in fraud cases. Land ownership is complex; Political and legal interventions are frequent; Liquidity issues are perennial; There is very little clarity on the policy or plan.

Dharavi, home to one million people, is another textbook example of the problems inherent in such projects. When global tenders were first floated in 2007 for the redevelopment of this 239-hectare settlement in the heart of Mumbai, 101 responses were received from developers around the world. When the bids were invited again in 2016 after several tenders were cancelled, none came.

Another attempt was made in 2022. Eight companies showed interest in the pre-bid meeting, but in the end only Adani Properties Pvt Ltd (APPL), DLF Ltd and Mumbai-based Naman Group submitted bids. Not a single reputed developer from Mumbai came forward. Naman was disqualified, and Adani 5,069 crore bid wins over DLF 2.025 crore offer.

At one time, Golibar or Dharavi were seen as real estate goldmines, but not anymore. Many credible developers stay away from similar projects.

Months after launching a joint venture with Transcon Developers in 2019 to develop the commercial part of a slum project, BSE-listed property developer Sunteck Realty has backed out. Kamal Khaitan, chairman of Sunteck, says that this has been done after a lot of hard work. “There are no reputed developers in slum redevelopment now because it is difficult. Today, even if I get a chance at the top spot, I will think twice before saying yes.”

policy is a cropper

This does not bode well for a city where half the population lives in slums. In fact, the Slum Rehabilitation Authority (SRA) was set up in 1995 with a clear goal of providing free housing to slum dwellers and making Mumbai “slum-free”. Considering that there are about 2,400 slum clusters in the city, the objective was huge. For 675 of Delhi.

But today, over 1,000 proposed slum redevelopment projects under the SRA are either stuck or have never taken off. Of the 380 pending projects, 230 ran out of money. In 2022, former Maharashtra housing minister Jitendra Awhad said that there is an estimate 35,000 crore was stuck in these projects as the developers failed to complete them.

“When the SRA scheme came, there was a lot of enthusiasm but no developer has been able to continue and do well. Several factors played a role, including the difficulty of clearing slums, the heavy premiums paid and increased costs. Hence, established developers today will consider slum projects only when they get clear land,” says Anuj Puri, chairman, Anarock Property Consultants.

Gautam Chatterjee, a former bureaucrat, understands the complexities all too well. He was the Chief Executive Officer of the SRA between 1995 and 1997 and the Dharavi Redevelopment Project between 2008 and 2010. “Among all brownfield projects, slum projects are the most difficult to execute. There are legal and political interferences, and a lack of transparency. What is needed is clarity in policy and planning by the government and its competent authorities. That’s when big developers will come,” he says.

So, how does the Slum Project work? A developer first needs the consent of 51% of the slum dwellers, after which he can approach the SRA for approval. The SRA then issues a certificate of eligibility, which is followed by a letter of intent. The developer then begins to clear the site, offering rent or transit camps for slum dwellers until the houses are ready. The developer will have to provide 300 sq ft house free of cost to the slum dwellers. To offset the expenses, it may sell a portion of the land or apartment on the open market.

But then slum projects cannot be done on an Excel sheet, says Haresh Mehta, chairman and managing director of Rohan Lifescapes, the JV partner in Golibar. “They need a practical approach, human touch and financial bandwidth,” he stressed.

In slum redevelopment, the state government levied a high premium fee on developers who expressed interest earlier. For example, they had to pay 25% of the land value, and the floor space index, or FSI, utilization (permissible area of ​​construction) on a plot was capped. “The goalposts kept changing in terms of policies, but things are getting better. The incentive structure for developers has improved. But slum projects are tough, and everyone wants their meat,” says Mehta.

With the change in the market, Mehta is hopeful of reviving the Golibar project as well. But given the liquidity challenge, it will be difficult. Unitech is still a partner (with 25% stake) in Shivalik, which is making investors wary.

The success of the Dharavi project is central to Mumbai’s slum redevelopment story. But following allegations of stock manipulation and accounting fraud on the Adani group, the state government is now waiting for the dust to settle.

bad boys?

The credibility of the developers is also important for slum projects. Last year, Godrej Properties Limited (GPL) announced its plans to invest 400 crores for 10% stake in DB Realty and separately, another 300 crore for a joint venture for slum rehabilitation and redevelopment projects. Just a day later, GPL called off the deal, following concerns by minority shareholders and other stakeholders, not only about the slum redevelopment business in general, but also about investments in DB Realty, whose promoters allegedly included in 2G. scam.

Separately, the promoters of Omkar Realtors & Developers Pvt Ltd, which specialized in slum projects, were arrested by the Enforcement Directorate (ED) in 2021 in a money-laundering case. Largest developer after DLF and Unitech, and largest slum developer in Mumbai. Its promoters were arrested in 2019 for their alleged role in the over There has been a fraud of 6,000 crores in the Punjab and Maharashtra Cooperative (PMC) Bank.

“Slum redevelopment deals with land, money and a large number of slum dwellers, who are important vote banks for political parties. Being a lucrative business, developers have in the past diverted funds to other businesses, leading to an unholy nexus between the stakeholders. Hence, it is no surprise that credible developers no longer want to be a part of it,” says a real estate consultant, who requested anonymity.

Slum developers like DB Realty and Omkar, who have land but are unable to develop and sell themselves, are partnering with reputed developers. For example, GPL is doing a slum project with a partner in Worli, south Mumbai, where the latter is responsible for clearing the land and dealing with the slum dwellers. GPL will develop commercial or free sale components. A spokesperson for GPL declined to comment.

Niranjan Hiranandani, one of Mumbai’s leading developers, suddenly finds himself in the shoes of a slum developer. About a decade ago, Hiranandani had assigned Omkar Developers the rights to develop a slum in suburban Vikhroli. As per the court order, in view of the developments in the Omkar case, the 16-acre project is back in the lap of the Hiranandani Group. “We are in the process of getting approvals. In a city where half the population still lives in slums, slum redevelopment is imperative. But the truth is that such projects do not make it easy to do business,” says Niranjan Hiranandani, co-founder and managing director of the Hiranandani Group.

Hiranandani, who was a co-signatory of the Dinesh Afzalpurkar Committee, a study group set up in the 1990s to provide a framework for slum redevelopment, says litigation, political interference and other factors lead to undue delay in such projects Are. “That’s why there are people who now help clear land and get approvals,” he says.

Reviving ‘dead’ projects

In the last one year, the Maharashtra government has come up with two policies to accelerate SRA projects. The first involves enlisting developers and contractors with financial capability. Once tenders are called for stalled projects, the SRA will assure fast-tracking of approvals.

The second is an amnesty scheme for projects where large financial institutions (FIs) have invested, but developers have faltered. Such financial institutions will be notified as co-developers and can nominate a developer of their choice and complete the projects. The original developer will be removed, and investors and new developers can receive money from the sale component of the project.

“Around 100 developers have been empaneled and the stuck projects will be completed. We have so far received 28 proposals under the amnesty scheme. Some leading lending institutions have expressed interest, says Satish Lokhande, chief executive officer of SRA. Of the 380 stalled projects, Lokhande says efforts are on to revive 148 projects.

find a middle ground

Developers who are still navigating the messy aspects of these projects are looking at risk-free alternatives. Recently, realty firm Raheja Corp acquired FSI rights of 152,000 sq ft in a slum project in Wadala. 275 crore, according to documents accessed by property analytics firm CRE Matrix. The project already has two other developers. While the existing developers rehabilitated slum dwellers on a portion of the land, Raheja would develop the commercial component of the project. This allows Raheja to sell around 350 units at market value, without getting involved in the more complex slum portion of the project.

Not surprisingly, investors and corporate builders are keen on redeveloping housing societies that are smaller in scale, involve fewer people, and are easier to execute. Mahindra Lifespace Developers Ltd is now planning to redevelop two adjacent housing societies in Santacruz, ushering in space.

Mumbai has limited opportunities for greenfield development in the absence of vacant land parcels. The only viable opportunity is through redevelopment – a market that is expected to be priced higher 30,000 crore, according to Mahindra Lifespaces.

The debacle of HDIL, Omkar and others in the past has also made investors wary about lending to slum projects. But they are warming to the less risky aspect of community redevelopment. Nisus Finance Co Pvt Ltd once backed out of the slum project even though the rehabilitation part was completed. Instead it invested in a number of community redevelopment projects in prime locations such as Prabhadevi and in suburban Chembur and Thane.

“Slum projects are high-risk, require large amounts of cash, the scale of approval and rehabilitation is massive. We chose society redevelopment as they provide better value to landlords and tenants,” says Amit Goenka, CEO & MD, Nisus Finance. Incorporating is simple.”

But this still leaves the mammoth task of redevelopment of Mumbai’s slums unfinished. SRA’s Lokhande is hopeful that developers and investors will gradually return to slum projects. It won’t be easy given the tumultuous past of the business. Lakhs of Mumbaikars still have to wait for their dream home.