Owning a shanty in India’s commercial capital just got more expensive.
With the Maharashtra government going ahead with a plan to redevelop Dharavi, prices of shanties in Asia’s largest slum have soared, by around 150% in some cases.
That’s because of Dharavi’s location—the slum occupies around 535 acres of land in the heart of space-strapped Mumbai, between the city’s swank new business district Bandra Kurla Complex (or BKC, as it is referred to) on the one side, and residential neighbourhood Sion on the other.
It is also because, with an eye on the redevelopment that will likely increase the value of land in the slum several times, speculators have entered the arena. Thus, a 10ft by 10ft shanty that sold for around Rs2 lakh a year ago, now costs about Rs5 lakh.
“Businessmen and investors come to me looking to buy premises, whereas earlier my clientele was restricted to poor people who had saved some money and wanted to buy a shack for a lakh or two,” said real estate broker Mohammed Sayyed. “Now the same shack sells for Rs5 lakh and the buyer is a businessman from South Mumbai who wants to invest and speculate. Poor people can no longer afford Dharavi,” added Sayyed. The speculators hope to make a killing when the redevelopment of the slum kicks off. Commercial real estate prices in BKC range from Rs15,000 to Rs30,000 a sq. ft.
With a shortfall of 2-3 million sq. ft in commercial real estate in Mumbai, the commercial space that will come up in Dharavi after the redevelopment would easily command a premium, real estate analysts said.
“A lot of people who cannot afford the BKC would prefer Dharavi, given its proximity to the BKC. That could lead to a premium on the Dharavi properties,” said Ambar Maheswari, director (investments) at DTZ, a real estate consultancy.
It isn’t just the speculators who are looking to make money from the redevelopment; it is also the companies that have lined up to bid for the redevelopment project.
Dharavi houses some 57,000 families.
Reliance Industries Ltd, Dubai-based Emaar Properties PJSC, the largest publicly traded developer in the Persian Gulf, New Delhi-based DLF Ltd, Mumbai-based Mahindra Gesco Developers Ltd and K. Raheja Corp. have bought expression of interest documents (preliminary papers they need to file with the government to bid for the redevelopment project), according to the respective companies. Around 25 foreign companies have bid for the project as part of various consortia.
New York-based Trikona Capital has also put together a consortium for the project, the fund’s president Mahesh Gandhi said. Investors in the fund include Fidelity and Lehman Brothers.
Media reports that cannot be independently verified said the redevelopment has drawn the attention of international financial biggies such as Lehman Brothers. Lehman has tied up with local developer Housing Development & Infrastructure Ltd to bid for the Dharavi redevelopment tender, reports said.
“We have been getting calls from hedge funds asking us about the Dharavi redevelopment plans,” said Sheela Patel, director of Sparc, a non-governmental organization that has been working in Dharavi for several years.
Altogether, 26 consortia have expressed interest in the project and the state government has begun the process of scrutinizing their bids.
However, the process of selecting bidders may see some delay. Anger is building up in the slum that is home to more than 500,000 people. The people of Dharavi are banding together to oppose what they see as a threat to their livelihood, and, in some cases, their very existence. Almost every house and business flies a black flag to protest against the redevelopment plan.
The state government has promised residents that it will conduct a socio-economic survey of the area before embarking on the redevelopment.
The Rs9,260 crore redevelopment plan, drawn up by US-trained architect Mukesh Mehta, calls for dividing the area into five distinct zones: a residential area with schools, hospitals and other amenities; and four commercial zones, including a gems and jewellery district, and a leather district.
The 57,000 families that live in Dharavi will be rehabilitated in 225 sq. ft multi-storeyed tenements, which will be maintained by the developer for 15 years. The developers will provide 30 million sq. ft of space, including housing, schools, parks and roads for the families. In return, they will be allowed to build 40 million sq. ft of homes and offices for sale. The plan, said residents, looks like it favours developers over residents, several of whom run thriving enterprises from the slum.
“This is our land that they are talking about redeveloping,” said 20-year-old Bharati Parmar, whose family has lived in Dharavi’s potter’s colony for three generations. “But they have not considered it necessary to even consult us once. We don’t know what is in store for us,” she added.
Other residents, some in the pottery business others in the leather business, echo Parmar’s words.
“Even educated men like me have been kept out of the process. We have knocked on every door in the government and we still don’t have any answers,” said Sanjay Khandare, whose family has been in the leather manufacturing business at Dharavi for two generations. “We are not against the development of Dharavi. We want to be a part of it,” Khandare added.
(Even as the Maharashtra government gets ready to go ahead with the redevelopment of Dharavi, Mint looks at the business of Asia’s biggest slum in a two-part series. Part 1 looks at the rush of speculators and developers who want to be part of the redevelopment of the slum. Part 2, which will be carried in Wednesday’s paper, will look at the businesses Dharavi’s residents are currently engaged in—pottery and leather, for instance—and the future of these.)