Mumbai: Alex Hayim was sure he was going to have to say no. The head of the Indian operations of Reit Property Plc., a UK-headquartered real estate financier, he had been approached by a Kolkata developer who wanted Reit as a partner for a slum redevelopment project. Reit Property has been investing in the Indian real estate space for the past two years.
“We are not in the business of slum development,” says Hayim, explaining his initial reaction. But he went to Kolkata to see the slum and go through the contours of the project “out of sheer interest”. He came back impressed enough to invest just under $10 million (Rs40 crore) in the project to redevelop a 17-acre slum in central Kolkata. People living in the slum get proper bricks and mortar houses as part of the project, and Hayim and his partner, whom he refuses to name, get to develop and sell 500,000 sq. ft of commercial property.
Across India, slum redevelopment is becoming big business. The largest and most ambitious of these is the Maharashtra government’s plans to redevelop Dharavi, Asia’s largest slum that occupies 535 acres between Mumbai’s suburbs of Sion and Kurla on one side and the tony neighbourhood of Bandra on the other. Companies, including DLF Ltd, Hiranandani Construction Ltd, Kalpataru Properties Pvt. Ltd and those controlled by Mukesh Ambani’s Reliance Industries Ltd, Anil Ambani’s Reliance Anil Dhirubhai Ambani Group have sought initial details of the project (all told, some 100 firms have expressed interest in participating in the redevelopment).
The size of the slum redevelopment opportunity isn’t known. What is known is that from Tamil Nadu and Karnataka to New Delhi and Maharashtra, it is on the agenda of the local governments that see it as a way to improve the quality of lives of people living in slums and create space in the heart of the city for residential and commercial property.
Mukesh Mehta, a former New York real estate developer and the man behind the $2.5 billion plan to redevelop Dharavi, estimates the slum redevelopment opportunity in Mumbai alone at $225 billion.
Officials in the Maharashtra government have previously said that Dharavi’s redevelopment will be a pilot project for the development of other slums in the city. Around 7-8% of Mumbai has been classified as slums, says Mehta, and 60% of the city’s population live in slums. The government’s redevelopment plan for the slum includes schools, colleges and hospitals.
Developers are drawn to these projects because they have the support of the local government and offer them the opportunity to develop land in the city centre.
The developers get permission to build additional commercial or residential units in prime areas in return for providing free houses for slum dwellers.
In May 2006, Housing Development and Infrastructure Ltd (HDIL) and Gujarat’s Adani Group struck a Rs2,250 crore deal to develop a plot in Mumbai’s emerging business district, Bandra-Kurla Complex (BKC). The land was acquired by HDIL as part of a slum redevelopment project it had carried out in the area.
What really convinced Reit Property’s Hayim to invest in the Kolkata slum redevelopment project was the state government’s support for it. The West Bengal government is driving the Kolkata Environmental Improvement Project or KEIP. The Kolkata Municipal Corporation has created a special purpose vehicle to oversee the Rs3,000 crore project, which is funded by the Asian Development Bank. The project has also attracted several infrastructural and construction firms, including Simplex Infrastructure Ltd, Nagarjuna Constructions Ltd and Tantia Constructions Ltd. These firms have been contracted to develop sewage systems and build houses, schools and hospitals in the area. The project is already in its second phase of implementation.
“The business opportunity is not only in redeveloping slum buildings—I see a far bigger opportunity in developing the related infrastructure that the government is trying to put in place, roads, schools and hospitals,” says Ashish Kalra, partner, Trinity Capital LLC, a New York based India-focused real estate fund. Last October, the fund invested $23.32 million in a Mumbai slum redevelopment project along with the city-based Lokhandwala Group. The investment gives Trinity a 49% stake in a redevelopment project in Worli.
Since then, Kalra has invested close to $150 million in several slum redevelopment projects along with some local builders. Kalra says that he would prefer to call these projects “urban rejuvenation projects rather than slum rehabilitation since we see them as socially-aware investments”.
Kalra wants to participate in developing roads and other basic infrastructure such as drainage and sewage in the slums being redeveloped. He is also putting together a consortium along with local partners that will invest in Dharavi.
Hayim, however, plans to stay out of Dharavi given Mumbai’s soaring real estate rates and land prices in Mumbai, and growing opposition to the slum’s redevelopment in some quarters.
The Dharavi redevelopment project has been condemned by people who live in the slum and who have created a vibrant self-sufficient economy of potteries, tanneries and other small industries among the narrow lanes. The slum has about 5,000 single-room factories and hundreds of cottage industries that together have a turnover of around $1 billion. “Most know Dharavi as a slum where poor people live,” says Abu Khalid Anjum, president of Dharavi Businessmen’s Welfare Association. “Not everyone knows how productive this place is,” he adds.
Under the terms of redevelopment, 57,000 families will move to high-rise residences close to where they currently live. Each family is entitled to 225 sq. ft of housing with its own indoor plumbing. Residents aren’t happy because they say the new apartments cannot be turned into workshops and factories. “Are we to run our business from cubby holes?” asks Nisar Ahmed who runs a plastic recycling unit in the slum.
In Delhi, some slums in the city’s centre have been cleared for development and the people housed in suburbs on the periphery of the city. For the redevelopment to work, “the city’s transport system has to be extended to these areas and the government has to ensure that the quality of housing (provided as part of the relocation) is really good”, says Vivek Dahiya, the managing director of DTZ, a UK-headquartered real estate advisory.
Despite such opposition, slum redevelopment projects will likely only gather momentum given the rising need for land. In Pune, Lalit Gandhi, chairman, Kumar Builders, has been lobbying the state and the city governments to partner with developers for slum clearance projects.
In Bangalore, the city administration has been working with non-governmental organizations such as Avas to help relocate slum dwellers in pucca houses through loans to self-help groups.
The National Housing Bank, the regulator of the mortgages industry, has drawn up guidelines for loans targeted at rural housing needs.
Krittivas Mukherjee ofReuters and AFP contributed to this story.