Mumbai: As Asia’s largest slum Dharavi is set for land redevelopment, the Maharashtra government’s share from the deal could touch Rs10,000 crore, up five times more than what was earlier estimated.
The state government is charging builders and developers a premium on the additional floor space index being given to them in return for building free houses for the slum dwellers.
For every additional square foot developed, the state government has demanded a minimum of Rs450 per sq. ft as premium, which puts the government’s income from the proposed development, of around 30 million sq. ft additional area, at Rs1,350 crore.
But as real estate prices soar in the area, and in the city, the government’s income is also set to go up significantly.
A senior official in the Slum Rehabilitation Authority (SRA), the state government’s nodal agency for the project, said that many of the 26 developers’ consortia that have participated in the first stage of bidding have offered around Rs3,000-3,500 per sq. ft to the government. This would push up the government’s share of redevelopment to Rs9,000-10,500 crore. He did not wish to be named as he is not authorized to speak to the media.
Mumbai’s Dharavi slum. As real estate prices in the city soar, the state government’s share from the slum’s redevelopment is likely to grow manifold
Under the proposed redevelopment plan, every developer gets to build additional space in the ratio of 1:1.33. That is, for every 100 sq. ft of slum housing, rebuilding of shantytowns, and municpal housing and amenities such as schools, colleges and hospitals, roads and drainage built, the developer gets to build an additional 133.33 sq. ft of saleable area. This is the area the developer gets to sell at market rates.
The redevelopment plan, drawn up by architect Mukesh Mehta, divides the whole Dharavi area into seven different zones, and each zone will be given to a single consortium of developers.
A total of 30 million sq. ft will be developed for the use of slum dwellers, including infrastructure, while another 39.9 million sq. ft will be developed for sale at market prices. Most of the additional developments will come up within the Dharavi area as the government is discouraging the transfer of development rights to other, more lucrative areas, said Mehta.
Mehta has been retained as the consultant on the project by the state government. The project will be completed in seven years’ time.
(Read Mint’s 23 June Business Lounge profile of Mehta at www.livemint.com/mehta.htm)
In anticipation of the rising prices, most developers have quoted well above the minimum premium required by the government, the SRA official said.
“The developers may have bid high premiums as they expect to make profits as prices in the area have been rising steadily since the plan was announced,” notes Mehta.
It is the developers’ discretion whether they build commercial or residential properties in the incentive portion of the development.
With a huge premium on commercial property in the city, a majority of developers are expected to come up with commercial property plans.
The prices of shops and industrial spaces in Dharavi are at an all-time high.
Residential shanties are commanding between Rs4,500 and Rs5,000 a sq. ft while industrial and commercial sheds rent for up to Rs10,000-12,000 per sq. ft.
At today’s prices, a 225 sq. ft residential tenement in the area could fetch upward of Rs10 lakh while a commercial tenement of the same size would fetch up to Rs27 lakh.
Comparably, prices in the Bandra-Kurla Complex (BKC) are Rs35,000-40,000 a sq. ft for premium properties. The 535-acre Dharavi sprawl borders Kurla’s small- and tiny-scale industries, and upper middle class residential localities of Matunga and Sion on the one side, and the modern offices of BKC, on the other.
With an existing shortfall of 10-15 million sq. ft in commercial real estate in the city, any commercial space in Dharavi will attract a definite premium, says a real estate analyst.
“A lot of people who cannot afford BKC would prefer Dharavi, given its proximity to the former. That will lead to a premium on the Dharavi properties,” predicts Ambar Maheswari, director, investments, at DTZ, a real estate consulting firm.