BackStates to ease norms, woo builders to house urban poor
States to ease norms, woo builders to house urban poor
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Bangalore: Sitting in his fifth floor office that partly overlooks a large shanty town in suburban Mumbai, S.S. Zhende is troubled. It’s been only two months that he has taken charge of Mumbai’s Slum Rehabilitation Authority (SRA) and he’s scrambling for ways to clear the city’s numerous slum pockets, where nearly seven million people live.
With realty developers strapped for cash, many of Mumbai’s 700 slum rehabilitation projects are either going slow or are stuck midway. To revive the pace of these projects, Zhende is trying to tempt the developers with additional incentives such as reduced bank guarantees and more commercial leeway.
Such rehabilitation projects typically involve private developers who construct tenements for slum dwellers, in return for using part of the land previously occupied by them or other sites for commercial realty projects.
A ballooning urban poor population coupled with looming Union and state government deadlines to clear slum settlements have pushed authorities to consider doling out various benefits to get realty companies involved in such ventures.
States such as Uttar Pradesh, Karnataka and West Bengal, which till now worked on such rehabilitation projects largely by themselves, too are charting new proposals to attract developers and build public-private partnership (PPP) models.
In India, an estimated 80 million urban poor live in cities and towns, roughly equal to the population of Egypt, according to the National Sample Survey Organisation (NSSO), part of the ministry of statistics and programme implementation. The organization is conducting a nation-wide survey on living conditions in urban slums, the socio-economic status of the urban poor and places of migration, said A.K. Yogi, additional director general, NSSO.
Mumbai’s SRA has proposed changes that would be implemented in new projects. “We want to ease certain regulations in slum schemes that will allow more developers to come forward. There have been requests from slum developers to relax the rules," Zhende told Mint recently.
The authority has proposed reducing the bank guarantee to be submitted by a developer to 10% from 25% of the project cost, and allow early construction of the commercial component as well.
Typically, developers participating in Mumbai’s rehabilitation projects are required to build 30-40% of the planned units for slum dwellers before they can start constructing the commercial part of the development. Zhende explained the new plan will allow developers to raise the initial capital required in a slum project. “If a developer is allowed to sell the commercial component from the start, it will be easier for him to build the free houses for slum dwellers."
The authority is also trying to reduce the time needed for granting sanctions, which usually takes 8-10 months for a project. Mumbai has set a target of building 20,000 slum tenements in 2009.
In Uttar Pradesh, home to the country’s third largest number of urban poor at 4.4 million, the state slum housing board is developing a model to incorporate developers in slum renewal projects. “It is impossible for the government to rehouse the urban poor by itself and we are thinking of facilities that can attract developers to come in," said A.K. Jain, superintendent engineer, Uttar Pradesh Slum Board.
Lucrative mega slum ventures such as the Rs15,000 crore Dharavi redevelopment project in Mumbai, too, have not been spared by the ongoing downturn. Five teams including the country’s largest slum redeveloper, Housing Infrastructure Development Ltd, opted out in March from the project in Dharavi, Asia’s largest settlement of urban poor.
Gautam Chatterjee, chief executive of the Dharavi Development Authority, said that though slum rehabilitation is financially more attractive than a regular project, the falling prices of the so-called transfer of development rights (TDR) have also raised concern among developers.
A slum TDR is a tradable paper issued in exchange for free development of slums and other facilities by builders that can be used to develop projects at other sites handed by the government. TDR prices have slumped from Rs3,200 per sq. ft. early last year to Rs1,000-1,200 per sq. ft. now.
Bringing in private parties into the sector wouldn’t be smooth now, said Arputham Jockin, president of the National Slum Dwellers Federation. Jockin, who was in Bangalore this week to meet state government officials, said the Karnataka government is planning to replicate the Mumbai model. “The challenge will be to dole out appropriate incentives," said Jockin.
Karnataka, which was granted about Rs400 crore by the Central government under the Jawaharlal Nehru National Urban Renewal Mission, has a 2010 deadline to build around 18,000 units for slum dwellers. A senior official of the Karnataka slum clearance board said the state is seriously considering the PPP model. “Some Mumbai developers had earlier shown interest to redevelop slums but they didn’t get back because we didn’t have a policy in place," he said, on condition of anonymity.
Developers such as Sobha Developers Ltd, who have no experience in slum rehabilitation, say such projects can open up huge commercial potential for them. “Most slums in Bangalore are centrally located and haven’t exploited the entire space that could be constructed. They have great real estate opportunities," said J.C. Sharma, managing director of Sobha Developers.
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