Prices of residential and commercial space in Mumbai are expected to stagnate following the state government’s plans to redevelop the 535-acre Dharavi slum, Asia’s largest. Dharavi is surrounded by the suburbs of Sion and Kurla on the one side and Bandra on the other, and its redevelopment will create 40 million sq. ft of additional space, equally divided between residential and commercial properties, in a city that is starved for real estate. Over the past 18 months, real estate prices in the Bandra Kurla area, one of Mumbai’s new business districts, have risen 40%.
“Already prices are down in the Bandra-Kurla Complex (BKC) by as much as 15-20% on the sentiment that such large development, based on a global tender is coming up in the neighbourhood,” says Pranay Vakil, chairman Knight Frank India Pvt. Ltd, a real estate advisory. “The sheer transparency in governance that a global tender will bring into the system has created a level of confidence that the government means business this time,” he adds. Last week, the Maharashtra government advertised in around 20 newspapers around the world inviting tenders for the redevelopment of Dharavi.
The 20 million sq. ft of residential space the redevelopment will create will keep prices down, according to Ashutosh Limaye, vice-president of the consulting practice at Trammell Crow Meghraj, a real estate advisory. Over the next four quarters, Limaye expects prices of residential properties to remain stagnant at current levels. He adds that prices of commercial properties will follow the inflation curve. Inflation, as measured by wholesale prices, was 5.06% for the week ended 19 May. According to Vakil, the new residential flats that come up where Dharavi slum stands today will not be priced higher than Rs7000 per sq. ft. Currently, prices in the area, in suburbs surrounding the slum, range from Rs 4000-7000. Vakil and Limaye also expect the development of commercial property in Dharavi to keep prices in the Bandra Kurla Complex (BKC) in check. “It (the new development) will be a slightly cheaper option to BKC and will keep prices from galloping away,” says Limaye.
An additional 20 million sq.ft of built-up residential property could mean 25,000-35,000 homes of varying sizes coming into the market over the next seven years; the redevelopment of Dharavi is scheduled to be completed by 2014.
Each year, around 60,000 new homes come into the market in Mumbai, while the demand is for 84,000, according to the Maharashtra Chamber of Housing Industry, resulting in an unmet demand of 24,000 units annually.
The plan to redevelop Dharavi and another to redevelop old and dilapidated buildings in the city—the second is part of a new housing policy that the state is considering—could see up to 30% of the city being rebuilt over the next five years, says Mukesh Mehta, the architect of the Dharavi plan. According to him, 55% of the people in the island city of Mumbai city currently live in slums and around 25% live in dilapidated buildings.
Vakil claims that the advertisements for redeveloping Dharavi have piqued the interest of developers from the US and the UK. He adds that developers from West Asia are also likely to be interested in the project.