Why nobody wants to revamp Mumbai’s slums

A slum in Mumbai. At one time, Golibar or Dharavi slums were seen as real-estate gold mines, but not any longer.
A slum in Mumbai. At one time, Golibar or Dharavi slums were seen as real-estate gold mines, but not any longer.


Slum redevelopment has become a risky, tardy and messy affair

Dinesh Shinde and his friends often meet in the evenings at Golibar Colony, a 130-acre slum cluster in suburban Mumbai. Having lived in 150-200 sq ft tenements all their lives, their conversations inevitably touch on their most pressing problem: how much longer do they have to wait to move into homes in proper buildings. Homes with an address that can help them avail a bank loan, get married or find a better job and facilitate admission for their children in good schools.

In 2006, the redevelopment of this slum, sprawling across Khar and Santacruz East, was handed over by the Maharashtra government to a joint venture of Shivalik Ventures, Rohan Lifescapes and Unitech Ltd. Sixteen years on, only 5% of the project has been completed. Unitech got mired in the 2G spectrum scam, making it impossible for the venture to raise funds. Another sticky issue is multiple ownership of the land. Once a firing range, Golibar is partly owned by the defence ministry, the BrihanMumbai Municipal Corporation (BMC), the Maharashtra Housing and Area Development Authority and others. Shinde, for instance, lives in the defence-owned 40-acre part of the slum that has around 9,500 huts.

Golibar typifies the long, complex and messy process that has come to define slum redevelopment in Mumbai. Developers are often embroiled in fraudulent cases. Land ownership is complicated; political and legal interventions are frequent; liquidity issues are perennial; there is little clarity on policy or planning.

Dharavi, which houses a million people, is another textbook case of the problems inherent in such projects. When global tenders were first issued in 2007 for the redevelopment of this 239-hectare settlement in the heart of Mumbai, 101 responses from developers around the world were received. After multiple cancelled tenders, when bids were re-invited in 2016, no one showed up.

Another attempt was made in 2022. Eight companies evinced interest in the pre-bid meeting, but finally it was just Adani Property Pvt Ltd (APPL), DLF Ltd and Mumbai-based Naman Group which submitted bids. Not a single prominent Mumbai developer came forward. Naman was disqualified, and Adani’s 5,069-crore bid won over DLF’s 2.025-crore offer.

At one time, Golibar or Dharavi were seen as real-estate gold mines, but not any longer. Many credible developers just stay away from similar projects.

Months after inking a joint venture with Transcon Developers in 2019 to develop the commercial part of a slum project, the BSE-listed property developer, Sunteck Realty, backed out. Sunteck chairman Kamal Khetan says it did so after due diligence. “There are no reputed developers in slum redevelopment anymore because it’s difficult. Today, even if I get an opportunity in the most prime location, I will think many times over before saying yes," he says.

Policy is a cropper

This doesn’t bode well for a city where half the population lives in slums. In fact, the Slum Rehabilitation Authority (SRA) was established in 1995 with the express goal to offer free housing to slum dwellers and make Mumbai “slum-free". The aim was lofty, considering that the city has nearly 2,400 slum clusters, compared to Delhi’s 675.

But today, over 1,000 proposed slum redevelopment projects under the SRA are either stuck or have never taken off. Of the 380 projects in limbo, 230 ran out of money. In 2022, former Maharashtra housing minister Jitendra Awhad said that an estimated 35,000 crore was trapped in these projects because developers had failed to complete them.

“There was a huge euphoria when the SRA scheme came up but none of the developers have been able to continue and perform well. Many factors played a role, including difficulty in clearing slums, hefty premium payments and cost escalation. So, established developers today will only consider slum projects when they get clear land," says Anuj Puri, chairman, Anarock Property Consultants.

Gautam Chatterjee, a former bureaucrat, understands the complications only too well. He was the chief executive officer of the SRA between 1995 and 1997 and of the Dharavi Redevelopment Project between 2008 and 2010. “Slum projects are the most difficult to execute among all brownfield projects. There are legal and political interventions, and lack of transparency. What’s needed is clarity in policy and planning by the government and its competent authorities. That’s when bigger developers will come in," he says.

So, how does a slum project work? A developer first needs the consent of 51% of the slum dwellers, after which it can approach the SRA for approval. The SRA then issues certificates of eligibility, post which the letter of intent is issued. The developer then starts vacating the site, offering either rent or a transit camp for slum dwellers till the houses are ready. The developer must provide 300 sq ft homes for free to the slum dwellers. To offset the expenses, it can sell a part of the land or apartments in the open market.

But then, slum projects can’t be done on excel sheets, says Harresh Mehta, chairman and managing director, Rohan Lifescapes, a JV partner in Golibar. “They need a hands-on approach, human touch and financial bandwidth," he stresses.

In slum redevelopment, the state government earlier levied higher premium charges on developers who expressed interest. For instance, they had to pay 25% of the land value, and the floor space index, or FSI, usage (permissible area of construction) on a plot was capped. “The goalposts in terms of policies kept changing, but things are getting better. The incentive structure for developers has improved. But slum projects are difficult, and everybody wants their pound of flesh," Mehta adds.

With the market turning around, Mehta is hopeful of reviving the Golibar project, too. But it will be tough given the liquidity challenge. Unitech is still a partner (with 25% stake) in Shivalik, making investors wary.

The success of the Dharavi project is central to Mumbai’s slum redevelopment story. But after allegations of stock manipulation and accounting fraud that hit the Adani group, the state government is now waiting for the dust to settle.

Bad boys?

The credibility of developers is also critical for slum projects. Last year, Godrej Properties Ltd (GPL) announced its plan to invest 400 crore in DB Realty for a 10% stake and, separately, another 300 crore for a joint venture for slum rehabilitation and redevelopment projects. Just a day later, GPL called off the deal, after concerns were raised by minority shareholders and other stakeholders, not just about the slum redevelopment business in general, but also about investing in DB Realty, a company whose promoters were allegedly involved in the 2G scam.

Separately, the promoters of Omkar Realtors & Developers Pvt Ltd, which specialized in slum projects, were arrested by the Enforcement Directorate (ED) in a money-laundering case in 2021. Ditto with Housing Development and Infrastructure Ltd (HDIL), once India’s third largest developer, after DLF and Unitech, and Mumbai’s biggest slum developer. Its promoters were arrested in 2019 for their alleged roles in the over 6,000 crore fraud caused to Punjab & Maharashtra Cooperative (PMC) Bank.

“Slum redevelopment deals with land, money and massive numbers of slum dwellers, who are critical vote banks for political parties. Being a lucrative business, developers have in the past diverted money into other businesses, leading to an unholy nexus between stakeholders. So, it is no surprise that credible developers don’t want to be a part of it anymore," says a real estate consultant, who requested not to be named.

Slum developers such as DB Realty and Omkar, who have land but are unable to develop and sell on their own, have been forging partnerships with reputed developers. GPL, for instance, is doing a slum project in south Mumbai’s Worli with a partner, where the latter is responsible for clearing the land and dealing with slum dwellers. GPL will develop the commercial or free sale component. A GPL spokesperson declined to comment.

One of Mumbai’s prominent developers, Niranjan Hiranandani, suddenly finds himself in the shoes of a slum developer. Almost a decade back, Hiranandani had handed over the rights of development of a slum in suburban Vikhroli to Omkar Developers. Given the turn of events in Omkar’s case, the 16-acre project is back in the lap of Hiranandani Group, as per a court order. “We are in the process of seeking approvals. In a city where half the population continues to live in slums, redevelopment of slum land is imperative. But the truth is there is no ease of doing business in such projects," says Niranjan Hiranandani, co-founder and managing director of Hiranandani Group.

Hiranandani, who was a co-signatory of the Dinesh Afzalpurkar Committee, a study group set up in the 1990s to provide a framework for slum redevelopment, says litigations, political interference and other factors cause unreasonable delay in such projects. “That’s why there are individuals who now help in clearing the land and in getting approvals," he says.

Reviving ‘dead’ projects

Over the past year, the Maharashtra government has come up with two policies to hasten SRA projects. The first includes empanelling developers and contractors with financial capability. After tenders are called for stuck projects, SRA will assure fast-tracking of approvals.

The second is an amnesty scheme for projects where large financial institutions (FIs) have invested but developers have floundered. Such FIs will be notified as co-developers and can nominate a developer of their choice and complete the projects. The original developer will be removed, and the investor and new developer can realize the money from the sale component of the project.

“About 100 developers have been empanelled and will be taking up the stuck projects. Under the amnesty scheme, we have got 28 proposals so far. Some prominent lending institutions have expressed interest," says Satish Lokhande, the chief executive officer of SRA. Of the 380 stuck projects, Lokhande says efforts are on to restart 148 projects.

Finding a middle path

Developers who are still navigating the messy aspects of these projects are looking at risk-free options. Recently, realty firm K Raheja Corp acquired FSI rights of 152,000 sq ft in a slum project in Wadala for 275 crore, according to documents accessed by property analytics firm CRE Matrix. The project already has two other developers. While the existing developers rehabilitated the slum dwellers in one portion of the land, Raheja will develop the commercial component of the project. This allows Raheja to sell around 350 units at market prices, without getting involved in the more complex slum part of the project.

Not surprisingly, investors and corporate builders are keener to redevelop housing societies that are smaller in scale, involve fewer people, and are easier to execute. Mahindra Lifespace Developers Ltd is now planning to redevelop two adjacent housing societies in Santacruz, marking its entry into the space.

Mumbai has limited opportunities for greenfield development due to the absence of vacant land parcels. The only viable opportunity is through redevelopment—a market estimated to be worth over 30,000 crore, according to Mahindra Lifespace.

The debacle of HDIL, Omkar and others in the past have also made investors wary about lending to slum projects. But they are warming up to the less risky aspect of society redevelopment. Nisus Finance Co Pvt Ltd backed out of a slum project once, even though the rehabilitation part was completed. It instead invested in multiple society redevelopment projects, in prime spots like Prabhadevi and suburban Chembur and Thane.

“Slum projects are high-risk, need huge amounts of cash, approvals and the scale of rehabilitation is massive. We chose society redevelopment because they are simpler, involving the landlord and tenants," says Amit Goenka, CEO and MD, Nisus Finance.

But that leaves the mammoth task of redeveloping Mumbai’s slums still unfulfilled. SRA’s Lokhande expects developers and investors to gradually return to slum projects. Given the chequered past of the business, it won’t be easy. For millions of Mumbaikars, their dream home will have to wait.

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