Bombay High Court speaks the awkward truth about Mumbai slum redevelopment: It’s unfair – Moneycontrol.com

In an earlier company I worked for, there was a receptionist who worked in South Mumbai but stayed in a small apartment far away at Panvel. There was also a security guard who, instead, chose to stay in a chaotic and crowded slum – but close to the office. Today, over a decade later, the receptionist continues to stay in the apartment at Panvel. The security guard, meanwhile, has become the proud owner of an apartment worth almost INR 1 crore. The reason: The slum got redeveloped and eligible slum dwellers got a free flat from the developer.

I have no idea if the receptionist today believes she made an error in judgement by choosing to stay in a formal and legal form of housing – instead of a slum. But I’ll be surprised if that thought didn’t pass her mind. This anecdote came to my mind after the Bombay High Court made a remark that has been one of the most under-mentioned realities of Mumbai real estate. With reference to the slum rehabilitation policy of the Maharashtra government it said “it is only in Mumbai that one encroaches on government land and in return is given free housing”.

In simple language, this is what happens according to the policy: Developers build free homes for slum dwellers on part of the land that has been encroached upon and build towers on the remainder that are on sale. The slum dweller is deemed a quasi-owner of the land he has encroached upon and thus needs to be compensated. The compensation is via the homebuyer who will purchase apartments that are on sale.

The irony is real: In the world’s most expensive city for real estate where home buyers often pool their entire life savings for owning an apartment –there is housing given for free to people who have illegally occupied land. The incentives have only risen over the decades. In a report presented to the University of Texas at Austin, Rohit Jagdale notes the rise in subsidies provided to slum dwellers. A direct subsidy of only 10% existed in 1985. Today the subsidy is 100% through a complimentary apartment. Even the minimum size of the free apartment keeps rising – today it is 322 square feet. Vote-bank politics makes politicians raise the sweetener periodically for slum dwellers. And political correctness ensures citizens keep silent on it. I have sympathy for people who reside in the terrible conditions that exist in most slums – but it is patently unfair when illegal encroachment is rewarded and legal housing is penalized.

If slum rehabilitation projects kick-off in a large manner there will be a lot of free flats given to encroachers. The numbers are significant. The Census 2011 data shows that 42% of Mumbai’s population stays in slums. Some reports put the population of slum dwellers to be as high as 65% of the total population. Not all will be eligible for a complimentary flat although the net keeps getting wider on eligibility. Official data from the Slum Rehabilitation Authority says that there is 35 crore square feet of space that is occupied by slums in 2015. So far, redevelopment of these slums has been an abject failure. There have been few stories of success as only around 200,000 replacement homes have sprouted in the last two decades.

That’s because driving a consensus is not easy – internally and externally. Internally – there are two very different types of slum dwellers in their approach to the SRA project. One, primarily the elder folk, are a tired and exasperated lot who feel that developers have betrayed their commitments over the years. The other, dominated by the younger lot, are hopeful that their world will change. They view slum rehabilitation projects as a jackpot to reach a new economic level. Things get tougher with larger slums where there are so many external ‘stakeholders’ that it is a Herculean task to get it done. Asia’s second largest slum, Dharavi, has been up for redevelopment for almost three decades and will probably remain that way for another decade.

The economics are theoretically lucrative. Aided by generous FSI by the administration for such projects, combined with no upfront large land cost – the returns can be highly profitable. At its peak, the profitability levels were unmatched. Pankaj Kapoor of Liases Foras says: “Earlier the return on equity for such projects was as high as 120%. Now it’s dropped to 70-80% at an official level. Realized returns are much lower given the pay-offs needed to be given to local stakeholders as well as delays associated in such projects.”

The economics of such projects may indicate that a slum-free Mumbai is possible. The politics however, which rewards illegal encroachment, will ensure that a slum-free Mumbai will remain an elusive dream. And people like the receptionist may keep thinking if they were wrong in opting for legal housing.