7 Ways In Which Mumbai Real Estate Could Be Made Affordable

India's financial capital Mumbai is known for its space congestion. This is evident from the fact that in 2009, the average floor area per person in the city was merely 4.5 sq mt. Contrary to most global cities where floor space consumption increased with rising income levels, Mumbai witnessed only a five per cent rise in average floor space consumption, while real incomes increased by over 30 per cent from 1991 to 2001.

However, the Maharashtra state government and urban local authorities have been proposing major reforms that may help the city overcome its space constraints. The proposed reforms, which also suggest taking private developers on board, are linked with the plan to make real estate in Mumbai affordable.

Let us take a look at some ways in which the government can make homes affordable in Mumbai:

Increasing supply of urban land

According to a World Bank estimate, the combined annual income from the idle land in Mumbai's central city would be greater than a billion dollars a year. The Port Trust, for example, owns 1,800 acres of expensive land along the eastern seafront from which it earns only Rs 200 crore per annum. Apart from that, about 400 acres of land in the city belongs to closed mills (part of this was auctioned off for $2,200 per square meter in 2009), 300 acres belong to Indian railways' land and 800 acres to the Brihanmumbai Municipal Corporation's (BMC) land.

In a city where urban land is scarce, keeping land idle in the heart of the city is an extremely costly proposition.

Moving in the right direction, the Mumbai Metropolitan Region Development Authority (MMRDA) plans to auction 34,000 sq mt of land. In May 2015, the central government also pledged 350 acres of Port Trust land for building affordable homes. The state government also plans to unlock idle land in no-development zones soon that belongs to the ministry of defence. By utilising this idle land in Mumbai in an efficient way, the city's infrastructure could be planned better.

Building bridges

As Mumbai's central business district Nariman Point is situated at the tip of a peninsula, it is difficult to increase the supply of land here. However, former World Bank researcher Alain Bertaud points out that cities like San Francisco and Hong Kong that are built around a bay turned such liabilities into assets by building bridges.

In Mumbai's case, the Mumbai Trans Harbor Link (MTHL) Bridge, which was proposed in 1962, is yet to be constructed. When constructed, the 22-km bridge would connect the Church Gate area to Navi Mumbai, lowering the commuting time from over an hour to about 30 minutes. By that, the commuting distance between Church Gate and Navi Mumbai will decline from 41 km to 26 km. Construction of this bridge may help using the idle land in the city better and make homes affordable.

Reforming coastal zone regulations

In Mumbai, development is not permitted within 500 mt from the high-tide zone. While coastal zone regulations were imposed to protect wet land, these norms make raising floor space index difficult and hinder reconstruction of buildings and slum redevelopment. Floor space index (FSI) is the ratio of the floor area to the size of a plot. If the FSI is 3, this means that the maximum permissible floor area on a 1,000 sq ft plot is 3,000 sq ft.

Urban policy experts point out that though such regulations may be defensible in rural areas, this is not true of large cities like Mumbai. Bertaud observes that New York, Hong Kong, Singapore, San Francisco and Rio de Janeiro would not even have been built, if similar restrictions were in place.

Raising FSI

If urban land is scarce, the only way a city can create more space for people is by increasing the height of buildings. This is why the highest FSI in Manhattan is 15 and 25 in Singapore. In China, such restrictions hardly exist. Compared to these cities, the FSI in much of Mumbai's central city is 1.33, while it is as low as 1 in residential areas.

Moreover, FSI is low in Mumbai's central city and higher in many areas that are farther from it. This allows construction of taller buildings where demand is weak, and hinders construction where demand for floor space is great.

Also, the ratio of the highest residential FSI (2 in the Bandra- Complex) to the lowest (0.5 in Gorai) is 4, while in New York, it is 30 (the highest FSI is 15 and the lowest is 0.5). The low ratio prevents concentration of residential construction near the epicentre of a city.

In 1995, Mumbai was the 26th most livable city in Asia according to Asiaweek magazine, while Shanghai was 24th. In 1999, Shanghai went up to the ninth spot, while Mumbai went down to 40. A reason behind this progress was that Shanghai allowed developers to build taller buildings. In 1984, average floor space per person in Shanghai was 3.6 sq mt; by 2010, it had raised average floor space to 34 sq mt per person.

Strong transportation networks

Of all major cities in the world, public transport usage is the greatest in Mumbai. But, Mumbai does not have rings or rapid arterial roads like other large cities. During peak hours, 14-16 people are packed in a Mumbai local train in one sq mt space. This is known as super-dense crush load. Data show that about nine people die every day on the suburban railway network because trains are tightly packed and networks are poorly planned.

People can live and work in the outskirts of the city, consuming greater floor space, if better transportation networks are built. This will raise the value of real estate in the periphery, making Mumbai's labour markets more vibrant.

Reforming rental market

In global cities, including Mumbai, rent controls were imposed around World War-II period. While these restrictions were repealed or eased later in many cities, they are still prevalent in Mumbai. This makes the rent procurement of buildings falling under such restrictions as low as 1/1000th of the market rate.

Moreover, in much of the Island City where regulated FSI is 1.33, data show  that nearly two-third of the existing buildings have an FSI over 4. So, redeveloping these building is difficult at the current FSI levels, especially when rent control laws makes eviction or raising rents difficult.

Redeveloping slums

In Mumbai, informal settlements can be redeveloped at an FSI of 4. According to the recent policy, developers will be allowed to build at a higher FSI, if they redevelop chawls and other informal settlements. For a city with a huge slum population, relocating everyone to formal settlements by allowing a higher FSI in isolated pockets may not be feasible. It is also likely that taller buildings will be allowed in areas, where infrastructure is not well developed.

In areas like Dharavi, where land is highly valuable, it may possible to build formal homes for slum dwellers for free, if developers are given more incentives.