Why Are Builders Not Keen On Dharavi Redevelopment?

Some of the shanties in Dharavi, the most well-known slum in India,  are worth more than Rs 1 crore. This is understandable, because Dharavi is near the Bandra-Kurla Complex, the de facto central business district of Mumbai, where real estate is among the most expensive in the city. In fact, if property titles were more secure in Dharavi, real estate prices would have been even higher. 

Considering the potential it offers, local authorities have been planning to redevelop slums such as Dharavi in the past two decades.

Under the plan fro Dharavi, developers will redevelop the slum, giving flats for free to the existing tenement dwellers and will be allowed to build taller buildings in return and such flats at market rates. The profits generated by selling these flats at market rates will cover the cost of slum redevelopment. However, developers have again withdrawn from the Dharavi redevelopment project.

Why?

While redeveloping an existing tenement of 25 square metres (sq mt), developers are allowed to build flats which are 42 sq mt large, though the carpet area is much lower. So, existing tenement dwellers will get better housing and additional space of 17 sq mt. Developers think that they need an additional space of 28 sq mt for the project to be economically feasible. They also think that while redeveloping a 25 sq mt tenement, they need to be allowed to build at least 53 sq mt floor space for the project to be feasible. Given the existing floor areas restrictions, they will not be able to do so.

It is understandable why builders withdrew from the project. It is nearly impossible to keep builders and home buyers happy at the same time. To begin with, for slum redevelopment projects in Mumbai to be successful, slums should be on land which is very expensive. If land is not expensive, developers will not be able to give flats for free for slum dwellers at their expense. In the case of Dharavi, this is true. But, this is not true of all slums in Mumbai and other large Indian cities.

Moreover, if authorities allow builders to build more floor space in return for building flats for free for sum dwellers, the price of appartments in Mumbai will fall. When this happens, slum redevelopment projects will become less and less profitable. Still, this does not mean that slum redevelopment projects in Dharavi would be, by default, successful.

Moreover, it is not clear why slum dwellers deserve larger, formal houses when pavement dwellers and people who live in makeshift houses, chawls or illegal colonies do not.

There are other constraints as well.

To allow redevelopment, building density levels in Dharavi should go up. Otherwise redevelopment projects will not feasible. There are two reasons why this would be difficult. Dharavi and other slums stand on land which is  not well served by infrastructure. Moreover, zoning regulations do not allow building density levels to go up. It is true that by increasing building height, we will be able to generate enough revenues to build infrastructure. But, raising the floor area ratio is slum areas will be politically difficult in a short period of time. This is one of the reasons why authorities find it difficult to give into builders demands, in this case.