A Hard-Working Economic Engine
For an outsider, one of the striking features of Mumbai’s housing situation is the mismatch between the relatively higher incomes of the people vis-a-vis much less per capita built housing space (4-6 sq.m. as per the Concept Plan), one of the lowest among world cities due to unimaginable real estate prices. The net density was about 37,000 persons per sq.km. in 2011, estimated on the basis of Census population. Therefore, I wasn’t surprised when my then would-be wife from Hyderabad wanted to run a personal check on where and how I lived in Mumbai before accepting the marriage proposal. Finding an affordable house in Mumbai is a struggle for most Mumbaikars.
Mumbai is not only the financial and commercial capital of India and a gateway for many Indians to the increasingly globalized world, it has been providing almost limitless opportunities to entrepreneurs – clean and shady alike – to make profits riding on the high tides of unprecedented growth in the demand for goods and services both on account of growing numbers and incomes. The real estate and housing sector have boomed endlessly here with Mumbai achieving the dubious distinction of having one of the costliest rentals for offices in the world despite India faring poorly on the ease of doing business indicator and with most of its citizens living in slums.
Affordable Mumbai
Affordability or, in simple terms, the ability to pay distinguishes the demand from the need. Mumbai is famous for its ability to satisfy most basic needs in a relatively cheap and affordable manner. The same cannot be said about housing if one chooses to leave out slums.
Most slum dwellers are not officially poor (below the poverty line) but are deprived of adequate housing due to poor living conditions.
People found shelters in slums by paying what they could afford after squeezing other expenses through a variety of ways in the local informal economy. As they say, Mumbai takes care of everyone from the very rich to the very poor. This characteristic of Mumbai probably makes it resilient and keeps it competitive. Mumbai’s economy attracts migrants, albeit at a slower pace now, and its large population base (12.44 million in 2011 as per Census) adds relatively more people through natural increase, most of whom prefer to continue to stay in Mumbai even if that means cramped spaces on mezzanine floors or structurally unstable upper floors in slums.
Critical Input of Land
Housing principally constitutes land, structure and services, and it is the scarcity of land, dictated by Mumbai’s peculiar geography and heightened by the competition from other economic activities, that has primarily made formal housing unaffordable for most Mumbaikars. The prices varied from R 55,000/sq.ft. at Malabar Hill in upscale South Mumbai to R 7,500/sq.ft. at Dahisar in the distant suburbs as per the Accommodation Times (March, 2015). The component of land in the cost of a formal house can be as high as 90% at prime locations. How is it then possible to make housing affordable? The Public Sector intervention for housing in Mumbai has a long history and its role has changed from a Controller to Provider to Facilitator. The role of a Controller largely meant prescribing building standards, which resulted in making all legal housing unaffordable to most and everything else illegal. As a Provider, the Public Sector attempted to construct and sell housing on limited public land available and such supply was nowhere close to the demand. The focus then shifted to facilitating housing by financing housing projects and house purchases through credits. The backlog of 1.1 million houses, i.e., 41% of all Mumbai households staying in slums in 2011, is too large to imagine how the Welfare State could have met this requirement. It would have literally meant building another Mumbai.
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Failure in the Supply of Affordable Housing
It is common knowledge that initial socialistic legislations to control rents and put ceilings on holding of urban land (maximum 500 sq.m. in Mumbai) became counter-productive over a period of time and attempts to provide housing for industrial workers and for employees by employers did not cut much ice. Provision of minimum and affordable basic housing in the form of Land Infrastructure Servicing Programme (Sites and Services) under the Mumbai (Bombay) Urban Development Project (MUDP) was designed for self-financing through cross-subsidy.It was largely successful in providing 55,297 houses including 55% for poor households in Mumbai but was not converted as a regular housing programme by the public agencies after the completion of the MUDP. Instead, the public authorities took up a Mass Housing Programme constituting fully built housing for various income groups.
The Regional Plan for Mumbai Metropolitan Region (MMR), 1996-2011, estimated that as against the need for about 30,000 houses per annum for new households during the 1980s, the average annual supply of formal housing was only 19,600 leaving an annual gap of 10,400 houses. Further, out of the total supply, only about 1,500 was provided by the Public Sector and in that the proportion of Lower Income Groups (LIG) and Economically Weaker Sections (EWS) was only 31%. The unmet requirement of over 10,000 houses a year and expensive housing provided by the private sector led to proliferation of slums not only on public lands but also on private lands ‘reserved’ for public purposes in the Development Plan and, more recently, on lands too dangerous for occupation such as land-slide prone hill slopes, under High Tension (HT) power lines and flood prone swamps. Thereafter, the Public Sector supply of affordable housing has not improved resulting in further proliferation of slums. The post-1991 story of growth of Mumbai’s population, housing requirement for new households and formation of slums provides an interesting twist:
While the average annual need for new households increased to 41,000 during the ’90s, it subsequently dropped to about 9,300 during 2001-11 primarily due to the shift of focus of population growth outside Mumbai in the Mumbai Metropolitan Region. The number of slum households increased by 0.26 million during 1991-2001 and thereafter actually reduced by 0.23 million in 2011. Further, as per the Census in 2011, about half a million (11%) of all Mumbai houses were vacant, which included 0.13 million in slums, despite the backlog, thus indicating high speculative investment in both formal and informal housing markets. While the exact reasons for the reduction of the number of slum households in 2011 are yet to be known, there is scope to believe that the redevelopment of slums and resettlement of project-affected persons may have contributed to this decline.
Dealing with Slums
The problems of informal housing in Mumbai are probably older than that depicted in the Hindi film Shree 420, a Raj Kapoor starrer released in 1955. In 2011, nearly 80% of slum dwellers lived in shelters with only one room or less (non- exclusive room) as per the Census. By definition, in essence, a slum is an area which is a source of danger to the health, safety or convenience of the public on account of lack of basic amenities or due to prevalence of insanitary, squalid, overcrowded conditions or on account of existence of inhabitable conditions of buildings and their surroundings. The Public Sector response to slums matured from the initial Slum Clearance to Slum Improvement to Slum Upgradation and Slum Redevelopment in that order.
Slum Clearance
Predictably, the initial public response to slums, being unauthorized and illegal structures and considered an eye-sore, was too clear and re-house the dwellers in subsidized rental housing as then attempted under the Slum Clearance Schemes. Low rent recoveries and lack of resources for maintenance of stock resulted in its failure. The attempts to clear slums miserably failed in the face of the fast pace of growth of slums and lack of political will. It was realized that slums were primarily a result of lack of supply of affordable housing and that the slum dwellers did contribute significantly to the local economy, which led to the tolerance of slums.
Slum Improvement
If slums were to be tolerated, this approach naturally resulted in the recognition that the slums needed to be provided with basic services such as water supply, toilets, electricity, pathways, street lights, conservancy, primary health and education, provision for which was enabled under the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act (called Slum Act hereinafter) based on which the Slum Improvement Programmes were undertaken.
This approach continues to the present day under various programmes (e.g., Basic Services for Urban Poor) and issues related to extension of services to un-recognized slums (not notified as slums under the Slum Act) and un-protected structures are being raised and resolved.
Legal Protection to Slum Structures
While the existing slums were being tolerated, the formation of new slums or slum structures could not be legally permitted. The Government of Maharashtra conducted a comprehensive survey of slums in Mumbai in 1976, issued photo-passes and made legal provisions in the Slum Act to grant protection to the then existing slum structures. This also meant that if any such protected structure was to be demolished, an alternative dwelling place had to be provided. The failure in preventing slum proliferation, however, continued and the cut-off date for protection was revised from time to time every 5 years i.e., 1980, 1985, 1990, 1995 and 2000. Revising the cut-off every time, the Government vowed not to allow more slums but could not enforce the same.
Slum Upgradation
Having protected the slum dwellers and realizing the impossibility of providing affordable formal housing to them, as the next corollary, a project was undertaken to mainstream slum housing through upgradation. The World Bank-assisted shelter project called MUDP (Mumbai Urban Development Project) implemented during 1985-1994, included a major component of upgradation of 0.1 million slum dwellers involving improvement in basic services, home improvement loans and, more importantly, leasehold tenure of land to the Co-operative Housing Societies (CHS) of slum dwellers on cost recovery basis. However, this programme faced difficulties due to parallel running of initially non-recovery-based slum improvement programmes and later due to provision of free housing. Further, transfer of tenure required change of use of lands occupied by slums, which faced institutional unwillingness. Finally, the project could be successfully implemented for only 22,204 households. Like the Sites and Services Programme, this approach remained restricted to the MUDP and was not continued as a policy. The attention soon shifted to Slum Redevelopment as a part of the political promise to provide free housing to all slum dwellers of Mumbai.
Slum Redevelopment
In land-scarce Mumbai, housing supply can be increased and profits multiplied if more habitable space can be built on less land.
The Floor Space Index (FSI) is a ratio of built-up area to appurtenant land and is a planning and development control tool used to control density of population and built form from the point of view of health and safety. The extent of FSI allowed on a plot of land decides how much built-up area can be constructed. The FSI can thus substitute scarce and expensive land subject to certain restrictions. Recognizing the potential of FSI, the concept of use of FSI as a market instrument for redevelopment of slums by private players (Builders/Developers) was introduced in the Development Control Regulations of Greater Mumbai in 1991. This allowed the private developer to re-house the eligible slum dwellers (protected under Slum Act) free of cost in self-contained PAP (Project Affected Persons) tenements of 269 sq.ft. (upgraded from 225 sq.ft.) carpet area each in multi-story buildings. Such buildings are built under specific lower standard building bye-laws on a part of the land occupied by the slum (in situ) by achieving a minimum tenement density of 500/net hectare. Further, the developer has to deposit R 840/sq.m. in the Island City limits and R 560/sq.m. in the suburbs for additional built-up area (incentive FSI) towards infrastructure charges and R 20,000 per tenement (R 800/sq.m.) as maintenance deposit to be provided to the Co-operative Housing Societies of the slum dwellers. The Project Affected Persons (PAPs) are not allowed to transfer such free-of-cost tenements in any manner for a period of 10 years, a measure to prevent re-squatting on other lands. Such Slum Rehabilitation Schemes are approved and their implementation is managed by the Slum Rehabilitation Authority (SRA) established under the Slum Act (provision included in 1996) for this purpose. The SRA is entrusted with overriding powers vis-a-vis other development control restrictions to facilitate slum redevelopment.
In return, the developer gets to construct built up area equivalent to that constructed for re-housing of slum dwellers on the balance plot of land previously occupied by the slum and sell it in the market as a free-sale component (affordable to only some Mumbaikars), which not only recovers the cost but also results in handsome profits. This means the total FSI allowed to be used is double or more than the normal FSI (upto 2.5 and even more in peculiar cases). In effect, the developer gets the land to be used for free-sale component free of cost – in case of private land, the owner gets a Transfer of Development Rights certificate (TDR) for the land and the mechanism of its use is explained later – against the cost of providing transit accommodation to slum dwellers, construction of elements for them and the financial contribution towards infrastructure charges and maintenance deposit.
Even if one accounts for other costs related to raising of funds, approvals and management, a back-of-the-envelope calculation would indicate that redevelopment becomes a profitable venture for many lands occupied by slums in Mumbai.
Slum Redevelopment through incentive FSI effectively reduces land availability per slum dweller but provides them formal ownership housing with better living conditions (as also seen from evaluation studies of rehabilitated PAPs) and generates more housing stock. So far, an estimated 0.1 million slum dwellers have been rehabilitated through such in-situ schemes. Asia’s largest slum Dharavi, where some parts of the film Slumdog Millionaire were shot, is also proposed to be redeveloped. As long as land prices remain high and the demand for new housing continues in Mumbai, this model of slum redevelopment will work and help in re-housing larger number of slum dwellers.
A variant of the Slum Rehabilitation Scheme undertaken by the developers on vacant lands replaces in-situ free sale component by Transferable Development Rights (TDRs) granted to the developer at the rate of 1:1 for land and 1:1.33 for built-up area, which allowed MMRDA to procure housing stock of over 60,000 PAP tenements, which are being used for rehabilitation of slum dwellers affected by its infrastructure projects. The TDR certificates, which are like permits to construct additional built-up area elsewhere to the north in the suburbs, can also be transferred and sold in the market.
The housing provided through Slum Rehabilitation Schemes leaves a lot of scope for improvement in terms of better space standards and designs for buildings, better quality of construction and equipment such as elevators and water pumps, improved amenities, particularly common open spaces and social infrastructure in larger layouts. The amounts of infrastructure charges and maintenance funds to be contributed by the developer also need revision on account of escalation in related costs since they were first stipulated in 1991. It is felt that many such improvements appear easily possible without jeopardizing the financial feasibility of such schemes.
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Future of Mumbai’s Slums: Need for A Multi-Pronged Strategy
In anticipation of the Government of India’s policy on ‘Housing for All’, the Government of Maharashtra has formulated (Final Draft) a comprehensive and ambitious New Housing Policy and Action Plan, 2015, that aims to provide 1.9 million houses for economically weaker, low income and middle income (EWS/LIG/MIG) groups in the State (out of which 0.8 million will be in Mumbai) and also aims to make the city slum free. The new policy spells out strategies and innovative measures for creation of land banks, promotion of affordable housing, optimum use of land resources through redevelopment and also aims at improving the quality of life and living standards and ease of doing business in this regard. For Mumbai, the emphasis is on redevelopment through the incentives of Floor Space Index/Transferrable Development Rights and with interventions by many agencies with a particularly larger role for Maharashtra Housing and Area Development Authority (MHADA) and SRA. As for slums, the draft policy proposes to remove the hurdles in redevelopment and assigns a more proactive role for SRA. It also rightly proposes to deal with all slum dwellers including the ‘ineligible’ and those located on Central Government (Railway, Mumbai Port Trust, Airport) lands.
In a way, the new thinking for housing banks more on the market mechanism on the assumption, which is based on the past trend, that Mumbai’s economy will continue to do well and this will keep the interest of the private players in the real estate business growing in using the incentives offered and in providing affordable housing to all – a virtuous cycle of hope!
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