Dharavi redevelopment & rehabilitation: Companies want project duration increased

Companies interested in the rehabilitation and redevelopment of Dharavi, one of Asia's largest slum clusters, have sought more time from the Maharashtra government authority for the completion of the over Rs 20,000 crore project.

The companies have sought a period 10-12 years for rehabilitation, setting up of infrastructure etc instead of the 7-year period granted by the Maharashtra government authority.

Further, for the entire redevelopment, the Maharashtra government authority has said that the project will be deemed to be completed after a period of 17 years. However, interested bidders have said that the duration is insufficient, according to the pre-bid clarification issued by the Slum Rehabilitation Authority (SRA).

Eight companies, including those from the UAE, South Korea and India’s Adani Group, had shown interest in redevelopment of Dharavi for which the last date of submission of bids is October 31. The Slum Rehabilitation Authority (SRA), under whose banner international tenders for the appointment of a lead partner for Dharavi redevelopment were floated, conducted a pre-bid meeting on October 11, in which the eight companies participated. However, the authorities have not disclosed the names of these firms.

What are the changes sought?

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The original clause in the tender document states that the special purpose vehicle (SPV) formed for the Dharavi redevelopment project will have to conduct redevelopment of a specified area comprising slum and non-slum sections, buildings/chawls. The project includes development of necessary on-site and off-site infrastructure, including water supply, sewage disposal, electricity supply, piped gas infrastructure, as well as other amenities within seven years from the date of issuance of a commencement certificate for the first phase of the project.

However, the query raised by one or more of the interested companies in this regard has stated, "Considering the size, complexity, and constraints in availability of open land, the completion period for rehabilitation, renewal, amenities and Infrastructure components should be 10 or 12 years for each phase of redevelopment."

Further, the authority has stated in the tender document that the Dharavi project will be deemed to be completed at the end of the 17th year from the Lease Execution Date. To this, the interested companies have said that considering the size and complexity of the project, it will not be feasible to complete the project within 17 years. Therefore, they have requested that the completion date be subject to master planning, site availability, a finalised construction schedule etc.

The SRA has however not given any extension, but has assured that an extension may be considered in the case of certain conditions mentioned in the agreement, including force majeure.

Indemnity clause opposed

The companies have also voiced opposition to the tender clause requiring the SPV to indemnify the Maharashtra government for payment of Rs 2,800 crore to the Rail Land Development Authority (RLDA) for the transfer of around 45 acres of railway land to the Dharavi redevelopment project.

One or more interested companies have said that if payment of such an amount is prescribed in a time-bound per the definitive agreement between Maharashtra and the RLDA, and the project is not completed within that time frame, then it would not be possible (accounting wise) to arrive at the exact amount of profit of the SPV.

Asking the SPV to still make payment of the same (without actually arriving at the accounting / book profit) to the RLDA is unfair, said the companies. However, the authority has not changed this clause in the tender document.

SVR Srinivas, Chief Executive Officer of the Dharavi redevelopment project, could not be reached for comment.

The Maharashtra government aims to complete the bidding process for the over Rs 20,000 crore project by the end of the year and the winner will have seven years to complete the work, including the rehabilitation of more than 56,000 families. Each of the eligible slumdwellers will get a house with a carpet area of 405 sq ft, and the project will get a Floor Space Index (FSI) of 4. FSI is the ratio of how tall can the building be constructed.

The government is also giving exemptions under development control regulations, and permission to invest or use transferable development rights (TDR) without indexation. The government will also refund the state GST paid by the special purpose vehicle (SPV) for 15 years, and by the industrial and commercial company after obtaining a certificate of occupancy.

Earlier, two companies had shown interest in the project but the tender was scrapped in October 2020 by the previous state government owing to technical issues. The two companies are Adani Group and Dubai's Sec-Link Group.

Dharavi is a hub of unorganised and small-scale industries manufacturing medicines, leather, footwear, and clothes. With an estimated population of one million, it is one of the most densely populated slums in the world. Located in Central Mumbai, Dharavi is close to the Bandra Kurla Complex commercial hub.