Dharavi has the potential to become the next Bandra Kurla Complex (BKC) after redevelopment. More than 1 crore sqft of construction is expected to come up in Dharavi, the central suburb in Mumbai, in the next 17 years and close to 70-80 lakh sqft will be constructed for rehabilitation and the rest put for sale in the open market, SVR Srinivas, CEO of Dharavi Redevelopment Project (DRP), tells Moneycontrol in an exclusive interview.
Dharavi's redevelopment has to be seen from the point of formalisation of the unorganised economy functioning in form of small-scale industries in it, said Srinivas, adding that incentives running in thousands of crores of rupees will be given by the state government to make this project a success.
Meanwhile, the Maharashtra authority floated bids for the redevelopment of Dharavi, which has a population of around 1 million, on October 1 and the last date for submission of bids is November 15.
What are the plans for Dharavi? By when will we appoint a lead partner and form a special purpose vehicle (SPV) to start construction work?
The steps are as follows: we want to complete the bidding process in the next two months. The last date of submission for bids was October 31, but the bidders wanted more time and hence we have given more 15 days. Later, we will evaluate the bids and we should be in a position before the end of the ongoing fiscal of 2022-23 to finalise the lead partner. Further, one should understand the structuring of the project, both physical and financial. The SPV has to be formed physically and the bid currently is only for the lead partner, and this is one thing. I look at 4 to 5 months for forming the SPV, and parallelly the lead partner and the authority will have to complete appointing a project management consultant etc. Based on all this, a master plan will be prepared, followed by a survey on the eligibility for rehabilitation. For construction, the SPV will have to decide the modalities, etc. The SPV will be headed by the government authorities and will have directors from both the government and the lead partner.
What is different this time from the bids that were floated in the past?
This time we have got the railway land of around 45 acres, which has been included in the redevelopment plan. The last time we had two bidders but could not move further because of not having the railway land. This is not the only different thing. Secondly, the structuring of the redevelopment project has been done in a manner keeping certain things in mind. Dharavi was a developer-driven project in 2008, 2016 or even before that. The size and complexity of the project are such that it is one of the most challenging urban renewal projects in the world. It is a very, very complex project and requires proper structuring, where it cannot be simple that a developer will come and redevelop. We are not talking about a few hundred tenements, but lakhs of citizens reside there. Hence, all stakeholders, especially the residents and investors, need to have a stake in it. When the developers come there has to be some interface for residents, and for the investors, there has to be some guarantee. There is stability in the policy process, which is very crucial. We have created an SPV model where the government is also accountable and our representatives are there on the board. For investors when the government is there, it is easier to deal with so many social issues. Another part is the financial structuring of the project keeps in mind the financial needs of the project. Thirdly, there is the state's support by declaring it as a vital public project, which was not there earlier. Very few are declared as such. There is stability in the structure because huge investments and thousands of families are involved, which is very much required for such a project, considering Dharavi is a city within a city and bigger than a few municipal corporations.
What are the challenges for the project? In how many years do you think the entire redevelopment project will be completed?
The crux of the project is rehabilitation, which is the priority and we have given seven years for it. I am aware it is challenging because we have seen many slum rehabilitation projects that are very small and have not been completed even after 20 years. I understand it is a very challenging task, but we should target it. If we want to make Mumbai slum-free, the starting point should be a project like Dharavi. It may take one or two years more but we are looking for it within seven years. For the entire project, we have considered 17 years that include even the sale component. We cannot have a project which says I will take 25 years, and see what happens that the financial calculations get difficult. Even for the slum dwellers, it is a very long time, wherein we have to take care of the next generation but not take the promise to the next generation.
Also read: Dharavi redevelopment & rehabilitation: Companies want project duration increased
What does the redevelopment of Dharavi mean for the real estate market of Mumbai?
About 60 per cent of Mumbai is in slums. This means that 7 million people are in slums, and how many cities in India have this kind of population in slums? Keeping the larger picture in mind, when we are taking care of these one million people (Dharavi), it is a substantial number in that context. Coming to real estate, we cannot have it in isolation with some projects here and there. Prosperity has to be commonly shared, and in this background, there is a rehabilitation and a sale component. The transfer of development rights (TDR) market will improve. It is a good market tool that is not in a good shape for now. A lot of things will come up in Dharavi and the segment here can be residential or even commercial. It all depends on the master plan the SPV will make, but I am sure a second BKC can come up in Dharavi. Not as big as the current one but at least half of it. In the free sale, we can or may have to go for commercial construction fully or partially. Dharavi has a lot of commercial and industrial establishments and we have to accommodate them. In addition to that, it is close to BKC and has a lot of commercial potential.
What will be the approximate project cost and the total area of construction?
It will be a 17 years period and a few million sqft development and the cost is over Rs 20,000 crore. The SPV will not like to release the free sale component in one go. There will be much cash flow that will go into rehabilitation in the first three years. In 17 years, we can expect 2-3 million sqft. For the rehab component over the period of seven years, it will be around seven to eight million sqft plus the 2-3 million sqft. It will take time, and we can say 10 million sqft will come up in Dharavi in the next 17 years, and it is a long time. The focus is not on sales right now but on the rehab component.
The government has announced a certain waiver of GST and premiums, etc. Can you give a figure on what amount of government tax and income will be waived off?
We are giving the state’s share in GST as waivers to commercial and industrial establishments for five years after they start operations. It is huge for them and helps the economy. There are incentives for open land, property tax, premiums paid, etc. However, right now I cannot give any fixed amount on the size of incentives. However, it will run into a few thousand crores. But these incentives will help Dharavi enter the formal economy. They would ensure the future of thousands of people and give stability to the stakeholders. Once in the formal economy, one might also invest more whereas right now it is not possible. The project has a huge outflow for three to four years after its inception. There is nothing coming in, right from the start. We need to structure it and hence incentives are given in thousands of crores. But quantifying the exact amount of incentives will not be correct.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
