MHADA floats Kamathipura cluster redevelopment tender; 6 million sq ft may be available for free sale

MHADA issues long-pending Kamathipura cluster redevelopment tender, developer may get 6 million sq ft in free sale

The Maharashtra Housing and Area Development Authority (MHADA) has issued the long-pending tender for the Kamathipura cluster redevelopment project in south Mumbai, under a construction and development model, sparking hope for an area in need of renewal.

The project will be executed through the Mumbai Building Repairs and Reconstruction Board, a MHADA unit.

Through the project, the winning bidder will have development rights of around 5.67 lakh square metres, or around 6.1 million square feet (msf). Additionally, the bidding developer is required to construct rehabilitation units for the area residents and hand over 44,000 square metres of land to MHADA, for the latter to increase its housing stock, MHADA said in a statement.

The project is also slated to include amenities such as recreational facilities, as well as commercial properties. The 34-acre land parcel has 8,001 residential and non-residential tenants, according to MHADA, the state's nodal authority for affordable housing. Many of them were housed in dilapidated, poor-quality homes known as "cess buildings".

While the area has been known in the last century as Mumbai's primary hub for prostitution, the area has a history of settlement for more than 200 years, with the original residents of the area, the Kamathis, a community of masonry workers and artisans from the erstwhile Hyderabad state, responsible for the development of much of modern-day south Mumbai. Workers employed in the Mumbai port also resided in the area, as did a small Chinese community that owned restaurants in Kamathipura and nearby areas.

Disputes and compensation

The area, with hundreds of dilapidated buildings arranged across lanes and with around 800 landowners, has been desperately awaiting a facelift, with many of the buildings deemed unsafe for residents by civic authorities. The state government decided on a cluster redevelopment project for the area, in which multiple land parcels are merged together for one large development.

However, despite Maharashtra's new development control rules for Mumbai accelerating and incentivising cluster redevelopment, the sheer number of private landowners was a long-term sticking point, as the compensation scheme remained unfinalised despite government approval in 2023.

Finally, the government approved a compensation scheme for private landowners in the area in July 2024. Under the scheme, each landowner who owns 50 square metres of land will receive a 500 square feet residential unit, with landowners possessing 200 square metres of land thus receiving four residential units of 500 square feet each. "For every additional 50 square metres beyond 200 square metres, one additional unit of 500 square feet will be provided to the landowners," MHADA said in a release.

Sale potential

Market sources said that the prevailing rates in the area hover around Rs 40,000 to Rs 45,000 per square foot, much lower than surrounding rates in south Mumbai. Assuming a free-sale area of around 6.1 msf, the revenue potential from the free-sale component in the Kamathipura cluster redevelopment can be up to Rs 30,000 crore, according to industry estimates.

Large and listed developers, who have adequate equity-led funding and deep pockets, may be interested in bidding for the Kamathipura project, with some evaluating the project already, observers said.

However, significant hurdles remain in realising that amount—particularly the vast commercial activity in the area, which would pose a challenge for any developer to accommodate, and the large number of permanent structures, which far exceed those seen in typical slum rehabilitation projects.

"Unlike Dharavi, where most people work elsewhere despite residing there, the residents of Kamathipura generally work and live in the same area. Evacuating and rehabilitating so many tenants will be a big challenge for developers in the near-to-medium term, as that would affect the livelihoods of many. Also, all the units to be rehabilitated here are permanent, brick-and-mortar units, unlike in Dharavi, and demolishing so many buildings may eat into the developers' margins," said Ritesh Mehta, senior director and head (north and west), residential services and developer initiative, JLL India.

The area's location, near the older, mercantile areas of the city, with relatively narrow roads and sparse transportation connections, can also pose a challenge to developers, some observers said, even as the area's vicinity will see the opening of three metro stations of the third and final phase of the Mumbai Metro's Aqua Line.

One observer said that the initial buyers of units in the free sale components may be the trader community in areas such as Kalbadevi, Bhuleshwar, Girgaon, and Bhendi Bazaar, who might be seeking upgraded accommodations from their old, chawl-type housing at or near the business establishments.