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    HomeNewsBusinessThe most exploited segment in Mumbai real estate: middle-class

    The most exploited segment in Mumbai real estate: middle-class

    Last week's announcement on the slum-rehabilitation policy makes sale of such apartments at an early stage possible, which sets the stage for future encroachment

    Vishal Bhargava
    November 10, 2021 / 19:07 IST
    Slum rehabilitation policy is an integral part of the housing market, since almost half the population lives in slums occupying 35 crore square feet.
    There is one business that the current Maharashtra Government understands better than every other state government in India. It is, wait for it, real estate. If one didn’t know any better, it could be inferred that the machinery was dominated by part-time politicians but full-time builders.Last year, it announced a cut in stamp-duty for home buyers, which allowed almost-bankrupt developers to garner sales. After that was done, it initiated a cut in FSI premium, which temporarily lowered costs for several new and under-construction projects, thereby addressing a key concern of builders--of project viability. Both the measures are positive and I laud the government for them.Then, last week, the Maharashtra government announced another measure that showcased--yet again--the unfairness of the housing policy. It is pertaining to the slum-rehabilitation policy. The policy is an integral part of the housing market, since almost half the population lives in slums occupying 35 crore square feet.Here’s a gist of the earlier slum rehabilitation policy: Developers build free homes for slum dwellers on part of the land that had been encroached upon and build towers on the remainder for sale to home buyers. Simply put, a homebuyer in the new tower is expected to subsidise the free housing for the slum dweller. The sole condition on the slum dweller: the free flat provided can be sold only 10 years after possession. The purpose was to ensure that slum dwellers don’t sell their free flat and then create another slum.I must concede that during my younger years I believed that such a policy was a much-needed remedy to create a more equal society in Mumbai. Then idealism mattered more than solutions. It took me a while but I realised the naivete of my belief. In pursuit of the perfect solution to satisfy all stakeholders, the government had dissatisfied all stakeholders.The slum-free mission failed as miserably as the Indian cricket team in the recent T20 World Cup. Far from becoming slum-free, Mumbai added more slums. Lessons ought to have been learnt.  Going by the recent announcement – they haven’t. The change made last week

    Last week's announcement was that slum dwellers who receive free apartments as part of the policy, can now sell their apartments five years AFTER DEMOLITION of their huts. There is now a possibility that apartments will in many cases be sold immediately on possession or even prior to possession. Thus, the short summary of the process is:

    Step 1: Illegal slums encroach on public/private landStep 2: Slums are then regularized. That makes the illegal slum - legalStep 3: Slum dwellers are then provided a free flat on the encroached landAnd now Step 4: Slum dwellers thereafter are permitted to sell the free apartment with easeSale of apartments at an early stage only sets the stage for future encroachment into the limited land parcels that are yet remaining. Moreover, it will create a speculative market in under-construction slum rehabilitation towers, which are easy pickings for manipulation.   One can wash the announcement off as just a political move prior to the upcoming municipal elections. It’s possible. Two years back a similar announcement was made wherein the minimum size of the free flat would be raised to 500 square feet – a size close to the 2BHK apartments that are sold to home buyers. The size was not raised but expectations certainly were. This consistent build-up in expectations is one of the reasons for slum rehabilitation projects struggling in “consensus building”. It is little surprise then that merely 2 lakh replacement homes have been created over two decades despite the approval of 1,481 projects.The one major improvement in the announcement is the requirement of slum dwellers to make a payment of Rs. 2.5 lakh for the new apartment of 300 square feet. This is for eligible slum dwellers and people who had stayed in slums between 2000-2011. At that pricing it is slightly over Rs 800/sqft to be paid by slum dwellers. Given the rates that prevail in Mumbai, the amount is petty and will almost certainly be arbitraged by several people. Yet it is a beginning to get a key stakeholder to contribute in slum redevelopment.For everything else of development in Mumbai, the key stakeholder remains the same: the middle-class home buyer. The one who pays lifetime savings for a home in Mumbai and funds successive administrations who continue to ignore it.
    Vishal Bhargava is a real estate enthusiast who views and reviews new projects, when not busy with his newstoon platform Snapnews. The views are personal.
    first published: Nov 10, 2021 07:07 pm

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