As Mumbai developers blame paucity of land and cumbersome laws for the high real estate prices, little is spoken of the 19,672 dilapidated buildings that need to be redeveloped which in turn would see the supply of 10 lakh homes.
Of over 1,500 developers in the metropolis, no more than 10 per cent are actively involved in redevelopment, especially of the tenanted buildings.
The reasons are apparent. Obtaining the consent of tenants, landlords and the 56-plus building permissions from various government agencies are not what all would want to do.
However, redevelopment in the suburbs is far easier as it involves interacting with the housing societies.
Speed is key
The key to the redevelopment business is speed, said Mr Jitendra Jain, Managing Director, Neev Group, which is redeveloping 40 buildings and is in negotiations for 80 more. Though he has taken up a few tenanted buildings in the city, he said the procedures are complicated and negotiations more tough when compared with the societal structures.
Mr Jain said once the property documents are found to be clean and negotiations start, decision-making has to be fast.
“We work with a 15 per-cent mark-up on the total construction cost of the project, which includes both the free sale area and the society members' portion. Unless the project is completed in two years, interest cost, escalation in input cost and more importantly, rentals we pay to society members for alternative accommodation will wipe out the margins,” he said.
Total understanding of the development control rules relating to redevelopment is a must, as societies have to be told what is permissible under law. “There is no going back on what is promised,” said Mr Hemal Jain, Director- Business Development, Neev Group.
Societies too bargain hard. A large housing society in suburban Mulund is known to have circulated a list of requirements that developers must satisfy if they come forward to redevelop their complexes. The list includes even the labour charges that should be paid for both shifting and relocating them back when the property is redeveloped. The packing and forwarding charges are borne by the developers.
FINE-TUNING NEEDED
Mr Pujit Aggarwal, Managing Director, Orbit Corporation, and Property Redevelopers' Association spokesperson said the government needs to fine-tune the laws relating for redevelopment of tenanted buildings as over 19,672 buildings had to be rebuilt.
Over two million people live in these buildings in South Mumbai.
The State had taken up the building maintenance and repairs as owners failed to maintain them, through collection of a nominal cess. Most are single room units between 100 and 200 sq. ft.
The State Government provides an incentive floor space index of about 50 per cent of the rehabilitation area constructed to house existing tenants to ensure that builders recover the cost.
Mr Aggarwal said only about 70 buildings had been redeveloped over the last 24 years. However, if the 19,000-odd buildings were redeveloped, it could provide each tenant 300 sq. ft. In all, about five lakh units could be made available to existing tenants and an equal number of saleable units (by virtue of incentive FSI) could come into the market.
An unit of 300-sq.ft. carpet area would have 450 sq.ft. of built-up area, which in Worli would be worth Rs 50-60 lakh. This would create enormous wealth for the stakeholders and additional supply too, besides revenue to the government through stamp duty and other charges, he said.
Approvals take long, sometimes over a year. “Some of the approvals (relating to Coastal Regulation Zone) I had sought were passed in March last year, but till date I have not received the formal letter of grant of the approvals,” he said, adding that more incentives and less complicated laws could only make builders look at redevelopment as a viable proposition.