Makeover for Maximum City
Real Estate

Makeover for Maximum City

Much of Maximum City needs a facelift. The massive stock of old, dilapidated buildings on prime property across land-starved Mumbai is crumbling and on the verge of collapse. The only way forward appears to be redevelopment. The elevation of ageing housing societies into a contemporary r...

Much of Maximum City needs a facelift. The massive stock of old, dilapidated buildings on prime property across land-starved Mumbai is crumbling and on the verge of collapse. The only way forward appears to be redevelopment. The elevation of ageing housing societies into a contemporary residential asset class, offering customers a premium lifestyle, is gaining momentum and the city has been witnessing a surge in redevelopment projects. In fact, redevelopment is estimated to be a Rs.1 trillion investment opportunity in Mumbai and redevelopment space contributes to over 30 per cent of total development potential. Towering offers Apart from the usual transit rent and extra sq ft, developers are luring society members with a slew of luxury facilities, such as swimming pool, Jacuzzi, centralised AC with wall units in the living and bedroom and imported marble, to name a few. For instance, the 13-storey Miami Apartments at Breach Candy, South Mumbai, which signed a deal with Rustomjee, will be replaced by a 40-storey luxury tower and each family will receive a flat with roughly 17 per cent more area. Similarly, the 16-member Sea Breeze society in Bandra (W) signed a redevelopment deal with Sunteck Realty where flat-owners will receive 50 per cent more space in the new building. In 40-year-old Daffodils Society, Pali Hill, Bandra, which is being redeveloped by Prestige Group, members will get apartments with 36 per cent extra space and the developer will shell out over Rs.210 million as corpus fund. Another interesting phenomenon is developers from other cities entering such projects in Mumbai. Bengaluru-based developer Puravankara secured its first project in Lokhandwala with a potential gross development value (GDV) of `15 billion with another Bengaluru-based company, Prestige Group, following suit with its project in Bandra. Hike in rentals Redevelopment in prime locations like Borivali, Kandivali, Malad, Khar, Bandra and Santacruz is keeping rental markets high as most owners of properties undergoing redevelopment prefer to lease flats in adjacent buildings to maintain continuity in their lives. Further, they are willing to shell out higher rents as they are getting financial support from the builder. “Redevelopment drives up residential rental yields in the immediate neighbourhoods due to excess demand and reduced supply,” says Vedanshu Kedia, Director, Prescon Group. And according to Pritam Chivukula, Vice President, CREDAI-MCHI and Co-Founder and Director, Tridhaatu Realty, “Improved infrastructure and amenities enhance the area’s desirability, leading to increased demand and higher rental prices. Wealthier demographics with luxury apartments and upscale amenities elevate rental rates.” Redevelopment rules Development Control Regulation (DCR), which grants developers more building rights and the desired floor space index (FSI), prepared the ground for a surge in redevelopment operations. “Incentivisation of urban renewal that brought about fundamental changes in Development Control Regulation (DCR) will revitalise the city,” predicts Chandresh Mehta, Executive Director, Rustomjee Group. “The current thrust on infrastructure to improve connectivity through new road networks and metro links will enhance the quality of life.” The Cluster Redevelopment Policy has also given redevelopment projects a boost. “Cluster development is essential for a congested city,” says Kedia. “It makes large parts of Mumbai that were earlier unviable to develop now viable. However, there are many challenges in implementation. The developer has to move the proposal from Municipal Corporation of Greater Mumbai [MCGM] to the urban development department, a high-power committee and the minister’s office, making it tough.” “The government has provided the highest FSI of 4; over and above it, developers get 35 per cent fungible FSI and 60 per cent auxiliary FSI,” explains Ramesh Prabhu, Chairman, Maharashtra Societies Welfare Association (MahaSewa). “Developers not only get highest FSI but are also in a position to provide the best amenities to residents. Podium parking, swimming pools, playing areas, etc, can be provided with better elevation and sufficient open space.” “Cluster development can be leveraged by developers to yield better FSI,” agrees Navin Dhanuka, MD and CEO, ArisUnitern Solutions. “With changing consumer preferences, developers can make the best use of cluster development to create integrated site layouts, minimise wasted spaces and create more value-added amenities.” For instance, Phase 2 of work is in progress on Al-Ezz and Al-Nasr towers in sectors 6 and 4 of Bhendi Bazaar. These two towers are being constructed to replace 23 old buildings. The project covers 16.5 acre with plans for wider roads and modern infrastructure. Meanwhile, Chivukula says, “Cluster development sometimes attracts increased FSI. However, its extent varies based on local zoning laws, urban policies and project specifics, and must be balanced with aesthetics, environmental impact and community needs.” “The concession provided would encourage developers to take up projects, boosting affordable housing,” opines Vimal Nadar, Senior Director and Head of Research, Colliers India. “Repealing the Urban Land Ceiling Regulation Act (ULCRA) opened huge land parcels for development, stabilising soaring housing prices.” Asked about rent control, ULCRA and FSI, Sanjay Devnani, CEO, Pardis Group, responds that these regulations were restrictive and had a negative impact on housing. “Transferable development rights (TDR) being linked to the Dharavi project [see box] by the government is unfair to small developers,” he averred. “Also, infrastructure needs to catch up.” “These acts,” adds Ashok Singh Jaunapuria, MD and CEO, SS Group, “have a wide-ranging effect on housing. Difficult implementation [of ULCRA] and low compensation rates made land acquisition unappealing, contributing to land scarcity and increased housing costs. In reality, despite higher FSI limits, Mumbai housing prices are still skyrocketing.” GST for redevelopment Development rights provided by a person to a developer shall be taxable under GST on the consideration received in the form of construction service. Regarding the recent Telangana High Court ruling on GST for redevelopment, where the government reduced GST on the real-estate sector and TDR from around 18 per cent to 7.5 per cent on the higher side, Vivek Jalan, Partner, Tax Connect Advisory, a multidisciplinary tax consultancy firm, asks, “Is TDR not akin to sale of land itself, which is not liable to GST under Schedule III of the CGST Act? While the Telangana HC ruled in favour of the GST department, this constitutional question is expected to be settled in the Supreme Court.” “Transparent and unambiguous guidelines are essential to prevent delays in project approvals, requiring cooperation between developers, legislators and industry stakeholders,” says Manju Yagnik, Vice Chairperson, Nahar Group, and Senior Vice President, NAREDCO – Maharashtra. “Joint development agreements (JDAs) blur the lines between land transactions and service provisions, further compounded by constitutional provisions, adding layers of intricacy to the debate,” weighs in Sridhar Samudrala, Founder, Hecta. “Ultimately, GST applicability has to be looked through the prism of constitutional principles and only the Supreme Court can provide clarity on this matter.” The challenges While redevelopment is seen as the answer to many woes, it comes with a host of challenges. For instance, getting majority consensus from all (or at least three-fourth) members of the society owing to a lack of physical presence, not agreeing to the terms and conditions of the builder or even design issues. Another challenge is transit accommodation for residents. “Developers face hurdles in obtaining unanimous consent from all tenants, a process that involves displacing residents for an extended period, typically three to four years,” elaborates Dhanuka. “Additionally, continuous rental payments during delays pose financial strains. On the tenant side, challenges revolve around the developer’s reputation. If he is unreliable, they risk not only losing their current residence but also face uncertainties in construction of a promised larger house. If the developer encounters financial issues, tenants may lose both their homes and rental accommodation, which is why senior citizens refuse to consent. These complexities demand careful consideration on both sides for an equitable process.” Issues certainly abound. In some instances, MHADA is not executing the permanent alternate accommodation agreement (PAAA) – residents are promised the PAAA only after two months as the document is sent to Pune for franking. “MHADA or any government authority needs to be proactive in registering the PAAA,” emphasises Prabhu. “The reasons that the PAAA has been sent to Pune and has not been received is unacceptable as it creates a trust deficit and delays redevelopment.” Another significant challenge is the impact of densification on resources and how urban development is not in tandem. “The earlier distributed loading on the ground substrata has been replaced by concentrated, high-intensity loading in the new scenario,” observes Professor N Raghavan, Department of Civil Engineering, IIT Madras. “Technical studies should be done on this aspect. The present lateral coexistence should give way to vertical coexistence only if it offers more space, comfort and a better social life, and there is no increase in demand for supporting services (water, sewage disposal, power, transportation, public transport, parking facilities, common toilets). Distributed densification bringing in more ground space such as Navi Mumbai, Konkan, would be ideal.” To decongest India’s financial capital, Navi Mumbai and Panvel are being given a major makeover. The master plan aims to improve connectivity and provide more affordable housing, among other things. Several large projects have been set in motion, the most significant being the Mumbai Trans Harbour Link (MTHL). Many infrastructure projects are in various stages of completion such as Ulwe Coastal Road connecting MTHL and Navi Mumbai International Airport (NMIA) and the mass transit system between Mumbai’s airport and NMIA, which will lead to a total of 142,000 direct and 200,000 indirect jobs as a result. The way ahead In the past 35-40 years only about 2,500 cessed buildings have been redeveloped. How many years will it take to redevelop all 16,000 buildings? Prabhu responds, saying, “Considering the dilapidated condition of buildings, I am hopeful that redevelopment of all cessed buildings in South Mumbai should be completed in 15 to 20 years.” This hope is clearly shared by many. “Looking ahead, we see redevelopment projects playing a crucial role in urban regeneration, addressing the critical need for modern infrastructure and efficient use of space in growing cities,” says Vinayak Pai, Managing Director, Tata Projects. “The future will demand a greater emphasis on green construction and smart technology integration, ensuring projects are future-proof. However, there are significant challenges, including regulatory complexities, stakeholder alignment and the intricate balance between preservation and modernisation. Navigating these challenges requires a collaborative approach, deep expertise and a commitment to excellence and innovation, hence building a better future for our cities and communities.” “The emphasis will be on sustainable and green development practices,” adds Kedia. “Incorporating smart city technologies and strengthening property management will be other key priorities.” And in Chivukula’s view, “Urban renewal will target slum rehabilitation, often involving PPPs. Infrastructure upgrades are crucial with projects like Mumbai Metro and the Coastal Road. The focus will be on incorporating green buildings and tackling climate-related challenges like flooding.” Indeed, while residents get an elevated quality of life through upscale conveniences, larger areas, more modern amenities and a better lifestyle, the city benefits in terms of a better skyline, multimodal connectivity and sustainable development – a win-win for all stakeholders. CW’s view on redevelopment RERA must govern redevelopment projects. The risk of delay and therefore the project getting stuck for years is very high and since residents would be left high and dry without their prized possession with a looming rent, it is important that the projects do not stray. A demand slump would encourage the developer to delay the project. Projects in the making: Ramabai Ambedkar Nagar, Bombay Development Directorate (BDD) and Dharavi Redevelopment To provide rehabilitation for 16,575 slumdwellers of Ramabai Ambedkar Nagar, a 75-acre sprawl in Ghatkopar, the Mumbai Metropolitan Region Development Authority (MMRDA), began the process to avail a `40 billion loan to execute development. This is its first time in a slum redevelopment project. It may earn `10.73 billion from the sale component of residential tenements or `29.18 billion if the sale component is sold to a developer. “Some ongoing projects like Ramabai Ambedkar Nagar in Ghatkopar and Bombay Development Directorate (BDD) are in their early stages,” shares Vimal Nadar, Senior Director and Head of Research, Colliers India. “In the next few years, these projects supported by upcoming infrastructure projects will enhance liveability.” That said, in the transition from chawls to skyscrapers (160 to 500 sq ft), are BDD residents being pushed into high-rises that would demand high maintenance? “Staying in high-rises has its merits and demerits,” responds Varun H Raje, Director, Raje Consultants. “Improvement in living conditions necessitates higher maintenance costs to maintain facilities of high-rises such as lifts, fire-fighting systems, housekeeping, etc. Such high-rises need to be painted every five years. The structure may involve a higher cost for repairs and parking, and larger premises need more workers. One cannot predict the income trends of families who have shifted to high-rises and whether they can afford the cost of living after the maintenance period promised by the authorities. The authorities should devise a mechanism to develop a robust fund management with sufficient corpus.” According to Ramesh Prabhu, Chairman, Maharashtra Societies Welfare Association (MahaSewa). “The government has promised free maintenance for 12 years. Thereafter, residents will have to pay it. No doubt it will be high. Over the period, they will be able to manage it as the government has already exempted flats up to 500 sq ft from property tax and the income of those families also will go up. Fearing high maintenance, redevelopment cannot be compromised or postponed.” Meanwhile, a row has recently erupted over ownership of railway land for the Dharavi Redevelopment Project (DRPPL) – there has been a delay in handing over the land while the Railway Land Development Authority (RLDA) has insisted on completing certain tasks before starting redevelopment. Adani has bagged the Dharavi slum redevelopment contract and SVR Srinivas is heading the Dharavi Development authority. “Post redevelopment, Asia’s largest slum can emerge as a sought-after residential and commercial destination, as the area is likely to be developed as an integrated township,” in Nadar’s view. “Central Mumbai, Bandra-Kurla Complex (BKC) and the eastern suburbs are poised to see heightened real-estate activity with successful implementation of the project.” “In a tale of two cities, Dholera [the upcoming smart city in Gujarat] and Dharavi, the contrasts illuminate the varied intricacies and considerations that shape the redevelopment landscape,” remarks Nayan Dedhia, Director, Toughcons Nirman. “While Dholera showcases a vision of a technologically advanced and sustainable city, Dharavi grapples with challenges posed by its diverse and complex urban fabric.” For his part, Kedia views the BDD, Ramabai and Dharavi projects as a course correction in urban planning. “These projects aim to transform densely populated and underdeveloped areas into modern and well-equipped communities while preserving their cultural and economic fabric,” he says. “However, developers face substantial challenges, including the relocation and rehabilitation of residents, achieving stakeholder consensus, upgrading infrastructure, ensuring financial viability, navigating complex regulatory landscapes, preserving resident livelihoods, and addressing environmental concerns.” “The BDD chawl has over 16,000 families in 195 chawls over 86.98 acre,” points out Prabhu. “Multiple forces are active against the project as it affects the housing rates of private projects and will have huge repercussions on realty, especially in Central Mumbai. It also has serious implications on Mumbai’s social culture as it signals the wipeout of Mumbai’s chawls. The transition of chawl residents to skyscrapers could be smooth, depending on how it is handled by the government and MHADA. Once Dharavi is redeveloped, there will be a huge supply of flats in Mumbai and the outlook of Mumbai will also transform drastically. And after Ramabai is redeveloped into a shiny new residential-cum-commercial zone, the face of Mumbai will change.” As for Chivukula, he believes the redevelopment of the three areas offers a crucial opportunity for improvement in dense areas. “BDD focuses on modernising living spaces and maintaining cultural integrity but faces challenges in resident relocation and heritage preservation. Ramabai aims to create integrated urban spaces, dealing with land acquisition and community engagement issues. Dharavi’s redevelopment could transform Asia’s largest slum by formalising workspaces. Across these projects, the balance of profitability, social responsibility, sustainable planning and political hurdles is paramount.” Pan-India outlook BENGALURU “Within the city, there is a dearth of space, so redevelopment can transform an existing foundation into a modern, amenity-rich asset. Redevelopment is a key reason behind the uptick in residential rentals and properties considered to be old and obsolete have emerged as viable options.” - Navin Dhanuka, MD and CEO, ArisUnitern Solutions GURUGRAM “Gurugram’s redevelopment has produced contemporary apartments with improved facilities, safety standards and amenities. Modernistic malls with ample amenities – from shopping and recreation to dining – are springing up, making it a happening place. Going forward, current challenges must be addressed in its redevelopment plan. Initiatives should combine luxury apartments with affordable housing and new projects should be near existing or upcoming public transportation hubs to make them accessible for all income levels.” - Ashok Singh Jaunapuria, MD and CEO SS Group

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