Mumbai's Construction Boom Chokes City

25 Oct 2023 CW Team

During the COVID-19 lockdown in 2021, the state government offered an incentive to builders by halving the premiums they pay. As a result, the Brihanmumbai Municipal Corporation (BMC) generated a record Rs 150 billion from developers that year. When this incentive concluded in January 2022, the BMC had already approved new real estate projects with a built-up area totalling about 150 million square feet in Mumbai. To put this into perspective, this area is roughly equivalent to the size of 15 Nariman Points.

Amid the pandemic's peak, the state government reduced the substantial premiums that developers were required to pay to the BMC. This discount, which lasted for a year, was extended to the construction industry, which had suffered a significant setback due to COVID-19. Developers seized this golden opportunity and expedited the approval of their project files by paying only half of the premium amount. According to a report by Liases Foras, the annual incremental construction within the BMC's jurisdiction in Mumbai has grown by 68 per cent since 2022 and 142 per cent since 2021. The Mumbai Metropolitan Region (MMR) has also seen a 36 per cent growth since FY 22 and a 98 per cent growth since FY 21.

The impact of these construction projects is evident in the form of a massive and noxious haze enveloping the city. In the western suburbs, especially in areas like Bandra, Khar, and Santacruz, cement and debris trucks continuously navigate the narrow streets as numerous plots are undergoing redevelopment.

Mumbai is struggling to breathe as it has evolved into an extensive hub for real estate development. Since the state's 2021 COVID-19 incentive, 780 projects have been greenlit in the Bandra-Andheri region. In the eastern suburbs, from Mulund to Ghatkopar and from Chembur to Kurla, 834 approvals were granted. Among the BMC's wards, T ward (Mulund-West) will contribute the most substantial supply of built-up area, totalling 15 million square feet. Wards containing Borivli, Bhandup, Andheri, and Parel-Dadar will each witness over 10 million square feet of supply.

In 2021 alone, the BMC approved 2,473 building project files, resulting in a record Rs 150 billion in premium fees from developers for India's largest and wealthiest civic administration. The frenzied construction activity primarily revolves around the redevelopment of old buildings and housing societies, where low-rise structures are being replaced by towering skyscrapers. This surge in construction is a significant factor contributing to the deteriorating air quality in Mumbai.

Pankaj Kapoor, founder-MD of Liases Foras, attributes the growth in supply and construction to discounts in premiums offered by the state government to developers, an increase in Floor Space Index (FSI), and the growth of the housing market in the Mumbai Metropolitan Region. He points out that the figures only pertain to the free-sale component of redevelopment projects. If the supply from the rehabilitation portion were included, the actual construction volume would be much larger. He acknowledges that these supply-side incentives have boosted housing production and the state's economy but have also increased pollution.

Mumbai has undergone a massive transformation into a sprawling construction zone, resulting in a stifling atmosphere. Data gathered by the research firm Liases Foras indicates that the area currently under real estate construction in Mumbai is approximately 32.4 million square feet, equivalent to around five times the built-up area of Nariman Point, which ranges from 7 to 8 million square feet. During the COVID-19 lockdown in 2021, the state government offered an incentive to builders by halving the premiums they pay. As a result, the Brihanmumbai Municipal Corporation (BMC) generated a record Rs 150 billion from developers that year. When this incentive concluded in January 2022, the BMC had already approved new real estate projects with a built-up area totalling about 150 million square feet in Mumbai. To put this into perspective, this area is roughly equivalent to the size of 15 Nariman Points. Amid the pandemic's peak, the state government reduced the substantial premiums that developers were required to pay to the BMC. This discount, which lasted for a year, was extended to the construction industry, which had suffered a significant setback due to COVID-19. Developers seized this golden opportunity and expedited the approval of their project files by paying only half of the premium amount. According to a report by Liases Foras, the annual incremental construction within the BMC's jurisdiction in Mumbai has grown by 68 per cent since 2022 and 142 per cent since 2021. The Mumbai Metropolitan Region (MMR) has also seen a 36 per cent growth since FY 22 and a 98 per cent growth since FY 21. The impact of these construction projects is evident in the form of a massive and noxious haze enveloping the city. In the western suburbs, especially in areas like Bandra, Khar, and Santacruz, cement and debris trucks continuously navigate the narrow streets as numerous plots are undergoing redevelopment. Mumbai is struggling to breathe as it has evolved into an extensive hub for real estate development. Since the state's 2021 COVID-19 incentive, 780 projects have been greenlit in the Bandra-Andheri region. In the eastern suburbs, from Mulund to Ghatkopar and from Chembur to Kurla, 834 approvals were granted. Among the BMC's wards, T ward (Mulund-West) will contribute the most substantial supply of built-up area, totalling 15 million square feet. Wards containing Borivli, Bhandup, Andheri, and Parel-Dadar will each witness over 10 million square feet of supply. In 2021 alone, the BMC approved 2,473 building project files, resulting in a record Rs 150 billion in premium fees from developers for India's largest and wealthiest civic administration. The frenzied construction activity primarily revolves around the redevelopment of old buildings and housing societies, where low-rise structures are being replaced by towering skyscrapers. This surge in construction is a significant factor contributing to the deteriorating air quality in Mumbai. Pankaj Kapoor, founder-MD of Liases Foras, attributes the growth in supply and construction to discounts in premiums offered by the state government to developers, an increase in Floor Space Index (FSI), and the growth of the housing market in the Mumbai Metropolitan Region. He points out that the figures only pertain to the free-sale component of redevelopment projects. If the supply from the rehabilitation portion were included, the actual construction volume would be much larger. He acknowledges that these supply-side incentives have boosted housing production and the state's economy but have also increased pollution.