Mumbai’s real estate remains just as manipulated under the new government
Mumbai, one of the world’s most crowded cities, is also known for the most expensive real estate in the world combined with a huge housing shortage. Yet, for the past three years, the industry is in a slump because prices have been hiked to a point where demand has dried up. Thanks to the lack of decisive action by banks, prices have failed to decline making property affordable again. In addition, constant changes in government policies and action against illegal construction have meant that nearly-completed buildings have remained without final clearances for as long as six to eight years, with no impact on prices. It is in this environment that the Maharashtra chief minister, Devendra Fadnavis, announced his ‘Housing for All’ initiative in May this year. The programme proposes construction of 1.9 million affordable homes by 2022.
While the idea is laudable, it is likely to be stymied by the government’s confused policies, the controversial Development Plan that may be re-written from scratch after widespread protests, and a TDR (transfer of development rights) racket that is being run by a builder-cartel. These builders have possible links to the 2G scam accused.
Real estate sources say that policy changes have allowed this cartel to monopolise the TDR. TDR is a unique tool that allows the excess floor space available on some plots of land to be sold like a tradable commodity. TDR rates in Mumbai used to be in the region of Rs22,000 per square metre (sqm), until just over a year ago. Realty sources say that TDR is now controlled through dubious strategies.
One example of their action is a tender for 30,000sqm of TDR to be issued through three schemes by MMRDA (Mumbai Metropolitan Region Development Authority). The cartel set out to destroy the tender by bidding at double the market rate for TDR, but for a mere 6% of the TDR on offer. This left the government with two choices. It has to either scrap the tender, or persuade other bidders to match the prices. Since no builder will agree to pay twice the price for TDR, the sale is automatically scuttled and the cartel wins.
At the time of writing this article, the tender is on the verge of being scrapped. If the Bharatiya Janata Party (BJP) government is serious about economic development, it will have to crack down on land sharks that have kept Mumbai’s realty prices abnormal and prevented trans-harbour connectivity to the hinterland for over 50 years. Unfortunately, the cartel is rumoured to have the support of one of BJP’s powerful national leaders.