Mumbai's Housing Society Redevelopment: A Sticky Wicket Over Excessive Incentives
Mumbai's older housing societies and real estate developers are engaging in redevelopment projects with excessive incentives, potentially leading to project unviability and market instability, warns Knight Frank India's Gulam Zia.
MumbaiReal EstateRedevelopmentIncentivesHousing SocietiesReal Estate MumbaiSep 11, 2025
Some societies in Mumbai, such as in Juhu or Bandra, have been given huge incentives by developers, ranging from flats 50 percent to up to 150 percent larger. In some of these cases, renegotiation is bound to happen if the real estate cycle heads downward. These extra incentives have been caused by greed, and we are on a very sticky wicket. In some cases, prices have gone completely crazy, said Gulam Zia, Senior Executive Director - Research, Advisory, Infrastructure and Valuation at Knight Frank India, while launching a report on redevelopments of housing societies in Mumbai.
The segment is on an upturn due to large number of deals being negotiated, but the overall situation remains uncertain, Knight Frank India said, adding that the trend of excessive incentives can render projects unviable. Gulam Zia said the relatively long gestation period for redevelopment projects - between 8 to 11 years from initial discussions to the delivery of new units - are a major reason for caution, as real estate cycles often rise, plateau, and decline over such time frames. Zia said this can upend developers’ calculations if there is a relatively large decline in home prices in any micro-market.
Most of the housing societies up for redevelopment in Mumbai as of May 2025 are built on small land parcels, averaging at a mere 0.45 acre. Zia said developers and society members would be well placed to keep the incentive of total area of rebuilt society given to existing members at moderate levels, so as to ensure long-term viability of the project.
We feel that for markets whose prices trend at around Rs 40,000-50,000 per square foot, the incentive should not be more than 30-35 percent, such as in areas like Borivali or Goregaon. For markets like Juhu and Bandra, where prices are Rs 75,000-80,000, developers should not share more than 50 percent of the space. The recent trends of more than 50 percent share works in markets like south Mumbai, where prices trade at above Rs 1 lakh per square foot, he added.
According to the Knight Frank report, society redevelopment as a segment may unlock more than 44,000 new homes in the Brihanmumbai Municipal Corporation (BMC) limits by 2030, worth a total of around Rs 1.3 lakh crore. Much of this supply is expected to come from the western suburbs, with the hotspots being Bandra, Juhu, Andheri, Goregaon and Borivali, besides other pockets.
Society redevelopment projects in the lucrative south Mumbai, or island city, brings complications such as the Rent Control Act as well as a large number of ‘cessed’ buildings or slums. These are rent-controlled, old properties that pay a nominal cess to the Maharashtra Housing and Area Development Authority (MHADA) for maintenance. Redevelopment of these projects is expected to be led by government agencies, such as MHADA or the Slum Rehabilitation Authority (SRA), although private developers often participate in these projects as a construction and development agency. The developers, in such instances, receive a free sale component in lieu of the construction of rehabilitation units.
Frequently Asked Questions
What are the main concerns with excessive incentives in housing society redevelopments in Mumbai?
Excessive incentives can lead to spiraling property prices and project unviability if the real estate market declines. This can cause financial instability and potential renegotiations of deals.
What is the recommended incentive level for areas with different property price ranges?
For markets with prices around Rs 40,000-50,000 per square foot, incentives should not exceed 30-35 percent. For markets like Juhu and Bandra, with prices around Rs 75,000-80,000, incentives should not exceed 50 percent.
What is the expected impact of housing society redevelopments on Mumbai's property market by 2030?
Society redevelopment projects are expected to unlock more than 44,000 new homes in the Brihanmumbai Municipal Corporation (BMC) limits by 2030, worth a total of around Rs 1.3 lakh crore.
What are the challenges in redeveloping housing societies in south Mumbai?
Redevelopment in south Mumbai faces complications such as the Rent Control Act and the presence of ‘cessed’ buildings or slums, which are rent-controlled and old properties.
How are government agencies involved in the redevelopment of housing societies?
Government agencies like MHADA and the Slum Rehabilitation Authority (SRA) often lead the redevelopment of rent-controlled and ‘cessed’ buildings, with private developers participating as construction and development agencies.
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