Mumbai's Leap Forward: Large-Scale Urban Redevelopment Projects
Everyone knows that Mumbai is undergoing a redevelopment frenzy. Small buildings are being demolished to be replaced with tall ones. Unfortunately, that’s the wrong type of redevelopment. Last week, the government announced a refreshing change. The Maharashtra Housing and Area Development Authority (MHADA) selected builders to undertake three large-scale projects across the city. The Adani Group won the bid for Worli and Bandra Reclamation. A consortium including JSW Group and Chandak Developers won the bid in Andheri West.
The scale of redevelopment in Bandra Reclamation is the largest, with its size being equivalent to 75 football fields. The plan at Worli is the smallest but is bigger than the biggest mill redevelopment that has occurred in Mumbai. Personally, I was surprised to see only four builders participate in the race in a city where there is competition even for small parcels of land. Heavyweights like Godrej, Oberoi, and L&T were absent from the process. Nevertheless, redevelopment in this manner is the way forward.
Redevelopment of standalone buildings is the laziest and most unproductive form of redevelopment. A short building gets torn down and is replaced with a tall building. There is zero addition made to the supporting infrastructure to accommodate a greater number of residents. The roads, drainage, sewage, open spaces, schools, hospitals, etc., remain largely unchanged. This sort of redevelopment may improve the quality of life inside your premises but it worsens the quality of life outside.
Mumbai has incentivised redevelopment of a group of buildings through “cluster redevelopment”. It was better than standalone redevelopment. Gated communities were a consequence of this sort of redevelopment. But the ideal way is redevelopment of an entire neighbourhood. It provides a platform to redesign an entire neighbourhood and location as per the requirements of today and tomorrow. While cluster redevelopment created gated communities, this sort of redevelopment can create something bigger. In a way, the development announced by MHADA has the potential to create multiple planned micro-cities within a chaotic mega city.
That is a top opportunity in a messy city like Mumbai. The reason for high home prices in gated communities or townships is that there are very few of them. Top projects in Powai or Goregaon are able to command prices on par with South Mumbai merely because they provide an ecosystem that is planned and flourishing with homes, offices, schools, hospitals, malls, etc. As the average middle-class or upper middle-class seeks to escape the ignominy of rotten municipal governance, these projects become the preferred shelter. The demand exceeds supply. Prices rise and do so disproportionately. The only way to tame such price rises is to raise the scale of planned townships or raise the number of planned townships.
There are no losers if that happens via large-scale redevelopment – slum redevelopment or otherwise. The original homeowners get larger homes along with other benefits. Home buyers have numerous options to choose from at a steady price. Builders gain handsomely due to the scale of operation rather than on rising home prices given the massive supply. And the city gains with the creation of big pockets of planned urban development that is accessible to a larger population.
The challenge in such projects is the risk of Mumbai real estate belonging to only a handful of players who may not be able to deliver. Given the heavyweights who have won, that appears a limited risk. I am comfortable with a market having fewer strong builders than several weak ones. That’s because in real estate, despite the perception, it’s almost impossible to have a sustained cartel given the capital pressures. Time will tell but I hope it works because that’s the next best option to the dream of Mumbai being a planned city.
