Transforming India’s Slums: A Case for Public Action
Mumbai is a city of contrasts. The tinsel town has recorded some of the most expensive real estate transactions in the world; it is also home to more slum dwellers than any other city in the world. Slums occupy about 20 sq km of prime property in the heart of India's financial capital, yet planners and property developers have been reluctant to engage in the slum replacement strategies here. Instead, developers are choosing to build more and more luxury apartments on ever-diminishing property space in other areas of the city. What is holding back private developers from engaging in slum replacement projects?
First, many property developers morally oppose redevelopment as this term has been often used as a euphemism for displacement. In many instances, the poor have either been directly displaced by the new land use or indirectly displaced through an increase due to a lack of affordability. Beyond these moral considerations, property values in slums are often discounted due to the lack of formal titles and legal recognition, the inadequacy of physical infrastructure services and fragmented land ownership. To ensure such an investment is financially viable, the developers consequently have to aim for high-value properties, which in turn leads back to the issue of affordability for existing residents. These issues all present significant obstacles for developers looking for low risk, and high return, investments.
The government needs to create more practical incentives for developers to take these increased risks. One promising strategy is subsidised onsite redevelopment, which takes advantage of the potentially high real estate value of slum land in the city. Slums are demolished and replaced by higher density housing, and, contrary to conventional slum clearance policies, slum dwellers are rehoused in replacement housing on the former slum sites at no additional cost. This is made possible as new market-rate housing is also developed on the former slums, which cross-subsidises the cost of the slum dwellers’ replacement housing and provide a financially viable option for real estate developers. In order for these schemes to be realised, it is essential that the government approves a change to the city’s land development regulations to allow for an increase in the density of redevelopment projects. Further key policy interventions include assistance with construction finance, providing temporary accommodation for residents and helping to address property-based disagreements.
Without effective incentive schemes, the chasm between uninhabited luxury apartment blocks and overcrowded, sprawling slums is set to further increase. A market-driven solution to the issue is needed, as the scale of the problem cannot be tackled by the public sector alone. Incentivising the private sector to play a role in slum replacement represents a sustainable way to build a city fit for the future.
Rahul Nahar is the chairman of Xrbia Developers. Xrbia is working towards correcting the discrepancy between supply and demand in Mumbai, through a slum replacement project in Chembur.