Amid a major slump in the construction industry, at least 10 developers have turned to a Maharashtra government agency for construction finance, promising to build affordable houses in return at some of the most prime areas of Mumbai, the country’s costliest real estate market.
The Shivshahi Punarvasan Prakalp Ltd (SPPL), a fully owned government company, is currently vetting the 10 proposals, all projects of slum rehabilitation in the city. If the SPPL finds the proposals appropriate, the schemes will not only rehabilitate eligible slum dwellers in buildings, but also yield a stock of low-cost houses for the government to sell in some of Mumbai’s most prime residential pockets.
Debashish Chakrabarty, Managing Director of SPPL, said, “These are all projects that have at least received a letter of intent from the Slum Rehabilitation Authority, while some have even started demolition of slums on site. We are currently verifying their eligibility for availing construction finance and conducting field visits of the project sites. Although we are yet to open the annexure that gives details on how many low-cost houses, each developer is willing to give and at what cost, we expect the 10 schemes to yield at least 750 to 1,000 affordable homes.”
He added, if the SPPL disburses finance to developers, the move will not only boost the government’s stock of affordable houses, but also speed up slum rehabilitation schemes that may have slowed down for want of funds.
The SPPL, which received a capital infusion of Rs 500 crore from the government last year, had in February invited applications from developers implementing slum rehabilitation schemes in Mumbai for construction finance at an 11.15 per cent interest rate.
An official said it is about four-five per cent lower than the prevailing market rates. The loans will be granted only to those developers who commit a sizeable number of small 30-square-metre tenements for the economically weaker sections and lower-income groups as part of their sale component, and hand them over to the government at a nominal cost.
Chakrabarty said most of the developers who have approached the SPPL for financing have projects in key suburban residential addresses such as Bandra East, Vakola, Oshiwara, Goregaon, and Vikhroli, while one is from Mahim, close to Dharavi.
Some are established builders such as RNA Corp, Unity Infra and Pune’s Naiknavare Developers, he added.
The move comes at a time when the government is scrambling to meet a target of creating 11 lakh affordable houses in the Mumbai Metropolitan Region. SPPL had tried a similar loan scheme in the 1990s, without any condition of getting affordable houses in return. The scheme had bombed after developers faltered on repayments, driving SPPL to a liquidity crisis.
Having burnt its fingers the previous time, the company is now taking a more cautious approach. It will release the funds in phases, linked to various stages of construction of the low-cost houses that the developer plans to surrender to the government. The interest recovery will also be concurrent during the project’s implementation.