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Dharavi redevelopment project: Tender terms turn off developers, no bids

Last date to submit bids extended to May 5, officials say no terms, conditions to be changed.

Written by MANASI PHADKE | Mumbai |
Updated: April 21, 2016 10:26:06 am
Dharavi, Dharavi redevelopment project, BJP, mumbai civic polls, mumbai dharavi, dharavi bid, dharavi bidding, Bandra Kurla Complex, indian express mumbai Dharavi Redevelopment Project failed to attract even a single bidder in the fresh round of bidding.

Amid fears of political opposition and aversion to risk in a sluggish real estate market, the Dharavi Redevelopment Project failed to attract even a single bidder in the fresh round of bidding. The government has decided to give developers 15 more days to make up their minds, and the bid submission date has been extended to May 5.

As many as 16 developers, including names such as Oberoi Realty, BG Shrike Construction Technology, Omkar Realtors and Kalpataru, had initially evinced interest in taking up the project, amounting to at least Rs 25,000 crore, and participated in the pre-bid meeting.

However, none of them submitted a final bid, despite Dharavi being seen as potentially prime real estate, centrally located in the island city and in close proximity to the Bandra Kurla Complex business district.

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The BJP-led government is still hoping to start the project before the 2017 Mumbai civic polls. The project, which has been stalled for more than a decade, was rejuvenated in January.

Nirmalkar Deshmukh, chief executive officer at the Dharavi Redevelopment Project Authority, said, “The time given to developers was actually more than sufficient. We had floated bids on January 30. But, I think it is just because of the overall real estate market conditions in Mumbai right now that not even a single developer has come forward. We are not changing any terms and conditions of the tender documents, but have decided to give interested bidders some extra time to put in their bids.”

A senior official with a construction firm that had attended the pre-bid meeting, however, said that developers had issues with certain conditions that were put down in the tender documents and until those are changed, the government is unlikely to get any bids.

“Commercially, the project wasn’t feasible. One of our issues is that we had asked the government to freeze the rules and regulations for this project, considering it will have a long gestation period, and any changes in building construction norms, premiums, floor space index and area of houses due to demands from slum dwellers will make our entire costing go for a toss. The government didn’t appropriately address our concern,” he said.

Besides several flip flops in policy until now, and opposition from some Dharavi residents with political support, developers had several technical issues that they expressed during the pre-bid meeting. They feared possible height restrictions due to civil aviation norms – with Dharavi located close to the airport, they will not be able to use the entire floor space index. Further, exclusion of large tracts of land under railways and Tata Power from the project, stringent open space norms while accommodating carpet area for rehab and renewal tenements with height restriction may hamper feasibility. Some even felt that the condition of preparing a list of residents eligible for rehabilitation within eight months was too optimistic and wanted the time frame to be increased to 12-15 months.

An ongoing agitation backed by residents of buildings and chawls of Dharavi and local political leaders may have also deterred developers, officials said.

The Dharavi revamp authority had invited bids for four of the five sectors of the 240-hectare slum sprawl on a public-private partnership model with one developer for every sector. The state government has appointed the Maharashtra Housing and Area Development Authority (MHADA) to redevelop the fifth sector.

For the other four sectors for which bids were called, the government estimated the redevelopment project, with a floor space index of 4, to create 1.08 lakh houses across the four sectors, of which 40,000 would have formed the sale component of the four developers. Of the rest, at least 55,000 houses were to house Dharavi’s existing eligible residents, while the rest of the housing stock was to be given to the government to be sold as affordable housing in the market. The government set a target of seven years to complete the project.

Pankaj Kapoor, managing director at Liases Foras, a Mumbai-based real estate research firm, said, “Dharavi is a major votebank and an election is coming up soon. The moment protests begin at the local level against the project, even those in the government who are in favour of the redevelopment may start opposing. At such a time when developers are finding it tough to meet even present commitments, making future commitments with such uncertainty is risky.”

An earlier attempt to tender out the redevelopment of Dharavi in 2007 too was unsuccessful. Fourteen developers had responded, of which seven later dropped out and the tenders were ultimately cancelled in 2011. The redevelopment project has been in the works since 2004, but has remained a non-starter due to political opposition, frequent policy changes, design alterations and differences with consultants, among other reasons. It has been a poll issue for all parties in every election conducted since then.

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