Spread over 2.40 sq km and home to over 60,000 slum families, Dharavi is Asia’s largest slum. The state government has now proposed a makeover of Dharavi as Mumbai’s new business district. On Tuesday, the Devendra Fadnavis-led Maharashtra government approved a fresh plan for Dharavi’s redevelopment. While it involves resettlement of the slum residents into planned habitats, the revamp plan’s mainstay is to transform Dharavi into a commercial hub.
Citing attempts of the slums’ revamp that failed in the past, an official communication from the Maharashtra’s Housing department, which was submitted to the state’s cabinet, said that the Rs 26,000-crore revamp project would not be viable if it was promoted as a residential redevelopment project. “For the project to be economically viable, the plan is to transform the region as a hub of business and economic activity,” the communication states.
Dharavi stands on a slice of prime land in the heart of the financial capital. It is just a stone’s throw away from India’s richest business district- the Bandra-Kurla Complex, where commercial office premiums are among the highest in the country. The slum sprawl itself is home to an informal leather and pottery industry which employs over a lakh people.
While Dharavi’s revamp was first conceptualised in 2004 and has been on the agenda of every political party, it has failed to take off with developers reluctant to invest in it. While the previous approach had been to divide the 240-hectare slum into five sectors to be developed separately and most holding a predominant residential character, the Fadnavis government has now combined all the sectors into one large cluster.
With the project expected to release over five crore square feet of saleable built-up space in the market, the new plan is to utilise a bulk of it for economic activity, confirmed sources. Apart from labelling the project as one of “vital importance”, the state cabinet on Tuesday also tweaked the economic development model.
Citing that the past attempts of private redevelopment had failed, the government has now decided to implement the project through a Special Purpose Vehicle (SPV) where it will hold 20 per cent stake. Lowering the risk for the selected private player (who will be the SPV’s lead partner), the government will make a capital investment of Rs 100 crore in the project.
On Tuesday, the government also extended a bouquet of fiscal sops and indirect subsidies to the project, which included waiver of stamp duty on the development rights agreement and also the first sale of the saleable area, and property tax refunds for the components used for rehabilitation of slum families and building infrastructural facilities.
On the lines of the state’s industrial promotion policy for mega investment, the cabinet has also approved in-principle a rebate of state’s share in Goods and Services Tax (GST) over taxable components for 15 years with the exception of cement consumption, which would not be exempt after an investment of Rs 2,000 crore. Following the cabinet’s nod, a proposal for permitting the concession in GST will now be placed before the Centre’s GST Council. Fiscal sops and grants have also been proposed for conversion of polluting industrial units to non-polluting ones, said sources.
Incidentally, the state’s Revenue and Finance departments have both objected to the tax concessions and the subsidies. The former has claimed that waiver of stamp duty on development rights agreement alone would cost the state exchequer a loss in revenue of over Rs 1,000 crore. The Finance department, meanwhile, has stated that the concessions amounted to extension of indirect subsidies that were inappropriate. However, the state’s cabinet has voted in the favour of the housing department’s contention that these sops were necessary to make the project “economically viable” and “attract investors.”
In a first, the state-run Dharavi Redevelopment Authority (DRPA) has also obtained the cabinet nod for a proposal to not collect land premiums and the premiums on compensatory fungible (additional FSI over and above permissible FSI) for the saleable area. The state’s Urban Development (UD) department has objected to the move.
Further, the cabinet has proposed lowering of premium for open space deficiencies to just 10 per cent of the ready reckoner rates or 2.5 per cent of the basic FSI, while proposing that the DRPA be allowed to retain it instead of the Mumbai municipality. Sources confirmed that the UD department is not in favour of the move.
Allowing the CEO of DRPA special powers to sanction building plans, acquire land for the project, and remove encroachment, the government has also permitted the SPV to sell the transferable development rights generated from the projects anywhere in Mumbai. The TDR is normally conferred on the land holder. About 70 per cent of the Dharavi land is owned by the Mumbai municipality and the state-run Maharashtra Housing and Area Development Authority.
About 30 hectare of private land is proposed to be acquired in lieu of TDR benefits or compensation in the form of developed land.
The government has argued that the formalisation of the industry in Dharavi will result in economic growth and boost tax collections in the long-run.