SSPP stands on shaky ground

For a city that has been made up of six islands, reclaimed boulder by boulder from the sea, it is no surprise that any exercise that has ...

For a city that has been made up of six islands, reclaimed boulder by boulder from the sea, it is no surprise that any exercise that has to do with real estate gets controversial. The stakes, in what was until recently the second most expensive city in the world, are very high. And despite being hit by a deep recession, officials of the urban development department and the buildings proposal and planning departments in the state and the civic governments continue to be the most envied in their circles. Builders in their safari suits and cellphones, their chamchas ready with fat envelopes, continue to be permanent fixtures in Mantralaya and BMC corridors. So heady has been the allure that many a corporator and minister have made their fortunes in real estate. Either legally or illegally.

Into such a scenario steps the Shiv Shahi Punarvasan Prakalp SSPP, a state government election promise, an initiative to bring in Rs 10,000 crore into the housing sector to build two lakh free houses forslumdwellers and around 75,000 houses for the commercial markets. While, on the one hand, this would be bringing in much-needed cash into the market which, it is hoped would give jobs to the thousands of masons and painters of the housing industry reeling under an unprecedented recession for the past three years, on the other, it would be adding to the stock of lakhs of flats already lying vacant for want of a buyer.

The unabashed public warring between the Shiv Sena and the BJP, with the latter clearly accusing its partner of promoting builders8217; interest, has only brought into the open the hectic behind-the-scenes lobbying both for and against the scheme. For one, the SSPP is an improvement on the earlier mooted Slum Redevelopment Scheme SRS in so far as the state government, in the SSPP, is putting its money where its mouth is. The SSPP, a private company backed by the state government, will be paying builders to construct free houses for the slumdwellers. This takes away the onus on the builder toclear the slum site, give slumdwellers alternate accommodation till their houses are built, bargain8217; with the goondaism of the local landgrabbers and then wait for buyers to buy their open market components to cross-subsidise their free houses.

Under the SSPP, the builder, as it has been put crudely, works as the state government8217;s contractor. It pays him. It helps maintain his overheads. He need not give away his unsold flats to pay off his debts. At an interest rate of three to four per cent per day, the debt of the average builder is at an all-time high.

It also builds 75,000 low-income group houses for sale in the free market. Without going into the logistics of the success of such a venture, the mere idea of having almost a lakh of new flats in a market where lakhs are still unsold is cause enough to fight tooth and nail to stall the scheme.

Then, experts pick up holes in the SSPP scheme itself. Some of them are certain it would not be viable beyond Andheri. The SSPP, which will be taking up slumsacross the city, will be working on real estate rates as disparate as those of Dadar and Kandivli. As of today, big builders like the Lokhandwalas have advertised housing projects with rates as low as Rs 1,345 per sq ft at Kandivli E. In Dadar, builders offer friends houses at rates not less than Rs 5000 per sq ft. At construction costs of Rs 840 per sq ft, which will escalate considering the other overheads, the SSPP will be constructing houses at a minimum of Rs 1,200 per sq feet. Its selling rates are being pegged at a minimum of Rs 2,000 per sq feet. How would it sell these houses at Kandivli?

Secondly, where are the buyers? The SSPP has a programme wherein it plans to sell houses cheap to various agencies like the Railways to rehabilitate the slumdwellers on their tracks. 8220;Has anyone asked if the Railways are willing to buy these houses? And at what rates?8221; asks a builder. If at all, he calculates, a man is willing to buy a 400 sq feet house for Rs seven lakh, if one were to account for his monthlyoutgoing, the installments on his loan, and the money needed to run his house, he would require a salary of Rs 15,000. 8220;Would a man earning Rs 15,000 agree to live in a house of 400 sq ft?8221; he demands to know.

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Clearly, CRISIL, the rating agency for the SSPP, the five-member panel appointed by the state government to have another look at the scheme, have quite a job at hand answering all the uncertainties as the SSPP continues to be a public work in progress. The viability or otherwise of the scheme will be seen only after three years, when the buildings will come up 8212; if at all they do 8212; and the buyers8217; respond to it.

At stake is crores of public money. Somebody will have to take up for the public interest as well.

Aruna Chakravorty is a senior reporter with The Indian Express.