An Affordable Home in Mumbai is a Dream

It’s one of Mumbai’s supreme ironies: people have jobs, sometimes even halfways-decent jobs, but most of them can never boast of a home.

With rising real estate prices, more and more people with perfectly respectable jobs cannot find affordable housing to buy or to rent. More than half the population lives in slums. But who is responsible for such a social imbalance? Is it just the builder who wants to maximise his profit? Is it the government, which fails to provide a single-window clearance  to speed up the approval process for builders? Or  is it the buyer who wants the maximum return on his investment?

In 2010, the Maharashtra Chamber of Housing Industry and the state government inked a Memorandum of Understanding (MoU) with the aim of developing five lakh affordable homes in Mumbai and the Mumbai Metropolitan Region (MMR). Two years later, the homes remain a distant dream. Realtors cite their poor financial health, a slowdown in the economy, rising cost of construction material like cement and steel, restricted floor space index and project delays as the reasons for shying away from affordable housing in Mumbai.

Says Paras Gundecha, president of the Maharashtra Chamber of Housing Industry (MCHI-CREDAI), “The real estate sector has virtually come to a standstill due to the innumerable delays that developers encounter.” This delays the completion of projects, leaving developers with no option but to pass on 25 percent additional costs to the consumers, he added. Builders bank on speedy execution to control costs and keep prices low, and by delaying approvals regulators blunt  low-cost housing  initiatives.

In any case, affordable housing requires support from the government, given the high land cost. Without a proper policy or a regulator in place, the role of  state agencies in facilitating affordable housing is limited by the sheer pressure from the politician-builder nexus, as the case with Maharashta Housing and Development Authority, or Mhada, demonstrates.

According to a research paper by PH.D Scholar Sahil Gandhi published by the National Institute of Urban Affairs, only 5-6 percent of Mumbai’s population can afford a house in Greater Mumbai. Given the current property rates, income distribution and institutional lending rates, 70 percent of Mumbai’s housing demand can only be met if property is priced Rs 20-25 lakh, he argues. This wouldn’t even cover the construction cost for developers in a city where land prices have risen by 200-300 percent in just the past four years.

“The real value of ‘affordability’ is Rs 15 lakh. At this price, a developer will lose his shirt because he will have to make houses  in the outskirts to gain cost advantage,” says Sanjay Dutt, MD at real estate services firm Cushman and Wakefield.

This, however, is the true reality of Mumbai. The aam admi has to live at least 60-90 km away from the city if he can even dream of owning a house.

The only solution is if government and state agencies take up the matter in their own hands and build sound infrastructure along with housing units to support sustainable living.

The Planning Commission has pegged the total shortage of dwelling units in urban India at  26.53 million with low-income households and the poor facing the maximum brunt. But the affordable model’ has been all but abandoned because there is a fundamental infrastructure and structural problem in Mumbai. The real shortage of land has been further exacerbated artificially by poorly conceived central, state and municipal regulations. “By excessively controlling construction in centrally  located areas and by making land recycling difficult, some  regulations tend to push urban development towards  the periphery,” says Ashutosh Limaye, head research, Jones Lang Laselle. ”Strict regulations, when not implemented correctly, lead to rampant  corruption as there are multiple stakeholders with large stakes in  real estate development.”

This was especially true in the National Textile Corporation mill deals in Mumbai in 2005: NTC sold its five mill land parcels at record rates to realty majors such as DLF, Indiabulls, Lodha and Kohinoor group triggering a ripple effect that struck at the very base of housing affordability. Given the prices at which mill land deals took place,  no project was viable, said Kapoor. “Some even  raked in a profit by getting the government to increase the FSI in specific cases. However they effectively jacked up property prices across Mumbai, which ultimately drove people to peripheral areas such as Kalyan-Dombivli, Vasai-Virar and Mira-Bhayander,” he added.

The problem that inhibits affordable housing cannot be tackled by developers alone. Unless the government fast-tracks sound, people-oriented policies and  engages citizens in discussions at various stages of the preparation of plans and guidelines, it cannot be solved. Secondly, “slum-related policies should focus on providing infrastructure to existing slums and implementing measures that restrict the densification of slums as well as the formation of new settlements,” said Gandhi in his report. This can only be done if Mhada takes the responsibility of at least  60-70 percent of the rehabilitation  and ensures low-income buyers are not squeezed  out by the better informed investor class.