Redevelopment Rush Adds Feet To Real Estate Boom In Mumbai

Amit Sawant had been a resident of Vashi in Navi Mumbai since he was a young child. His parents bought a home there in the late 80s. Even as the place was considered ‘extreme outskirts’ back then, it’s now a goldmine. While its value has soared exponentially since the 2010s, his family has gained little. Married with a wife and child, Sawant’s joint family resides on the fourth floor of an old building. 

“I had requested my parents to sell it and buy a more spacious home elsewhere. But they wouldn’t budge,” Sawant says. But his problems received a spectacular solution two years back. A builder has sought the redevelopment of the 40-year-old building. 

“We’d now get a 3BHK instead of the 2BHK we now have. He also promised us many amenities. But we would really enjoy a lift, as we are tired of taking the stairs,” he said. 

Sawant’s story resonates with many Mumbaikars living in the island city, amid poor infrastructure, extensive crowds and skyrises. The post-pandemic real estate boom, combined with a large number of old and dilapidated buildings, has created a rush for redevelopment in the city. 

“The lack of basic amenities, such as lifts, parking, and proper sanitation facilities is a major concern for occupants of older buildings. These factors often become key drivers for residents to opt for redevelopment as they seek to improve their quality of life,” said Prashant Sharma, president of National Real Estate Development Council, Maharashtra. He also adds that as many as 31,000 redevelopment projects have been approved as of May 2024.

Ranjeet Pawar, director of finance and operations at Sugee Group, pegs the scope for redevelopment in Mumbai at anywhere between 50,000 to 80,000. 

The city, owned by fishermen, quickly changed hands to the British. In the late 1800s, mills set up tenements or BDD chawls for the mill workers. Other popular houses were mostly bungalows, individual homes or slums. In the 60s and 70s came the high rises with large apartments. 

Unfortunately, a lot of these buildings continue to exist offering little to their residents. “The average age of buildings undergoing redevelopment in Mumbai is any building over 30 years. Structures from the 1970s and earlier, built under the old DC (Development Control) regulations, often lack modern amenities and safety features, making them prime candidates for redevelopment,” said Sharma. 

Added to that, Mumbai has ‘cess properties’, wherein cess collected is used to repair these old structures. Almost all of these old buildings have similar problems. The toughest of them being squatting tenants of ancient structures. 

“Due to the Rent Control Act, a lot of tenants have been living in a few residences for over four to five generations. Apart from space crunch as their families grew, some of these buildings have common toilets. A lot of these buildings are also joined together. Once redevelopments come in, they’d have more space, better hygiene along with a few amenities if possible,” explained Pawar. 

A significant number of these properties have been classified as dilapidated or unsafe by the BMC or other civic authorities. In addition, the residents downvote them for reasons more than lack of lifts. The next most sought-after amenity is car parking. Most of the buildings were made in times when only a few people in a block had cars. “Now every family has two vehicles and parking has become a key issue,” adds Sawant. 

“A significant concern with the older buildings is a lack of basic amenities, such as elevators, poor structural conditions, and undersupplied water and sanitation facilities, which has created a demand for redevelopment to provide modern and fully equipped homes,” said Khetsi Barot, director and co-founder of The Guardians Real Estate Advisory. 

While the need for redevelopment has always been there, the pandemic rush for homes hastened the pace of residents consenting for it. 

“Tenant occupants receive extra area, and the owner of the building who’s barely making any money can monetise the property. If redevelopment occurs at a large scale, the economy of the microcosm gets energised with new cafes and rejuvenated,” according to Pawar. 

There have been random redevelopments across the city, but the areas that are seeing most traction include Dadar, Bandra, Santacruz, Chembur and South Mumbai areas like Girgaum and Grant Road, because of high density of older housing stock. Suburbs like Andheri, Borivali and Vashi are also seeing a flurry of activity. 

The addition of new infrastructure in Mumbai has also set the pace for redevelopment. After decades of lull in transport infrastructure addition, the city now boasts of a brand new Atal Setu trans-harbour link, an underground metro in trial mode, Mumbai Coastal Road Project along with Navi Mumbai Metro, as well as others connecting suburbs like Dahisar and more. 

Thanks to the metros and arterial roads which enhance property values, redevelopment has become more appealing to both residents and developers alike. 

“Redevelopment in Mumbai has gained speed, with new metro lines and infrastructure projects. Redevelopment activity has picked up in areas close to metro corridors, such as Lower Parel, Bandra, and Goregaon, with better connectivity and accessibility to key hubs,” said Barot. 

Builders say that they have received redevelopment requests from posh areas like Malabar Hills, Napiency Road, Peddar Road, Bandra and Sion too. 

Moreso, the floor space index rules have been relaxed for suburbs and extended suburbs, paving way for more reconstruction. The city authorities have been preparing to cope with the redevelopments as well and extend its infrastructure. 

"For surface infrastructure like urban mobility, parking areas, quality of roads, we already have the plans ready. The infrastructure below the land, like sewage water, water supply, might face challenges, as the amount of water per capita is going up,” Dr Bhushan Gagrani, commissioner of the Brihanmumbai Municipal Corporation, said at an event recently. 

A few, however, worry that redevelopment will cause a lot of gentrification in areas. Added to that is the high costs of living in a home with amenities that come with high maintenance costs, which might affect affordability of homes.

Dr Niranjan Hiranandani, co-founder of Hiranandani Group, advocated for the need to reduce premium on redevelopment.

A premium on redevelopment is a charge levied by the state for approvals to initiate, progress, or complete a redevelopment project. The premium can include charges for FSI, open space deficiency, more ground covered for construction lobbies, lift wells, and staircase. 

"The challenge is to match the pace of redevelopment. Reduction of premium would create more affordable housing in the city and hence, at least 50% reduction in premium is necessary. Redevelopment should provide aspirations for a better quality of life,” Hiranandani said at a recent event. 

A lot of developers also believe that a good balance between affordable and ultra luxury apartments can be achieved. “While prime areas like South Mumbai see a shift toward luxury apartments, suburban areas continue to offer affordable housing options under redevelopment. A balanced approach ensures inclusivity for different income groups,” Sharma said.

Katya Naidu is a senior business journalist who writes about equity markets, startups, energy, infrastructure, real estate and healthcare.