The Hindu Business Line : Redevelopment

About 20,000 old and dilapidated cessed buildings in Mumbai, which house over 20 lakh families, can now be redeveloped with residents to get a minimum of 225 sq.ft of developed space.

Cessed buildings refer to buildings that were built earlier than 1940 and are under the maintenance of the Government which collects a cess for the maintenance cost. These buildings which have come under the rent control Act were neglected by the owners who found it unviable to maintain them. The Maharashtra Housing and Development Authority planned to redevelop these buildings but the developers found the conditions for redevelopment unviable. A recent Supreme Court ruling cleared up the issues and has paved way for the redevelopment.

A conservative estimate places the total saleable area at 300 million sq.ft, on the premise that the average size of the plots is 500 sq.m.

The challenges look formidable given that redevelopment will mean providing alternative accommodation to tenants involving several rounds of negotiations with them and the landlords, besides the bickering on the monetary component that goes along with such transactions.

A compact segment

Mr Pujit Aggarwal, Managing Director, Orbit Corporation, says about 50-60 developers alone are totally into it and apart from a handful the rest have no more than one or two projects on hand. At a frantic pace the redevelopment could be done in 15-20 years. However, some developers are convinced that it could take anywhere between 30 and 50 years to complete.

Orbit Corporation is a major player in the redevelopment segment, with 39 projects on hand, 12 projects in the pipeline and four more to be added later this year. “About 1.1 million sq.ft is under production and an additional two lakh sq.ft will be added before the year end,” Mr Aggarwal says.

A viable proposition

Mr Mayur Shah, Managing Director, Marathon Group, says Marathon had done a few redevelopment projects but had come to realise the limitations the land size imposed on open space and on-site infrastructure, though financial viability was assured. The company would only venture into redevelopment if it could be done as a cluster, so that sufficient open spaces could be provided. On fears of the additional load that the projects would put on existing infrastructure, Mr Shah says the tenants would only get more living space and additional space would satisfy the existing demand from the locals who were anyway living in South Mumbai.

Curbs off

The Supreme Court recently set aside a Mumbai High Court ruling of 2006 imposing restrictions on compulsory open spaces and certain certifications mandatory under the Maharashtra Housing and Development Authority, besides additional approvals from new committees. Developers had considered the High Court orders stringent and commercially unviable. The order relates to cessed buildings built prior to 1940. It is estimated that over two million people reside in the creaky structures — mostly in single room units of about 100-120 sq.ft.

In the late seventies, the Government levied a cess on the buildings for repair and maintenance as landlords were unwilling or could not meet the expenses with rentals frozen by the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947. Developers say there are cases where the landlords could not be traced.

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