Mumbai real estate: How big-name developers are turning slum-bay into luxe-bay

MUMBAI: Piramal Mahalaxmi is a premium housing project that offers luxury apartments with panoramic views of the Mahalaxmi racecourse and the Arabian Sea. The 2, 3 and 4 BHK apartments, in three towers, promise a “lifestyle filled with luxury, comfort and extravagance”. Piramal Mahalaxmi is also Mumbai’s tallest slum redevelopment project, executed under the state’s Slum Redevelopment Authority (SRA).
For decades, the words ‘luxury’ and ‘slum rehab’ didn’t go together – not any more. Piramal Mahalaxmi is typical of a new trend, where an increasing number of branded developers are entering the slum rehabilitation space, ironically, to sell premium and luxury residences. A handful of such projects has been completed in the last couple of years, where slum-dwellers have received 300sq ft homes, as mandated by the SRA; developers are selling luxury apartments, as part of the free-sale component of their agreement with the SRA, and the city gains large open spaces, once covered in shanties.
What’s in it for branded developers? In a nutshell – massive incentives in Floor Space Index (FSI) and a host of policy changes such as the new Development Control and Promotion Regulations (DCPR) 2034, strategic location of the land parcels, a dearth of larger land parcels, better margins, newer business models, evolving dynamics in real estate, and market consolidation.
Among the growing roster of such developers are: Godrej Properties, Adani Realty, L&T Realty, Ashar Group, Piramal Realty, Prestige Group, Forum Group, Chandak Group, S D Corporation and Oberoi Realty. According to industry sources, two Bengaluru-based companies, Puravankara and RMZ Corp, are scouting for ‘lucrative slum projects’ to expand their realty portfolio in Mumbai.
Modus operandi
A common trend is for branded developers to take over stressed or stalled SRA projects at strategic locations that have the potential to be lucrative. Piramal Mahalaxmi, for instance, was deemed a stressed project in 2018. Spread over seven acres, the project will house 7,000 slum-dwellers from the nearby Dhobi Ghat.
Piramal Realty and Omkar Realtors & Developers signed a joint venture agreement to revive the project in a 60:40 revenue-sharing agreement. While Omkar undertook ground-zero management – the toughest part in SRA projects – that involved obtaining approvals and constructing the rehab component, Piramal Realty handled construction and sale of the free-sale, premium apartments. In August, the first batch of rehab homes was handed over in two 42-storey towers. Possession of premium apartments in a 65-storey, free-sale building is expected to start by June 2025.
To keep their brand value intact, the branded developer usually doesn’t disclose the SRA nature of the project; it merely advertises it as a premium project. For example, Oberoi Three Sixty West, Worli, is a joint venture between Sahana Realty and Oberoi Realty, to rehouse 2,300 slum families. The uber-luxury apartments have a price tag of over ₹50-100 crore each. The rehabilitated residents have been accommodated behind the upscale residences, owned by the who’s who of Bollywood and top corporate executives.
Apart from rehousing slum-dwellers on non-prime parts of the property, builders are also permitted to rehabilitate the slum residents elsewhere. In these instances, a large part of the original land is reserved for premium housing.
Slum rehabilitation projects involving branded players are gaining ground in the Mumbai Metropolitan Region (MMR) as well. The Ayushi Group teamed up with a smaller builder to develop Ashar Pulse at Majiwada in Thane in April 2022. “The SRA project was stuck for eight years. This project, launched in November 2022, to develop 1.2mn sq ft, has mixed-use development of ground and two floors of retail space and 900 free-sale homes of different configurations,” said Ayushi Ashar, director, Ayushi Group.
Omkar Realtors & Developers had teamed up with L&T Realty’s Crescent Bay in Parel, where 1,200 residences were created after clearing 7,000 shanties spread over 17 acres.
“To give momentum to stalled and delayed schemes, an amnesty scheme to appoint developers through a tender process was floated by the state government in May 2022. Prior to developers taking up such projects, we invited them to get empaneled with us,” said an SRA official. During the first half of 2023, 30 developers were empanelled with SRA in three categories based on the total square feet developed by the company.
Why the shift?
The prime reason large developers are jumping on the slum rehabilitation bandwagon is the massive FSI incentive offered to them under these projects. Under the new DCPR 2034 policy reforms, developers executing projects under SRA get an FSI of up to 4. They can also avail fungible FSI, also called premium FSI, which simply means they pay a premium to the state authorities to build higher than the FSI cap. Fungible FSI works out to up to 35% for residential, and 20% for industrial and commercial developments. Builders get to generate Transfer of Development Rights (TDR) while undertaking slum projects. The developer itself can utilise this TDR or sell it to other players in the market.
Also, the economic impact of the pandemic has led to consolidation of the real-estate industry, where developers are exploring options such as joint ventures and SRA projects, where the initial sizeable investment to purchase land is not required.
“This regulatory environment has nudged prominent developers to explore new micro markets within Mumbai via the SRA route. By engaging in SRA projects, developers are able to connect with a previously untapped demographic, allowing them to build both rehabilitation projects and free-sale projects,” said Niranjan Hiranandani, chairman, Hiranandani Group.
Hiranandani, who has entered into a joint venture for an SRA project at Park Site, Vikhroli, adds, “The JV for SRA projects is effective as it allows developers to pool resources, expertise, and mitigate risks. However, it is not the only successful approach. Some developers may find success with independent ventures, particularly if they possess strong financial capabilities, regulatory acumen, and in-house expertise.”
Saarathi Realtors’ co-founder Rajiv Agrawal, adds, “The returns for stakeholders are far better in SRA projects than in the case of redeveloping buildings. For a real-estate project, strategic location of the land is the most crucial element.”
Hindustan Times reached out to Godrej Properties, Adani Realty and Chandak Group but they refused to comment; while Oberoi Realty, Piramal Realty, Hiranandani Group, Prestige Group, Omkar Realtors & Developers and L&T Realty didn’t respond.
Some challenges
Piramal Mahalakshmi is among the success stories in this space. However, some projects are in limbo. One such project is the redevelopment of Shivprerna SRA Society in Wadala (East), taken up by S D Corporation, who was issued Letter of Intent in 2008 to clear encroachments on the state government land. The project is nowhere near completion due to litigation.
In another case, Hiranandani Group had collaborated with a leading SRA developer on the Hanuman Nagar slum project in Vikhroli. Due to litigation issues, the project was stalled but there are plans to revive it soon.
Even if this new road to slum redevelopment is sometimes rocky, the entry of large developers seems to present a workable model. Where projects were typically tied up in red tape and a host of other challenges, there appears a way forward. “As Mumbai and MMR continue to urbanise, it is likely that more branded developers will explore SRA projects, given their potential for growth and alignment with developer expertise,” said Hiranandani.