Why nobody wants you to have an affordable home in Mumbai

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.

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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**.**

[caption id=“attachment_458275” align=“alignleft” width=“380”]  With rising real estate prices, more and more people with perfectly respectable jobs cannot find affordable housing to buy or to rent. AFP[/caption]

But the truth is that neither the government nor the developer thinks that affordable housing is essential. “Why should they? After all, developers are businessmen and not social entreprenures,“says Anirudh Walhal, Director at property research firm DTZ. When affordable housing is not your core business and when there is enough demand for your regular projects, builders are bound to stay away from affordable housing given the low margins. Only a few listed companies like Godrej and DLF, which have a reputation to maintain and are accountable to shareholders, migrate to middle-income projects from luxury projects when recession sets in in order to offset the impact of unsold inventory in luxury homes. But here too houses are sold to the investor and not genuine buyers - as in the case of Godrej Properties’ Gurgaon project, where the company sold 50 percent of the flats on the first day of launch, a realty expert told Firstpost on condition of anonymity. Typically, end-users visit a site three to four times before making their down payment, not buy on the first day of launch.

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.

Sunil Makhija (35) is a clerk at a private bank in South Mumbai’s Opera House; his wife works in a beauty parlour in Kandivili. Their combined monthly income is less than Rs 35,000. Makhija has two options: either own a house in Karjat, 90 km away from Mumbai, and spend five hours commuting everyday, or live in Mumbai’s slums because of its proximity to the city. Makhija chose the first option. His only saving grace, however, is that Karjat is well connected to the city by local trains that run frequently, and a small house can be bought for Rs 5 lakh.

While Makhija has to spend six hours a day commuting everyday, Pankaj Kapoor, MD at realty research firm Liasas Foras, says a low-income housing scheme only works best when affordability and habitation needs go hand-in-hand. Most of the people opting for low-cost housing work in the city, but projects are coming up outside the city. There are no incentives to move out of the city, in terms of facilities like schools, hospitals etc. “These are nothing but ghost townships,” he argues.

Kapoor adds that there are hardly any genuine buyers because these areas are not habitable and developers have failed to make community housing possible as the net intensity of life is still only in the MMR region.Take the case of Rashmi Housing in Naigon which is offering one-bhks at Rs 450 a square foot. Even though the project boasts of a 47 percent price appreciation in the past two years, according to Monitor Inclusive Market, the overall area is not developed with smaller roads being almost non-existent.

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.

Which is perhaps why others who faced Makhija’s dilemma opted instead to live like squatters in the city and pay much more for basic amenities like water, power and sanitation, but hoping that they will benefit from the next slum rehabiliation plan.)

According to an EPW article by Shirish B Patel, 81 police inspectors and 4,413 police constables live in slums in Mumabi “There could be no more glaring instance of the city providing perfectly legal jobs - in this case the job holders are officers of the law - and at the same time providing no place for them to stay,” he argues.

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.

Patel says in his EPW article that “past chief ministers have withheld signing orders pertaining to urban development until the contents had first been run past a builder friend. Not all of them will want more land on the market to enable more affordable housing - whether it is salt pan lands or Port Trust lands or any other.”

And it is this politician-builder nexus that has prevented the development of the Mumbai Trans Harbour Link, a 22-km freeway-grade road-bridge that is set to begin in Sewri, South Mumbai, crossing Thane Creek north of Elephanta Island and end at Nhava Sheva. The state government cites paucity of funds as the reason for delaying the project, but the link would cut travel time to just 20 minutes, opening up surplus land, which would will bring down Mumbai property prices.

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.