Wednesday, December 12, 2012

Mumbai's redevelopment: Realty dream a nightmare for human relations

Mumbai's redevelopment: Realty dream a nightmare for human relations
Mumbaikars who were neither poor nor rich had one thing going for them — friendship and neighbourliness rare in other big cities. But redevelopment, creating modern apartments out of old houses, is destroying those relationships and creating bitter feuds. That’s a tragedy for the city.
Mumbaikars who were neither poor nor rich had one thing going for them — friendship and neighbourliness rare in other big cities. But redevelopment, creating modern apartments out of old houses, is destroying those relationships and creating bitter feuds. That’s a tragedy for the city.

Much of Mumbai's middle class living in cooperative housing societies of vintage 1970s and '80s are traumatised by an ongoing, or impending, event that is triggering suspicion and turning friends into foes — redevelopment.

This involves getting a builder to come in and make an offer to demolish the dilapidated structure and build a new one in its place — this requires the developer to pay for alternative accommodation while the work is on, shell out cash for approvals and fund the new building. The builder recovers cost and makes money by putting in more flats than what the original structure had and selling those at current market prices.

The operative part is "makes money". That's where the rottenness begins to set in, for everyone wants a share of it, even your neighbours who you've addressed as uncle and aunty since Class IV. Their avuncular features have diminished over the years because they're now empowered by being part of the society's managing committee.

The profile of a typical member of a housing society managing committee in Mumbai is of a loser — someone who has been pushed around all his life, who was stuck in a low-paid job and was never given any importance. Post-retirement, the grandiose titles of honorary chairman, honorary secretary and honorary treasurer are their ways of getting back at an unfair world.

It keeps them busy and provides a sense of satisfaction when they rattle out provisions of the Maharashtra Housing Societies Act bylaws to a befuddled senior neighbour who is told that he has to seek the committee's permission before squatting down for the morning ablutions. This is irritating, but harmless.

The true monsters come out when the society decides that this cowshed is way past its expiry date and a developer needs to be invited to do the "needful" vide resolution X passed in the annual general body meeting. That decision was taken at a meeting adjourned twice over for lack of quorum because most of the other residents were very busy watching Bigg Boss.

Building Complex

Greed is easy to succumb to because the money is relatively big for a person who has led a very ordinary life. The maximum profit to a developer comes from a building where the floor space index, which is the ratio of built-up area allowed in relation to the land area, is not fully used. The FSI cost in Mumbai can range from Rs 30,000 in Worli to Rs 8,000 in Goregaon. Ten thousand square feet of spare FSI in Worli is worth Rs 30 crore.

Mumbaikars who were neither poor nor rich had one thing going for them — friendship and neighbourliness rare in other big cities. But redevelopment, creating modern apartments out of old houses, is destroying those relationships and creating bitter feuds. That’s a tragedy for the city.
In cases where the FSI has been fully consumed, the additional free sale portion comes from the developer buying transferable development rights (TDR) and utilising spare FSI from a neighbouring property. TDR prices are typically half of the market value of land cost — so TDR cost in Goregaon will be around Rs 4,000 per sq ft.

In a fair and above-board transaction, the developer should pass on some of that value to residents of the building, either through money paid as a corpus to the society, or additional space in the flats, or both. Here's where the managing committee can be lured into agreeing to a raw deal for their neighbours of decades. Two-crore rupees passed on by the builder is a very small amount for him, while for the members of the managing committee, it's an amount they've never seen before.

There are, of course, guidelines laid down by the Maharashtra government to ensure that all residents of a housing society get a fair and market-driven deal. A housing society cannot be handed over to a designated developer unless it is agreed to by at least 70% of the members. The process of selection of a developer has to be preceded by the appointment of a project management consultant (PMC), who is an architect and knows the exact value of the property and how much residents should get as their share of the upside.

Redevelop and Perish

But as is the case with deviant India, this process is almost always subverted by appointing a PMC who gives a doctored report to favour a certain builder. Housing societies with literate and aware residents will make sure that there is transparency in the selection of the project management consultant.

This is done by asking some PMCs to send in their profiles with track record of work done and the value they brought to residents in housing societies that they have previously advised. This is crosschecked with references from residents of societies who have availed of their services and can vouch for the veracity of the PMC's claims. The developers short-listed are also asked for a similar profile and a list of projects successfully delivered.

None of this is done in case the managing committee wants to cream off some of the money for themselves, in which case they typically end up with a developer who has little experience, virtually no capital and is hungry to make a break. Land is prohibitively expensive in Mumbai and a redevelopment agreement grants a builder access to that asset for free.

The builder assumes that once the old building is demolished and a board put up announcing the new one in fancy photographs of stunning flats with jogging tracks, swimming pool and swathes of green with happy children dotting it, buyers for the free sale portion will queue up and provide funds to construct and complete the project.

Owing to lack of experience, connectivity and capital, such builders usually falter at step one, which is getting approvals from the authorities for redevelopment. That is still safe for residents of the buildings because in most cases, their home would not have been razed to the ground until that is in place.

But there have been cases in Mumbai where buildings have been demolished and construction stalled owing to cash flow problems for developers.

In September this year, the Bombay High Court directed the police to probe allegations of gobbling money and illegally selling floor space index against four members of the DN Nagar Housing Society in Andheri. The case dates to 2009 and by the time it is resolved, most of the owners would probably have died. The four members will probably serve time in prison, but their actions have disrupted the lives of 480 families, who will continue to live in their crumbling buildings.

The trouble with middle-class Mumbaikars, who have led too much of a blinkered existence because that's the only way they could retain their sanity, is that there is too much insularity. Those who are not in the managing committee don't want to be bothered and those in it think they can get away with pocketing large sums of money without getting caught.

Losing the Friendly Neighbourhood

Regardless of the outcomes in each case, what stays constant is that it turns decades-long neighbours into bitter enemies. Owing to Mumbai's small-size flats where all of the front doors are clustered into a space that's barely 5 ft by 2 ft, the relationships built are closer than family ties. Many a redevelopment tale in Mumbai has broken that camaraderie between cheek-by-jowl neighbours. That's a tragedy because that's the only enviable thing that Mumbaikars had.

Everything else about the city stinks because it's not in their hands — the filthy streets, the horrific suburban trains and the prices. Enduring relationships were in their hands and they maintained them beautifully, until Mr Money came along.

(The writer, a former journalist, is founder of a financial firm that advises global private equity funds on real estate in India)

Source :  Uday Khandeparkar,ET

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