India: Investors Build Free Apartments in Mumbai Slums

Not Everyone Is Grateful as Investors Build Free Apartments in Mumbai Slums
Anand Giridharadas/International Herald Tribune

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By ANAND GIRIDHARADAS
Published: December 15, 2006

A growing number of towers like Crescent Heights and Buckley Court, house the rich and the aspiring. At the other extreme is a growing labyrinth of slums, sheltering more than five million people in squalid conditions. There are shortages of water and toilets. Disease is rampant, as is the odor of waste and garbage.

Yet now, a housing boom in this fast-growing economy may start to change that. Under a government program that is unusual in slums the world over, investors both here and from abroad are doing what was once left to philanthropists: giving slum dwellers new apartments free of charge.

Builders raze entire slums and use part of the land for tenement houses to shelter the former residents. The apartments are 225 square feet, the size of a typical shanty here. In return, the developer wins the right to build lucrative towers on the rest of the land, and pays nothing but the cost of resettlement.

Investors are eager to build these homes. Â"The moment you put them in a tower, youÂ're releasing 90 percent of the land,Â" said Pranay Vakil, chairman of the Indian arm of Knight Frank, a global real estate consulting firm.

So far, 100,000 apartments have been built in Mumbai, formerly known as Bombay, housing 600,000 people, said Debashish Chakrabarty, a civil servant who runs the cityÂ's Slum Rehabilitation Authority. Â"Not only is there a component of providing good housing to people who cannot afford it,Â" Mr. Chakrabarty said. Â"It also promises good returns to many of these big-time developers.Â"

Even so, the slum dwellers and their charitable backers have questions about resettlement. They are worried that todayÂ's horizontal slums will simply become tomorrowÂ's vertical ones, without the vibrant street life and sense of community.

There are 933 million slum dwellers worldwide, according to the United Nations, and many different methods of addressing their plight. A common approach is for government to sanction slum clearance and then build low-cost housing with public funds.

The United Nations is now financing an alternative project to give slum dwellers small loans to improve the quality of their shacks on their own and, in the case of natural disasters, to build new homes.

What makes the Mumbai program unusual is the participation of investors building free apartments, said Toshi Noda, Asia director of the United Nations Human Settlements Program, known as UN-Habitat.

Â"Free apartments is not common,Â" Mr. Noda said. Â"It is a new scheme. I think it will work, because the private sector can get their profit by developing the other half of the real estate.Â"

Some leading property developers and their financiers have noticed. Trikona Capital, a New York investment fund focused on Indian real estate, recently said it would invest $1 billion over the next four years in slum resettlement in Mumbai and the lucrative construction that follows. The fundÂ's investors include financial giants like Lehman Brothers and Fidelity Investments.

Â"It makes a lot of investment sense for us,Â" said Mahesh Gandhi, a Trikona director. Â"WeÂ're not here just to serve a social cause.Â"

Next year, the government will open bidding for resettlement in Dharavi, a vast Mumbai shantytown with hundreds of thousands of residents that is one of the worldÂ's largest. Foreign companies, including ETA-Ascon of Dubai, have expressed serious interest, Mr. Vakil of Knight Frank said. Trikona is also considering a bid, which could be in the range of $200 million for each of five 107-acre plots.

So profitable is resettlement becoming that a local developer, Akruti Nirman, has built its business around slums, and it is expected next year to raise $100 million in a stock offering that has attracted overseas investors.

The moves reflect a surge of enthusiasm for Indian real estate, which was closed to foreign capital until last year. Billions are pouring in from firms like Goldman Sachs to build malls, apartments and offices, and many property-related stock offerings are planned in 2007. Over the next decade, the real estate industry is projected by analysts to grow to $102 billion from $14 billion today.

Typically, land and construction costs of slum resettlement amount to roughly a third of the total project cost. But because builders usually get the land free or at a big discount, the effective cost an acre works out to much less than the market price of the land.

While some occupants of the new luxury buildings might be squeamish about living next to new buildings with former slum dwellers, the alternative is often to live next to old slums — and their dwellers. Businesses like Tata Consultancy Services, a large outsourcing company, and the French bank BNP Paribas have moved into towers built on former slum grounds.

Yet critics worry that building skyward will strain public services and disrupt the livelihoods of vendors, shopkeepers and fishermen, whose work calls for them to live in ground-level homes where they can store their boats and nets or closely supervise their stores.

They warn that the poor will not be able to afford the upkeep of capital-intensive buildings, and there are fears of replicating the ghettoization that has fed unrest in suburban Paris and elsewhere.

Big buildings also deprive slum dwellers of self-sufficiency, said Celine dÂ'Cruz, a coordinator in Mumbai for the advocacy group Slum Dwellers International. In a slum, a broken pipe is fixed by a local handyman. In an intricately built tower, professional help is usually required.

Â"I wouldnÂ't glorify that ecosystem,Â" Ms. dÂ'Cruz said of the slums. Â"But people have found an equilibrium within their means. The moment you give them something beyond their means, itÂ's a disaster.Â"

A slum can be resettled if 70 percent of the households agree; dissenters who remain are removed forcibly. Slum dwellers who arrived in Mumbai after 1995 are excluded from the resettlement program in an effort to discourage continuing migration, and they too can be ejected when slums are cleared.

A recent visit to units built by Akruti Nirman in the Andheri suburb of Mumbai found mixed results. The new buildings were concrete, with windows protected by grates. Children played in a clean courtyard below.

Next door was a warren of shanties not yet cleared. The picture was of a typical slum in India: tiny spaces. Clothes hung on outside walls. Cigarette butts and other debris floated in streams of sewage in the streets. Children played near dirty, mosquito-infested puddles.

But many living there said they wanted their slums back: shared open latrines instead of private toilets, rag covers instead of wooden doors.

Â"It was much better there,Â" said Ram Jatan Pal, a graying man who supports eight people on the few dollars a day he earns as a sidewalk bookseller. Â"Before, there would always be four guys around your shanty. We sat, we chatted. Now itÂ's like being caged in a poultry farm.Â"

The home was a single room with an attached kitchen and bathroom. A bunk bed was littered with Mr. PalÂ's books, making it unavailable for sleeping, which is done instead on straw mats on the floor.

Â"If they close this building and give us our slum back, we are ready to leave immediately,Â" Mr. Pal said. Â"EveryoneÂ's doing this for their own profit.Â"

But the Beheras, a family of migrants from the state of Orissa, said resettlement gave them new dignity.

The mother, Shisula, appreciates having her own toilet. Lilly, her 12-year-old daughter, studies twice as long in the silence of an apartment.

That afternoon, the family was snapping together hundreds of pairs of sunglasses in the apartment, a cramped room that doubles as a factory during daytime.

For Rita, 17, a school dropout, what the Pals call loneliness is what the Beheras call privacy.

Â"ThereÂ's peace here,Â" she said.>