Mumbai slums are getting expensive

by on July 21, 2013 at 4:08 am in Current Affairs, Economics, Uncategorized | Permalink

Life in the Maximum City is changing:

A shanty in Dharavi is fetching a price of over Rs 1 crore, and real estate prices in Asia’s second-largest slum cluster are beating those in posh central Mumbai areas like Lower Parel.

Sample this: an 80-sq ft house in Dharavi costs upwards of Rs 25 lakh today, which is over 31,000 per sq ft, while Lodha had recently launched a new project in Lower Parel at Rs 23,000-25,000 per sq ft. In a market where sales of apartments have slowed down significantly, especially in south and central Mumbai, property sales in this slum cluster in central Mumbai have gone well and prices have doubled in the last couple of years.

Take the example of Amrish Devaliya who listed his 450-sq ft Mumbai home on a popular property portal last month. His asking price was 1 crore, but now he’s hoping to get much more. Devaliya’s property isn’t located in one of Mumbai’s many middle-class hubs, but a shanty inside Dharavi, where property prices have been on the rise over the past few years.

While the rest of the city battles falling home sales which are down 50% from the peak of June 2009 and a huge inventory pile-up of 40 months (139.33 million sq ft as of March 31, 2013, according to property research firm Liases Foras), this 427-acre slum, home to lakhs of labour that serves the Maximum City, has stood out, thanks to continuing high demand for comparatively ‘cheaper’ homes by an immigrant labour force which caters to the city as domestic help, plumbers, daily wagers, other office workers or those who run micro businesses. A healthy market usually maintains an inventory of around eight months.

Could it even be a bubble?

Prices of houses, which have tin or wooden roofs, or sometimes slightly better with brick structures, but no attached bathrooms, have more than doubled in the last two years. Typically, deals for these homes are struck by the roadside. If you are on the lookout for a house here, you could be accosted by a so-called real estate agent at the corner of a street. These agents scour the streets, looking for buyers and sellers and most of them don’t even have a registered office: they get 2% of the deal size as commission in return for their services.

Here is more, and I thank a Harsh Ketkar, a loyal MR reader, for the pointer.

Here is an excellent piece on building in Mumbai, it ties together infrastructure, civil society, Jane Jacobs-like ideas, and other points, all in a very short space.

Rahul July 21, 2013 at 5:58 am

The fact that it’s a slum or tin-shed’s irrelevant: The real price is for the land underneath. Slum can easily be turned into a skyscraper of condos in a year or two. Actual building cost is only a fraction of the real-estate cost.

What catalyzed the price spurt is new, more liberal (and partly corrupt) land zoning rules, and rapid changes in technicalities like FSI (Floor Space Index), TDR (Transfer of Development Rights) etc.

Jacob A. Geller July 21, 2013 at 6:44 am

Rahul’s right. Where I live in Gurgaon, a few decades ago this land was a bunch of worthless rocks. Hardly anyone lived on it. The people were poor farmers. Then a ton of real estate developers made them very rich practically overnight, by buying up all their (by all appearances worthless) land and developing it to the point where it’s now a booming city of 1.5 million people, and a corporate/industrial hub.

And when I say booming I mean *booming.* The future cash flow of even a worthless-looking tin hovel could be enormous, if Gurgaon is any indication.

Speaking of Jane Jacobs, there is an interesting relationship to rape culture in this story. Right now Gurgaon is an extremely dangerous place at night — local bands of men go around after about 10pm or so and rape women. Taxi drivers take women from pubs to side streets and they’re raped their too. The locals tell me that this is in no small part due to the fact that Gurgaon sprang up from nothing practically over night. The people got rich, and other people moved into the area en masse, but the culture of the people who were living there didn’t change overnight. So people went from being socially backwards (e.g. selling wives or daughters to brothel-owners was considered normal) but extremely poor, to suddenly being rich in an area where it is common for women to be out late at night, unprotected, in women’s clothing. The clash between culture and development didn’t *increase* the number of rapes, necessarily, it just changed their form, from marital rape or sexual slavery to even-teasing and anonymous gang-raping.

…horrid story I know, but that’s the word around here and it affects daily life in very interesting ways. And it’s related to property values in Mumbai slums.

Jacob A. Geller July 21, 2013 at 6:45 am

…I meant *Western clothing, not women’s clothing.

Jacob A. Geller July 21, 2013 at 7:10 am

PS – What Rahul is saying about the zoning rules, etc., in Mumbai, is (was?) certainly true for Gurgaon. The Delhi government ceded control of real estate development in Gurgaon to private corporations some decades ago, and offered very attractive tax incentives, slashed red tape, and so on, which is what brought on the boom (and probably also a considerable improvement in the quality of life, downsides notwithstanding).

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