A controversial scheme

Published : Aug 29, 1998 00:00 IST

SHIVSHAHI Punarvasan Prakalp Ltd (SPPL), the agency to implement the Shiv Sena-Bharatiya Janata Party Government's slum rehabilitation project for Mumbai, was formed in August. The SPPL scheme is a rehash of the Government's earlier Slum Redevelop-ment (SRD) scheme which promised two lakh houses to resettle 40 lakh families living in slums (Frontline, June 13, 1997). Of Mumbai's population of 1.08 crore people, 55 lakhs live in 2,235 slums.

The SRD scheme failed for a variety of reasons. Wary of backtracking on its most popular election promise, the Shiv Sena-BJP Government revived the scheme under the name SPPL. So far, less than 2,000 houses have been built and handed over under the SRD scheme. The official deadline for the completion of the task is December 1999.

The BJP has now labelled the scheme a "disastrous project" and wants the Government to reconsider the blueprint of the new scheme before it commits itself to an amount ranging between Rs.8,000 crores and Rs.10,000 crores needed to implement it.

The main differences between the SRD scheme and the SPPL scheme relate to their structure and financing. The SRD scheme, which came under the statutory Slum Rehabilitation Authority (SRA) of the Housing Ministry, was conceived as a self-financing project for which the Government would not incur any expenditure; houses were promised free of cost for 40 lakh families. In contrast, the SPPL scheme will be controlled jointly by the Mumbai Metropolitan Regional Development Authority (MMRDA) and the Maharashtra Housing and Area Development Authority (MHADA). The SPPL will have an equity base of Rs.600 crores, to be shared equally by the MMRDA and the MHADA. All construction will be on public land, the value of which is estimated at Rs.500 crores.

Unlike in the case of the SRD scheme (where the SRA was only a facilitating agency), the SPPL will actively take on the role of a builder. Private builders themselves have been given the role of contractors so as to get them to participate in the scheme. Under the earlier scheme, the builders were expected to make the capital investment without any input from the Government, and there were no profit margins. Under the SPPL scheme, however, the builders as contractors can provide for profit margins.

The State Government has also scaled down the size of the project from eight lakh units of 225 sq ft each to two lakh units of the same size. The deadline - December 1999, months before the Assembly elections are due - remains the same.

One of the main failings of the SPPL scheme is that it depends on public land as a resource. Most public land in Mumbai is already occupied by squatters.

The SRD scheme had no budgetary support; this made financing through subsidy and sale in the open market the only option. Poor supply and the growing demand for land had dictated prices, and the builder-developer lobby held the city to ransom, charging exorbitant rates. But with the announcement of the SRD scheme and the consequent availability of slum land for development, even in the downtown areas, the bubble was pricked. Furthermore, the Government's decision to allow the sale of mill lands in South and South Central Mumbai opened up acres of prime property for development.

The acceptance of the Sukthankar Report on the Urban Land Ceiling Act and the Rent Control Act will ease the housing problem in Mumbai further since the report recommends the demolition of old structures and the reconstruction of multi-storeyed buildings.

These factors have forced builder-developers to rethink their involvement in the scheme. Even the carrot offered in the form of a liberal floor space index (FSI) that allows construction on additional space within a given area and permission to the builder to sell in the open market the space thus built (the cross subsidy system) was not attractive enough for them because it is not easy to persuade people from the higher-income groups to live in the same complex where lower-income groups also live.

Of the two lakh units to be built, 1.25 lakh units are to be given free of cost to slum residents. The builders, however, will get between Rs.600 to Rs.800 a sq ft, against the construction cost of about Rs.425 a sq ft. Somaiya asserts that if this pricing pattern is followed, the rest of the 75,000 units will have to be sold at higher than market rates.

The BJP's objection to this system is that the "demand-supply situation in the housing business at present is so bad that there are bound to be severe losses." The BJP contends that the Government has not carried out any demand-supply survey. Somaiya refers to the slump in the market and says that over the 40 lakh sq ft of built-up area in the private sector remains unsold.

One other point of dispute is the SPPL's status. Initially it was not clear whether it would be a public company or it will be controlled by the Government. This, however, is a minor issue and has been resolved by the involvement of the MHADA and the MMRDA and by making SPPL a deemed government company. However, the politicisation of the project seems to have extended here as well. There are rumours that the MHADA and the MMRDA may not agree to provide the capital outlay.

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