Aug. 13 (Bloomberg) -- Developers in Mumbai, the world’s most densely populated city, are putting up luxury high-rise condos for millionaires in former slums and re-housing displaced residents on the same properties.
The 60-story twin-tower Imperial, with apartments costing as much as $14 million, was built on the narrow lanes cluttered with tin sheds that once housed 10,000 slum residents. The 50-story Lodha Bellisimo has sprung up a few meters from the prison that houses the only gunman caught alive during the 60-hour terror siege of the Taj Mahal Palace and Tower in 2008.
“Mumbai is a very congested city and to accommodate this congestion and have more open spaces we have to rise up vertically,” said Amit Thacker, a director at SD Corp., builder of The Imperial, India’s tallest apartment complex. “This is possible only when we clear the existing occupied plots of land by rehabilitating the existing residents.”
Constrained by a four-decade-old law limiting height in built-up areas of India’s financial capital, developers are constructing luxury towers in shanty towns and re-housing the slum-dwellers in new flats the size of a single-car garage. India’s government is relying on such projects to make cities slum-free by 2015 as it braces for an inflow of about 250 million people who are expected to pour into urban spaces in the next 20 years.
The penthouses at The Imperial are estimated to sell for between $13 million and $14 million, according to Jones Lang LaSalle Meghraj, the local unit of the second-largest publicly traded commercial property broker. They boast views of the Arabian Sea, a golf course and Mumbai’s horse-racing track. Flats at the Bellisimo cost as much as $6 million.
DB Realty Ltd. and the K. Raheja Corp. are building luxury residential towers with views of train tracks on defunct textile mills in central Mumbai’s Jacob Circle, an area congested with traffic, industrial units and slums.
Developers including Housing Development & Infrastructure Ltd. and Ackruti City Ltd. are building in slums because of a 46-year-old law that limits building height in established residential areas of Mumbai, a city of 18 million built on seven islands.
Mumbai’s Floor Space Index -- which determines the maximum floor area permitted in a building compared with the land on which it’s constructed -- was introduced in 1964 and set at 4.5. That means a building on a one acre (0.4 hectare) plot of land, a little smaller than a football field, vertical living space totaling 196,000 square feet can be built.
The Municipal Corporation of Greater Mumbai lowered the permitted FSI to 1.33 times in 1991, which means all buildings with an FSI exceeding 4.5 times were built before 1964. That’s the opposite to most cities with limited land which tend to raise the permitted FSI to accommodate growth, as in Manhattan, Singapore, Hong Kong and Chinese cities, according to a World Bank report last year.
“Abnormal constraints on FSI are one of the main reasons” Mumbai hasn’t built more tall buildings, said New Jersey-based Alain Bertaud, an urban planning consultant for the World Bank who has been visiting the city annually for the past 15 years.
While Mumbai’s FSI varies from 1 to 1.33, it can go as high as 4 in the slum areas under redevelopment.
Half of Mumbai’s 18 million residents live in slums -- more than the population of Switzerland. The city’s clusters of ramshackle huts made from scrap materials line narrow garbage-strewn alleyways, usually lack proper sanitation facilities and water supply, and residents often use pilfered electricity from tapping into power cables.
The business district is a different world. Mumbai is the world’s fourth-most expensive business location, behind London, Hong Kong and Tokyo, according to real estate services company CB Richard Ellis Group Inc.
“Mumbai as a city is undergoing a redevelopment process and within a few years most of it may get redeveloped,” said SD Corp.’s Thacker.
The government plans to make the country “slum-free” by 2015, Finance Minister Pranab Mukherjee reiterated in his budget speech in February. In 1995, the Maharashtra state government decided to legitimize all slums in existence as of that year, meaning existing slum-dwellers were entitled to be re-housed if the shanty town they inhabited was developed. That year it set up the Slum Rehabilitation Authority.
The government plans to redevelop larger shanty towns such as the 535-acre Dharavi slum, Asia’s second-largest after Pakistan’s Orangi Town and the home of Jamal Malik, the fictional hero of the film “Slumdog Millionaire.” The Maharashtra government wants to build 1 million budget homes over the next few years, mostly with private developers and primarily through redevelopment.
The 252 meter-high Imperial, built on a 13.5-acre plot that housed an old textile mill in the Tardeo area of South Mumbai, has 228 luxury apartments ranging from 2,500 square feet (232 square meters) to 10,000 square feet.
The Imperial was built on the site of a shanty town with 2,700 one-roomed tin-roof huts, whose inhabitants were relocated to 225-square-foot apartments in separate buildings nearby. The 2,000 square feet taken up by the lap pool in the penthouse is about the same size as seven apartments given to the slum dwellers.
Taxi driver Kamran Shaikh, 55, says he’s happy to have been given a flat by The Imperial’s developer and is glad to be out of the slum.
“We proudly tell people we live next to the tallest towers in Mumbai,” says Shaikh. “It’s a good feeling that we have progressed from a slum to a flat.”
Shaikh said he and his family of four used to have to walk 3 kilometers to collect water from a bore well. Now the building provides them with water for 20 minutes a day.
Lodha Bellisimo is located on a 13-acre plot a few meters from the Bombay Central Prison, home to Mohammed Ajmal Kasab, the Taj gunman. Most of the 300 residences have been sold, said R. Karthik, senior vice president of marketing at Lodha Developers Ltd., which also is building World One on former textile mill land in Mumbai. About 73 percent of the buyers at the Bellisimo are from the services sector, mainly from top management, he said.
“Our buyers are those who work in world-class offices, travel business class, so they want these world-class amenities on the residential side too now,” said Karthik. “People are willing to move away from posh localities as long as we offer them world-class facilities.”
Investors have reaped gains. Lodha started selling flats at the Bellisimo project for 11,000 rupees a square foot in 2005 and now it sells for three times that price, Karthik says.
Demand for luxury apartments in India is rising as the biggest rally in stocks in 18 years boosts the ranks of the affluent in the third-fastest growing major economy. The South Asian nation has 84,000 millionaires, according to the 2009 World Wealth Report by Cap Gemini SA and Merrill Lynch Wealth Management.
The number of millionaires in India and China is expected to triple between 2008 and 2018, according to the report. About 40 percent of India’s 52 billionaires, the most in Asia after China, live in Mumbai, according to Forbes magazine.
“Mumbai’s real estate market boundaries are constantly extending into newer areas,” says Anuj Puri, Mumbai-based chairman of Jones Lang LaSalle Meghraj. “Mumbai, being the archetypal city of opportunity, generates an unprecedented demand for properties across the residential, commercial and retail sectors.”
Mumbai’s transformation into a “world-class city” would require radical changes to transport, housing and sanitation, as well as a reduction in the slum population, consulting firm McKinsey said in a 2003 report. Mumbai occupies an area of 440 square kilometers (167 square miles).
“Mumbai’s infrastructure is at the bottom of the list among international global cities, somewhere between Yangon and Kabul,” said Bertaud, the consultant.
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