‘Dharavi redevelopment among 5 most complex tasks in world…our Special Purpose Vehicle model gives us crediblity, risk mitigation and freedom in execution’: SVR Srinivas

How different and challenging is the Dharavi slum redevelopment project?

With a population close to a million, it is just like a municipal corporation of class one size. It is different first in terms of high density. Second, it has thousands of commercial and industrial structures, which is also driving the economy. Third, the area is highly complex in terms of demography — different communities, different languages and social demography composition. Fourth is the sheer size — it is city within a city so making it into a regular habitation is by far one of the most complex tasks ever to be undertaken in the world, perhaps among the top five in the world. Fifth is to take care of the transit accommodation during construction. The sixth and final point is eligibility — accommodating ineligible people is a big challenge as you cannot expand horizontally in Dharavi. There is not an inch of land left so we can go only vertical. But with government support, I am sure we will be able to come out with a dignified solution.

After 18 years, Dharavi redevelopment has been planned again. What measures have been taken to ensure its take-off?

The biggest challenge to be overcome to make the plan successful is to mobilise resources. To do this, investment of thousands of crores of rupees (billions of dollars) is required. So to draw the investment at the right time from credible investors, be they government or private or a combination…we have to come out with a suitable financial structure. Second, to make the project successful, it cannot be developer-driven like earlier models were in 2009 or 2016. Dharavi redevelopment is a very high risk project and to do that we require a lot of upfront investment and in billions of dollars because no money is coming in the first two or three years. The money initially will be only outgoing. So the project has to be structured in such a way that these two aspects are taken care of — funds coming in but at the same time risks are mitigated.

Can you help us understand how the project will be made feasible on the profitability aspect for companies to participate?

There are two aspects — liquidity and profit, and both are two different issues.

The problem is of liquidity because thousands of crores of money will go for rehabilitation and from where will the profit come? There are no free lunches so ultimately somebody has to pay for it. So there are two alternatives — one is it’s a slum so let the government spend its money. Another is to go to the market and get investment. Going to market has two issues — upfront investment and high risk. So for that, we have come out with a Special Purpose Vehicle (SPV) model. There will be a SPV where the government is also a partner. In fact, it gives a lot of credibility and a lot of risk mitigation to the project and at the same time it gives freedom and flexibility in the execution. The majority stakeholder will be from the private sector for that we give them open competitive bidding based on a pricing mechanism in the market.

Profit is return on investment which goes back to the government partly in terms of taxes and partly to private pockets, which comes back into the economy only. Here also, the profitability is ensured by giving certain concessions. More than profitability liquidity is ensured because since upfront payments are there, so we are giving them some concessions so that liquidity is protected. The project will be profitable…

Dharavi comes under the funnel zone. How are you going to cope up with the existing restriction?

In Dharavi, the height varies from 100 metres to 70-60 metres. In BKC it is 58 metres. So considering all those complexities we have to ensure that the project goes smoothly because the lower the height permitted, the more the footprint. The more the footprint, the more difficult it is to accommodate eligible and ineligible people in the same area. We will be requesting the civil aviation authority to give height clearances faster.

What additional sops will be given to the bidder?

We are trying to give three-four types of concessions to attract investors. One is stamp duty waiver, then state GST can be reimbursed. This is to attract investments to do with the initial load that is one type of concession. Second, to take care of site constraints…premiums can be waived. It is an extremely brownfield project. Third is to increase sales velocity as ultimately money will come to the project when the free sale component is taken care of, so on the first sale of residential units in the free sale we are trying to give stamp duty concessions. This will increase sale velocity, which is the expectation. Last is to take care of the existing slum dwellers who are the main stakeholders. So we are trying to give them some property tax concessions. To the commercial units we are trying to give GST concessions for five years. But the industries have to convert to clean technologies so they cannot pollute. We are also thinking of giving some subsidies under MSME schemes. There are thousands of commercial units and industries…During construction their livelihood needs to be taken care of…

Can you explain the SPV model?

The government will be a partner in the SPV. The interface is very important. The government officers will be on the board of directors, they will be watchdogs for the entire process. It is a very good interface mechanism, not just for the slum dwellers but also for the investors. The speed of SRA projects in Mumbai is only a few hundred per year so with that rate it will take 200 years to make the city slum-free (about one-and-a-half lakh tenements built in the last 25 years). That will happen anyway but we are not here to do that and we will not be here to see in 200 years what will be the result . So we are proposing these types of financial structuring where the government is also a party, which will take care of the investor. I think the project has a good bright future .

What will be the timeframe for completing the project?

The rehab component should be completed in seven to eight years maximum.

Will Dharavi redevelopment make Mumbai slum-free?

Mumbai is called ‘Slum Bai.’ So if Dharavi can take off, which is almost half a million people, I think all other projects will definitely get a big spark. Dharavi is also right next to BKC, one side is Worli, one side is Dadar, it is in the heart of the city. So if you can develop 600 acres of land near about a million people it will make a huge impact on Mumbai. By far the single biggest step forward for a slum-free Mumbai.

What size of houses will the slum dwellers be given?

The minimum size of tenement will be 300 sq ft with additional 50 per cent area. In addition, we are trying to give some income to the societies like some flats will be given so that they can get rental income to maintain those buildings.