Mumbai’s stuck housing redevelopment projects to get a push

The Maharashtra government has decided to help resolve the issues that have stalled nearly 550 housing redevelopment projects in the country’s commercial capital Mumbai for the past five years through its intervention as a facilitator.

The state government’s Ministry of Housing will act as a mediator to guarantee that these issues are handled and that the projects can resume construction. The measure is also likely to enable financial institutions to release their direct equity, structured debt, and construction-linked financial commitments to these projects.

The ministry has already begun issuing letters to housing societies and their respective developers to assess the problems that have stalled projects.

“The government is taking this initiative to create a win-win situation for all three elements facing the current impasse - residents, developers and bankers,” Jitendra Awhad, Minister for Housing, Maharashtra, told ET. “We want those eagerly awaiting a new roof over their heads to get it sooner, developers to give impetus to the economy and job creation, and banks to breathe a sigh of relief as their locked funds become productive. I think it's incumbent upon the government to play the role of a facilitator.”

Real estate projects involving redevelopment and rehabilitation are the mainstay of Mumbai’s property market as the land-starved city has few vacant land parcels. For the past few years, successive governments have pushed redevelopment projects in an effort to provide better options to residents living in unsafe and dilapidated structures, increase housing supply to combat exorbitant property prices, and support the city's infrastructure revamp.

While redevelopment projects benefit both society members and real estate developers, they frequently get stuck due to financial problems or disagreements between housing society members and the developer. The government's decision to intervene and assist in the resolution of the challenges should help these projects get back on track.

In August, there was a separate government proposal to take over more than 550 slum rehabilitation projects in Mumbai that were stuck for a long time due to various issues and to undertake the development of those through the Slum Rehabilitation Authority (SRA).

Realty developers have raised over Rs 50,000 to Rs 70,000 crore from financial institutions to support these slum rehabilitation projects. However, this investment is also locked in given that the projects have been stalled. This decision was taken after it was found that developers of these slum rehabilitation projects had borrowed funds from financial institutions and non-banking finance companies based on mere Letters of Intent (LOIs).

Several of these developers have even abandoned the projects halfway through after raising these funds. With the proposed induction of new developers, these slum rehabilitation projects are also expected to be put back on track, offering relief to affected slum dwellers and financial institutions that have investment exposure to such projects.

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