On September 1, the most ambitious program yet to resettle Mumbai’s Dharavi slum entered an active phase, promising to free the city of the biggest embarrassment in its quest to become a global business destination. A government agency began evaluating “prequalification” bids submitted by developers across the world to build housing and social infrastructure to resettle the slum’s residents. About 57,000 families with about 340,000 people and hundreds of small businesses currently occupy the 535-acre stretch in mostly illegal structures that have multiplied over decades.

The new “ecosystem” that will replace the slum was conceived by Mukesh Mehta, a U.S.-trained architect whose firm is the project’s manager. Mehta has become India’s pre-eminent slum-rehab guru: He has taken on a handful of similar projects in other cities including Hyderabad and Ahmedabad, and he wants to replicate his model of replacing slums with sustainable ecosystems across the country and in other emerging economies. Mehta’s firm, M. M. Project Consultants, where he is chairman, is also overseeing a project to resettle and rehabilitate between 60,000 and 80,000 families in a slum stretch near Mumbai’s international airport, in order to make room for a project already underway to upgrade and expand infrastructure there. India Knowledge at Wharton spoke to Mehta and Sanjay Reddy, CEO of Mumbai International Airport Pvt. Ltd., about the impact these projects will have and any potential challenges that lie ahead.

For the Dharavi rehabilitation, 26 consortia comprising 78 companies have filed preliminary bids. The project’s total cost is estimated at Rs. 9,250 crore ($2.3 billion), covering housing, civic infrastructure and amenities. It will be distributed across five contracts valued at between Rs. 1,000 crore ($250 million) and Rs. 2,500 crore ($625 million) each. Winning bidders will pay a “premium” to the government in exchange for the development rights. Mehta says the state government could collect premiums totaling as much as Rs. 4,000 crore ($1 billion), which will come out of the developers’ profits.

Mehta says bidders that meet prequalification criteria will be short-listed by the end of September, and then asked to submit detailed proposals. By early December, he expects to announce the successful bidders, and ground should be broken by January of next year.

Public-Private Partnerships

Mehta’s model is designed to cross-subsidize free housing and infrastructure with for-sale housing and commercial space. Under the plan, developers will provide free housing of 225 sq. ft. to each of 57,000 families. These would be one-room studio apartments with an attached bath and kitchen, plus related utilities and amenities including schools, colleges, hospitals and parks. The developers will offset their costs with for-sale housing and commercial space at market rates. Some of that will come from the market prices residents and commercial establishments like shops will be required to pay for space greater than 225-sq.-ft. A portion of the developers’ revenues from these for-sale properties will accrue to the government as a premium.

“All the world’s eyes are on Dharavi,” says Mehta about the bidding interest the project has generated so far. The bidders include many of India’s major industrial groups such as Reliance; engineering and construction firm Larsen & Toubro; and real estate developers DLF, Hiranandani Constructions, the K. Raheja Group, Tata Housing and Mahindra Gesco. Several foreign companies have also shown interest in bidding, including real estate developer Hines of Houston, Tex.; Ascendas and Capitaland of Singapore; and Emaar Properties of Dubai.

Mehta acknowledges that the project’s schedule could be thrown off course by legal squabbles, bureaucratic delays, disputes between and with slum dwellers, and any opposition from local politicians, underworld slumlords and other interested parties. He says that the project’s very economic and social logic will hopefully overwhelm critics, and he routinely addresses local meetings to garner support. He adds that the courts should play a supportive role, because they “have understood the slum rehabilitation scheme and are aware that this has been going on for 10 years.”

A City within a City

Mumbai’s slums hold 55% of the city’s 12 million residents, or 1.2 million families in 1,126 slum pockets, as a survey by Mehta’s firm revealed. Dharavi is the most high profile for a variety of reasons, including its prime location straddling the city’s eastern and western corridors, flourishing small and medium businesses, a reputation for spawning crime, and chronic unsanitary conditions on which the city’s municipality appears to have given up.

“This is now my life’s work,” says Mehta, 56, who was born into a wealthy family that ran steel mills and other businesses in India’s Gujarat state. Dharavi was far from his mind when he graduated with a degree in architecture in India and then left the country to obtain his master’s degree at the Pratt Institute in New York City in 1984. While in the U.S., he developed expensive, custom homes in Long Island’s affluent Nassau County. Until 1997, he shuttled between the U.S. and India while running a few businesses, but eventually closed them all down to focus on his Dharavi project.

Mehta literally stumbled upon Dharavi when he returned from the U.S. He says he was galvanized by the combination of filth, squalor, poverty, enterprise and the locked potential of the slum’s prime location, and began to work on a rehabilitation plan. He set up his offices in Dharavi “to understand who I am dealing with, and interact at the grassroots level with the slum dwellers.”

Perversely, Dharavi is also emblematic of the survival instincts of Mumbai’s continually expanding population in the face of infrastructure unable to keep pace. About 300 new immigrant families are said to enter the city as permanent residents every day. Meanwhile, the slum residents have started hundreds of small businesses in pottery, leather craft, plastics and metal recycling, cottage-industry electronics and garments. “Show me a single beggar in Dharavi,” says Mehta, underscoring his point that the suburb has the potential to transform itself from an eyesore into an economic engine for the city.

Government Planning Shortcomings

Over the years, successive governments have attempted to rehabilitate Dharavi’s slum dwellers, and it became one of the first targets of non-government organizations looking for suitable projects. Mehta felt many of these went about the task in a piecemeal fashion. He drafted an alternative plan that he pitched to the state government in 1997.

Mehta says the government’s plan at that time was “brilliant,” in that it sought to use public-private partnerships to extract value from the land on which the slum dwellers resided, by allowing for-sale development options. But it suffered from some fundamental shortcomings, he notes. Most important of all was the failure to recognize the organic and haphazard ways in which slums proliferate into every available area: Lacking contiguous settlements or rectangular plots, they don’t allow for conventional master planning.

Dharavi’s redevelopment occurred only in those pockets where developers were able to secure the required consent from residents in any slum (70%). But because these pockets were typically mapped out in irregular plots and in what continued to be a slum neighborhood, the for-sale housing went for low prices. The government, for the most part, kept a hands-off approach after laying down project specifications.

The poorly staffed government machinery was unable to enforce the project specifications on construction quality, and rampant corruption made things worse, says Mehta. The roughly 100,000 homes that have been built in this manner so far “will become vertical slums,” he says. Moreover, he adds, development under the government’s plan is not sustainable. “Unless I improve the ability of the slum dwellers to generate income and live the modified lifestyle, they cannot maintain their new housing.”

Mehta proposed a master plan for the entire slum — an integrated, sustainable development approach called HIKES (health, income, knowledge, environment and socio-cultural development). Mehta says the HIKES approach allows slum dwellers “to maximize their opportunities and be respected for who they are” in terms of their own achievements. The government gave the plan enthusiastic support.

“With HIKES, the chance of [slum residents] leading a sustainable, improved life is greater than you would get by providing just housing,” says Mehta. “This is the mistake that all the developing countries are making — China, Mexico, Brazil, South Africa, Turkey and Malaysia. They are thinking of slum rehabilitation as a housing issue. Housing is only one part of it; the larger part is human resources.”

Leveraging Location

Dharavi has several advantages in terms of its location. It is the only Mumbai suburb with connections to all three of the city’s commuter rail corridors (Western, Central and Harbor lines). It is also less than two miles from the airport, and a third of a mile from the new Bandra-Kurla commercial complex.

The integrated development approach and the prospect of a slum-free suburb emerging in Dharavi made it easier to market the project to businesses, academic establishments and professional associations. Mehta lists a string of collaborations that have been struck so far:

  • A collaboration with the All India Association of Day Surgeons ensures that in exchange for space to house day surgery polyclinics, its member doctors would provide free or subsidized services to slum residents.
  • Alliances with primary and secondary schools to set up facilities in Dharavi. For every free school an educational institution puts up, it will get space for a full fee-paying school, provided the quality of education is the same at both schools.
  • An agreement with the National Institute of Design (NID) in Ahmedabad to allow for Dharavi’s leather crafts and pottery industries to turn out designer brands. “So far they are only imitating the Guccis and the Pierre Cardins and the Christian Diors of the world,” says Mehta. “NID has agreed to upgrade the skills of the leather craftsmen and make ceramists of the potters.” A few brand-name retail chains like Metro Shoes and Hi-Design have agreed to market the leather crafts produced through such ventures. Mehta sees similar possibilities in a range of other industries, from garments to toys and food products.
  • A provisional agreement with the Gems & Jewelry Export Promotion Council for its members to set up 300 factories and hire 250 people for each, creating a total of 75,000 jobs with an average annual income of Rs. 100,000 ($2,500). Mehta says this would be a big income generator even if only a third of those employees are hired from Dharavi. He says this initiative is estimated to generate exports worth $1.5 billion annually.

A project to create a golf driving range in the middle of Dharavi has gotten traction among some big businesses such as the Reliance Group, says Mehta, who argues it would prevent encroachment of vacant land and draw the wealthy into Dharavi. Another of Mehta’s ideas is to set up a cricket museum in the suburb. He sees both possibilities as efforts to help integrate the slum population with mainstream middle- and upper-income groups.

Mehta claims the revised regulations for sewerage, storm water drainage and other utilities are in line with international standards. “We have looked at eco-housing criteria. We’re talking about alternative sources of energy, solid waste recycling and management, recycling water, rain water harvesting, energy conservation and even issues related to global warming, at the infrastructure level,” he says.

Further, Mehta’s firm has also rewritten much of the earlier regulations that he felt held site planning and construction norms to low compliance requirements. The mandatory space required between two buildings has been doubled from the earlier level to 20 ft.; similarly, open space requirements, as a proportion of construction area, was increased from 8% to 15% of the developed area.

Under the earlier regime, homes could not get “even light and air ventilation properly,” Mehta says. Some developers “cheated on the 8% open space norm by providing 1% here, 3% somewhere else and 4% in a third place, with the result that you don’t even get one maidan [Hindi for “playground”],” he adds. Slum dwellers needed more open space than others, he argues, “because their per-capita housing space is less and the density is higher.”

Will people used to the ways of a slum adopt a new outlook about upkeep and keep their surroundings clean? Mehta isn’t taking chances: Deals are in place for all providers of utilities and services, including plumbing, elevators and exterior paint to maintain and undertake repairs free of charge for the first 15 years. Developers, too, will be required to maintain the buildings they erect for 15 years.

Mehta doesn’t see slum proliferation through encroachment as a recurring problem in the areas that will be developed. The residents, as owners of their new dwellings, will prevent that, he says. “If it is your fiefdom or your area you will not let anybody come in.” The resettled families will have an initial 30-year lease, with automatic renewal for another 30 years. For each home they build, developers will put Rs. 20,000 ($400) in an escrow account to finance its upkeep; the homeowner will meet costs beyond that. All that comes with a caveat: residents cannot sell their homes for the first 10 years.

Mehta says his firm’s responsibility for managing the project runs “until the last slum dweller is re-housed.” That may take about seven years from now, he says. His firm currently has 68 employees; he expects that to grow to more than 350 by the time construction starts in December.

A Different Set of Challenges

The public-private partnership model is also a key driver at the other big slum resettlement project on Mehta’s plate, near the city’s international airport. At an estimated cost of Rs.7,200 crore ($1.75 billion), the expansion and upgrade of Mumbai’s international airport is among the largest private-sector infrastructure projects underway in the country. Plans are to double both annual passenger capacity to 40 million annually and cargo capacity to 1 million tons.

But to make way for that expansion, the project’s promoter — Mumbai International Airport Pvt. Ltd. (MIAL) — has to clear 276 acres in the airport’s vicinity. That stretch includes a slum that houses between 60,000 and 80,000 families. The plans are to resettle them into new housing at another location within a six-mile radius. “They have their social and financial sustenance in this locality, so there would be huge resistance if we try to move them too far out,” says Sanjay Reddy, CEO of MIAL, whose family-run GVK Group is a 74% joint venture partner with the public sector Airports Authority of India (26%).

Reddy’s firm has already identified the lots where it plans to build the new housing, and is in the process of selecting a developer. “We took over the airport’s operations about a year ago and are doing many things in parallel,” he says. “The first is to continue running the existing facility. Second, we are simultaneously working on improving the operations. The third leg of the project is to redevelop the slum land in the airport area.”

But Mehta notes that having to move people out of the area will likely make for a more challenging project. “Slums are really a vote bank for the political parties,” he says. “Even if you can convince the slum dwellers to move and give them a better lifestyle, the political parties obstruct it because they lose their votes. Local politicians don’t want to see a vote base they have cultivated for many years suddenly vanish.”

Reddy says MIAL has so far been successful in persuading politicians to cooperate. “We have gotten a lot of support form political, bureaucratic and government officials,” he says. “We cannot do anything without them.” However, he adds that securing records related to the land and its dwellers has been “a messy affair.”

The airport slum resettlement project shares many of the features of the Dharavi model. Mehta says the effort here is also to have an integrated, sustainable development approach with public-private partnerships. “Here, too, we would work for a similar kind of township approach, and maybe even generate opportunities for income generation with skill development and capacity building,” he says.