The redevelopment could have opened up large tracts of land as nearly 38% of the city falls in CRZ II.
The then Union environment minister Jairam Ramesh had introduced this condition to ensure developers do not oust slum dwellers and grab the land to build housing for the rich.
The Slum Rehabilitation Authority, which had invited redevelopment proposals in May, got response from only one developer until the July 3 deadline, and has now extended it to July 18.
It took the SRA two years to identify and map the clusters, which include large sprawls in Worli-Koliwada and Bandra.
Officials admit most of the FSI will get consumed in rehabilitating the tenants who are living in closely-packed homes. Besides, while the government will not invest any money, the developer has to share 51% of the incentive FSI with it.
Senior state officials admitted the proposal is unlikely to take off, with past negotiations with developers proving futile.
They also admitted that public agencies like MHADA, Shiv Shahi Punarvasan Prakalp Limited and MMRDA, that were touted to take up this redevelopment, have no wherewithal to do it on their own.
The chief minister had requested union environment minister Jayanthi Natarajan last month to dilute the condition, but got no assurances.