Chief Minister Ashok Chavan's offer to purchase the eight-acre Bharat Processing Mills at Worli from National Textile Corporation (NTC) to build low-cost houses has been turned down.
With this, the hope that 8,000 affordable houses would come up in central Mumbai has been dashed.
Chavan wrote last month to Union Textile Minister Dayanidhi Maran, asking him to cancel the auction of the mill — scheduled for August 4 to 6 — and offering to buy the land for Rs 750 crore.
"Merely sending a letter has no meaning. The state must send a valid offer and take part in the bidding," said K. Ramchandran Pillai, NTC's chairman and managing director. "In any case, Rs 750 crore is the reserve price and we can get a better offer than that through the bidding process."
The city is facing a huge space crunch, which in turn has led to a shortage of houses and soaring of property prices.
Five mills have been sold to developers so far, but only ultra-luxury housing is coming up on the land. These houses are out of reach for most Mumbaiites and do not help ease the crisis.
Minister of State for Housing Sachin Ahir criticised the NTC for rejecting the state's offer.
"NTC should not act like a private company that is only concerned with money without social responsibility," said Ahir. "We were asking them for land to house people who cannot afford houses in the city."
The Maharashtra Housing and Area Development Authority (MHADA), which makes low-cost houses has only five acres left in its land bank and is scouting for space. Such houses cost Rs 5,000-Rs 6,000 per square foot in areas where a private developer would quote over Rs 22,000 per square foot.
MHADA Vice-President and CEO Gautam Chatterjee said: "The city has lost a chance to build affordable houses."
Housing activists were up in arms.
"Nobody is bothered about low-cost housing, which concerns most of the population," said Sreedhar Sharma, of the Revathy Foundation, which works in the housing sector.