Some of the most premium luxury projects are coming up on redeveloped slum lands, but the Maharashtra government now plans to spend more of the taxpayers’ money to ensure profits for builders.
The state government is considering a slew of measures to encourage more builders to take up slum rehabilitation projects, including allowing them to mortgage government land and providing 40% of the cost of the projects.
Housing experts and critics have always maintained that the city’s slum rehabilitation authority’s (SRA) schemes benefit no one but the builders, and at the cost of losing public land.
Builders HT spoke to agreed that SRA schemes are seldom ‘unfeasible’, as the government likes to call them.
A major builder said calculation shows that if the sale component of an SRA project fetches over Rs10,000 a sqft, the project becomes feasible. However, he pointed out that big developers were no longer keen on getting into these projects because of the consent issues.
The housing department and the SRA are trying to come up with a mechanism to determine whether projects are feasible or unfeasible.
One of the major incentives being considered is allowing builders to mortgage public land and raise loans. A senior official said, “When we buy encroached land, we value it at 25% of its ready reckoner value, which is exactly how much the builder pays us while executing the SRA scheme. Hence, there’s no harm allowing them to raise loans on it, if it helps the project.”
While sources in the revenue department, which owns all government land, said it had opposed the move, the housing department seems to be pushing for it.
In addition to this, the government is also considering funding as much as 40% of the project cost for unfeasible projects.
Terming it as ‘viability gap funding’ (VGF), sections of the government feel such funding would make it possible for builders to carry out projects that “don’t have high profits attached”.
And to give these incentives, the SRA is coming up with a mechanism to deter mine the ‘feasibility’ of a scheme. “There are several reasons SRA projects don’t find too many takers. We want to study if there can be a tangible way of calculating how attractive a project is or not,” said an official in the SRA.
According to the National Real Estate Development Council chairman and developer Sunil Mantri, there are barely any ‘unfeasible’ SRA schemes in the city. “These are welcome steps by the government. After paying the 25% ready reckoner rate premium, we are anyway virtual land owners.”
Housing rights activist Utsal Karani, however, lambasted the proposed move. “It is unimaginable that the government owns the land and still wants to give VGF to private builders. By this logic, the government should also ask for a share of the profits from profitable projects.”
A senior official also pointed out, “Instead of monetising the value of the land for the state exchequer, we are offering incentives to the cash-rich builders lobby.”