Advance transit rent leads to 50% SRA projects in Mumbai being stuck
Rehabilitation projects have been stalled after the SRA made it mandatory for developers to deposit two years’ advance transit rent with the body
MUMBAI: Around 50 per cent per cent slum rehabilitation projects in Mumbai have been stalled after the Slum Rehabilitation Authority (SRA) made it mandatory for developers to deposit two years’ advance transit rent with the body, through circular number 210. Approvals are now granted only after this norm is fulfilled.
The circular was issued on August 1, 2023, after the Bombay high court’s (HC) order of July 19, 2023, that asked the state government to “find a solution to the issue of non-payment of transit rent” by builders to slum dwellers who vacated their homes on their projects.
This is the scenario today: a staggering 64,917 slum dwellers are yet to be paid transit rents, said a top SRA source. “Before the HC order, arrears to the tune of approximately ₹1000 crores were pending and scores of slum dwellers were repeatedly thronging the SRA office for relief and redressal,” the source added.
Subsequently, SRA managed to recover between ₹700- ₹750 crores from defaulters while over ₹300 crores are still due, said the official.
This has led to a slow-down in the progress of SRA schemes – of the 1527 ongoing projects nearly 700 have been suspended because of cash crunch, along with issues such as CRZ norms, legal proceedings, evacuation and eligibility of slum dwellers, defence NOCs etc.
A case in point is Omkar Builders who have 17 SRA projects currently underway in prime areas such as Mahalaxmi, Worli, Parel, Mahim, Bandra, Andheri and Malad. The company had an outstanding due of ₹175 crores as transit rent. “We were facing a big resource crunch at the time and therefore defaulted on payments. Following the new circular all our permissions were put on hold. As a result, our project timelines and math were compromised,” said Babulal Verma, managing director, Omkar Realtors and Developers. The company was however compelled to clear the arrears because interest rates were mounting and outgoings piling up. “We have just about managed to emerge from the mess,” added Verma.
SRA’s move has irked developers of all categories, with many small-time builders choosing to opt out of such projects.
Oyster Living LLP have an ongoing project in Dahisar, where of the 969 slum dwellers 350 have already vacated. “We have paid them one year’s transit rent; but now with the new rule we have to arrange for another ₹5 crores to be deposited as the second year rent. We also need an additional amount of ₹10 crores for the 300 slum dwellers who are yet to be evacuated in the second phase. Where do I get the money from? Structural institutional funding for SRA schemes is limited. So now my project is temporarily stuck,” said Tejas Vyas, director of the company.
Rushi Mehta, director of Neelyog Group, one of the pioneers of slum rehabilitation schemes in Mumbai, who prides himself for “never defaulting in transit rents in the last three decades”, has had to rethink on embarking on a project involving 2000 slum dwellers. “Circular 210 has changed the dynamics of redevelopment. Instead of completing the project in two phases, we are now looking at doing so in three or even four phases to realign with the new cash flow requirements imposed by the circular,” said Mehta, expressing reluctance “to take on any new SRA project”.
“The cost benefit and risk equilibrium are skewed. It is no longer lucrative to execute SRA schemes in Mumbai now,” he added.
Mehta, who is the joint secretary of Slum Redevelopers Association accepted that while the quantum of unpaid transit rent is alarming, instead of deciphering why such a scenario has occurred, “the government has chosen to only throw more money at the problem and compound it”. “Why punish all the fish in the pond to straighten a few errant ones,” he asked.
Meanwhile, CREDAI-MCHI, the Mumbai based body of developers that has a membership of over 1800 real estate stakeholders, moved court challenging the circular, in October, 2023.