The Global Urbanist

News and analysis of cities around the world


The economics of "free housing" in Mumbai: time for a new discourse

In the last of three articles examining Mumbai's housing market, Sharmeen Contractor and Shilpa Rao propose that the current slum rehabilitation scheme creates incentives for developers to further distort the city's housing market, and calls for civil society to challenge the rhetoric of 'free housing' to allow political leaders to start considering alternatives.

Cities: Mumbai

Topics: Housing, Urban economics, Informal settlements

High-rise construction overlooking settlements in Mahalakshmi, Mumbai, seen from the Nehru Centre. Photo: Sthitaprajna Jena (Flickr: zeeble)
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Despite the problems we outlined last week, the slum rehabilitation policies in place in Mumbai have a number of positives. The Maharashtra government has made the leap to recognise the poor's legitimate right to housing. The rehousing of citizens 'in situ' — on the same land as their original slums — allows them to remain close to their jobs and schools, and most importantly, receivers of rehabilitation homes are guaranteed security of teure.

Yet two stories of recent rehabilitation projects illustrate deeper structural problems with the scheme. As the Central Chronicle reports, residents of a slum in Golibar "wondered how the builder had procured the necessary approval of 70 per cent of the residents", required for the Slum Rehabilitation Authority to green-light the project. "Through a Right to Information petition they learnt that Shivalik Ventures had connived with a former resident … to manufacture the necessary consent through a forged document of a general body meeting in February 2009 that had never taken place."

And in Chandivali, a sting set up by the Mumbai Mirror found "tenements allotted by the government for the rehabilitation of hutment dwellers are now illegally being sold by the beneficiaries. Mumbai Mirror met a couple of estate agents who promised tenements in buildings meant for rehabilitation."

The government's policies rest on the concept of 'free housing'. What would an economist make of this? In economics, free goods are those required by all and available without limits, without scarcity, and at zero opportunity cost to society, such as air and sunlight. It's a wrong concept to apply to housing.

With housing being one of the scarcest commodities in Mumbai, giving it away for free certainly cannot bear a 'zero opportunity cost' for society. The easy money, prime real estate and floor space on offer entices land-hungry developers to the scheme, employing all possible illegal and criminal means to manufacture slum dwellers' consent for a project.

Any asset given away for free, especially one that is mighty scarce and overpriced, will naturally be abused by its recipient. Many slum-dwellers prefer to sell this new asset in the 'extra-legal' market and retreat to other shanties in the fringes of the city. And at average prices of USD 200 per square foot in prime areas, why wouldn't they?

Other slum dwellers refuse to consent to the developer for years because the flat they will receive is a standard 25m² irrespective of the size of the family. However as in millions of homes built incrementally over time, it is typical to see families renting out a second or third floor to other families or commercial undertakings to provide themselves with a steady rental income. Forced into a standard home, these families must sell or rent out their new homes to make up for this sudden shock to their income stream.

Without logical incentive alignments, the market will not work for the larger social good. Areas that require much needed development may remain neglected if located in financially unviable neighbourhoods. And most viable projects display a distinct pattern: new 'vertical slums' alongside super-luxury residential and commercial skyscrapers. In order to generate 'sufficient profits', the open market component of the scheme creates fresh housing stock for only the top 5% of the income strata, under-serving the needs of the larger market.

While tall buildings should be welcome in a city where going vertical has been deliberately restricted for decades, this has to be matched with adequate augmentation in infrastructure in order to compensate for increased population density. There is no feedback mechanism to ensure that the municipal corporation is forecasting these new needs and boosting water, sanitation, road and rail infrastructure in and around these projects.

Because the guidelines for these rehabilitation buildings are so flimsy, their quality leaves much to be desired. The distance between rehabilitated buildings is sometimes as little as 1.2 metres. Slum dwellers are crammed into a small corner of the plot while the majority of the land is used for the glossy free sale component with impeccable quality standards.

In its current form, the scheme is facilitating the creation of more slums. The policy strictly holds that only those living in ground structures before the year 2000 are eligible to receive a flat regardless of ownership status. The scheme has not devised a solution to tackle the large percentage of migrants who have come to Mumbai later. There is a clear stock-flow imbalance which is not being addressed. In many highly dense areas, such as Dharavi and Jari Mari, not more than 50% of people are eligible! This sends a very strong signal to incoming migrants that it's 'business as usual' in Mumbai's slums, and will never prevent new migrants from entering the city.

In almost every slum, the electoral identity cards which the Slum Rehabilitation Authority (SRA) require as proof of domicile before 2000 are being forged and sold by middlemen at exorbitant rates, and ineligible slum dwelers are more than willing to invest in obtaining them, if that is all it takes for them to be rehoused where they are. The term eligibility itself seems to have lost its meaning.

Time for civil society to think of alternatives

The last thing Mumbai's real estate market needs are a million homes that are small, poorly designed, 'free' and bearing no transferable property rights. And the SRA is doing little to make this scheme work for all stakeholders. Why are we resorting to free housing without assessing the willingness and ability of these citizens to pay? By doing so, the scheme ignores the major demand-side constraint whic prevents the market from producing homes for the poor today — a lack of inclusive housing finance infrastructure.

Instead this scheme very wrongfully misconstrues a right to housing for an entitlement to free housing. The more important issues of poor urban planning, archaic land-use management policies and frozen rent control laws are being sidelined. These policies and government departments should be just as much a part of the discussion on slum rehabilitation as anybody else! Creating new bodies with new jurisdictions over one issue alone cannot be the only answer.

Being as populist as it is, disbanding or even rethinking the 'free housing' scheme would be political suicide for anyone in power. We therefore need more civil society actors to draw attention to its ineffectiveness and build a rational advocacy platform to begin to think of alternatives.


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