Mumbai's cluster redevelopment races against time amid red tape

Cluster redevelopment in the land-starved island city of Mumbai appears to be taking off despite challenges related to tenant consent, financing, bureaucratic delays, and skyrocketing land prices.

- PRACHI PISAL

While the Maharashtra government has been promoting the scheme since 2018, it recently called for an audit of 13,000 cessed buildings in the Mumbai Metropolitan Region (MMR) to ensure timely redevelopment, offering a huge opportunity to developers.

Realty majors like Mahindra Lifespaces, Tata Projects, Adani group, and Prestige group have commenced projects as they seek to capture a share of Mumbai's cluster redevelopment market, which, according to the Brihanmumbai Municipal Corporation (BMC), is valued at 30,000 crore.

With difficulties in redeveloping small, isolated buildings in Mumbai's dense areas, realtors are increasingly banking on cluster redevelopment, which not only provides more space to develop but also promises larger returns.

"In a redevelopment project, developers should be making 20-30 per cent in earnings before interest, tax, depreciation, and amortisation margins. It is viable. In the case of joint ventures, margins are lower, ranging from 15-20 per cent," said Vijay Agarwal, managing director (MD) of investment banking at Equirus.

According to norms, any building over 30 years old or declared dilapidated can be redeveloped.

Cessed buildings are old, dilapidated, tenanted buildings constructed in Mumbai before September 1969, for which the Maharashtra Housing and Area Development Authority (MHADA) collects a repair cess.

Any cluster redevelopment scheme requires consent from at least 70 per cent of tenants.