Evaluation of risks associated with the Dharavi Redevelopment Project (DRP) and proposal to consider/not consider the project.

1. DHARAVI
MEPVI – Group 5
ABHISHEK PANICKER . KEDAR HUDDAR . KOUSHIK GANGULY . PUSHKAR SABNE . RAKESH KADARKARAI

2. Case setting
■ March 2009
■ Dharavi Redevelopment project (DRP) - Government estimate: 3 billion
– 40 million sq.ft of commercial space and 30 million sq.ft of residential development
– Contribute Rs. 20,000 per family for further maintenance, addtl 20,000 by RP
– For every 100 square feet of free housing, the builder was allowed to build and sell 133 square feet
– Construct & Maintain all buildings & public areas for 15 years
■ Bid for five sectors, awarded for max one sector
■ Stage 1 - $ 10,000 for EOI application
– 100 developers
■ Stage 2 - $ 3.5 Mn security deposit per sector
– 19 developers selected

3. Guidelines
■ Prequalification - Experience in 1 township development
– unutilized borrowing capability of $105 million
– average annual turnover of $85 million.
■ minimum $9 per square foot of the free-sale component area as a “premium” to the SRA
– 10% premium on award, 20% BG, 70% after free sale
■ Bidder’s premium - three economic variables
– the cost of construction,
– expected market prices
– cost of capital

4. Way ahead
Risks
■ Project estimate – 57,000 free houses
– Possible to increase to 90,000
■ 300 sq.ft per family - free, option to buy 100 sq,ft – at cost
■ Disagreement over height allowed, FSI: 4.0 compared to 3.1 in municipality
■ Land prices @ RS 7000 / sq.ft : Neighbouring Sion area: Rs.12,000 / sq.ft
■ Land rates 300 % in 2 years
– prices down 25% last year
■ Government floor for Bidder’s Premium is Rs. 450 / sq.ft
Options
– meet the government’s minimum “bidder’s premium
– Submit a proposal well above the minimum
– elect not to compete

5. Scenario analysis

6. Consideration for slum dweller
■ Allocation & size of housing / work space
■ Tendency to rent-out and shift to another slum
■ 80% earn livelihood from within slum

7. Id Risk Element Probability Impact Risk Rating Risk Mitigation Plan
Risk rating
after
mitigation
1 Regime change Possible Major Critical - -
2 LandAcquisition from private owners Unlikely Moderate Medium Market rates to be given
Land acquisition rule to be
deployed
Med
3 Agitation by people staying on rent Likely Major Critical Provide safe dwelling to everyone
Use proper ID card to identify
(Aadhar card)
High
4 Land prices continue to fall Possible Major Critical Hold for prices to surge, Mumbai
prices will surge
Med
5 Resistance from informal (unregistered)
business
Likely Major Critical Provide one stop license to all the
vendors, govt. to form a committee
to do the same
1. This will increase govt.
revenue in tax collection
2. Illegal activities can stop
Med
6 Delay in Environmental clearance Unlikely Moderate Medium To be taken upfront from the govt. Low
7 No cap on additional purchase on
construction cost for commercial
establishments
Most likely Major Critical Cap to be introduced Low
7

8. Most Likely
Likely
Possible
Unlikely
Rare
Probability
Insignificant Minor Moderate Major Extreme
Impact / Consequence
Low Medium High Critical
7
3,5
1, 4
2, 6
4
3
6 5
7
Risk Rating
8