DHARAVIMEP VI – Group 5

ABHISHEK PANICKER . KEDAR HUDDAR . KOUSHIK GANGULY . PUSHKAR SABNE . RAKESH KADARKARAI

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

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

Way aheadRisks

■ 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

Scenario analysis

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

Id Risk Element Probability Impact Risk Rating Risk Mitigation Plan

Risk rating after

mitigation1 Regime change Possible Major Critical - -

2 Land Acquisition from private owners

Unlikely Moderate Medium Market rates to be givenLand acquisition rule to be deployed

Med

3 Agitation by people staying on rent

Likely Major Critical Provide safe dwelling to everyoneUse 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 same1. This will increase govt.

revenue in tax collection2. 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 Low7

PROJECT RISK

Most Likely

Likely

Possible

Unlikely

Rare

Prob

abili

ty

Insignificant Minor Moderate Major Extreme

Impact / ConsequenceLow Medium High Critical

7

3,5

1, 4

2, 64

3

6 57

Risk Rating

8

RISKS INVOLVED (Pre and Post mitigation)

THANK

YOU