The Maharashtra government has started auditing 13,000 old and outdated buildings for possible reconstruction, which is expected to bolster Mumbai’s real estate market. In order to evaluate these “cessed” buildings—structures constructed prior to September 1969 for which Mhada receives a repair cess—the Maharashtra Housing and Area Development Authority (Mhada) has hired structural specialists. To aid with rehabilitation, notices have been issued under the Mumbai Building Repair and Reconstruction Board’s authority.
“This initiative will improve the administration of cessed buildings, ensure timely redevelopment, and enhance living conditions for residents,” Mhada stated in its notices. The agency has already audited 171 buildings, receiving 32 reports so far.
These old structures have a lot of promise, according to industry experts. The managing director of Vascon Engineers, Siddharth Vasudevan Moorthy, counsels developers to monitor Mhada’s reports, work with stakeholders, and make sure rules are followed. According to the standards of the Municipal Corporation of Greater Mumbai (MCGM), any structure that is more than 30 years old is eligible for rehabilitation, with the anticipated market for redevelopment in Mumbai being 30,000 crore.
Massive projects, such as the Dharavi slum redevelopment and the revamp of British-era BDD chawls, are already underway. Surplus land from these areas will be used for free-sale buildings, where developers can sell newly built residential units at market prices.
The government’s redevelopment plans won’t have an effect on the housing market for a few years, according to Anuj Puri, Chairman of Anarock Group. Despite these initiatives, Mumbai’s lack of open land keeps homes from becoming oversupplied.
According to Knight Frank India, Mumbai continues to be the largest housing market in India, with 96,187 units sold in 2024—an 11% YoY increase. According to experts, demand will keep up with the supply of new homes, particularly in desirable areas.
“In areas like South Mumbai and Bandra, demand remains robust, preventing an oversupply,” says Shveta Jain, Managing Director – Residential Business at Savills India. The vacancy rate for ready-to-move-in homes is below 5%, making housing oversupply unlikely, adds Anand Moorthy, Co-founder and Chief Business Officer at Square Yards.
It is also anticipated that prices will not change. While an increase of redeveloped units may put downward pressure on low and mid-market housing, the scarcity of land in South and Central Mumbai will keep significant price reductions from occurring, according to Swapnil Anil, Managing Director at Colliers India. In 2024, the average price of a home in Mumbai increased by 5% to ₹8,277 per square foot.
“A price correction is possible if supply significantly outpaces demand, but given Mumbai’s strong appetite for luxury properties, any adjustments will likely be moderate,” says Rahul Thomas, Whole-time Director at Suraj Estate Developers.
The government provides a 50% incentive over the current Floor Space Index (FSI) for cessed structures in order to promote redevelopment. Redevelopment is a profitable business model since developers can attain profit margins of 20–30% before interest, taxes, depreciation, and amortisation.
The Maharashtra government has also eased regulations, reducing the conversion premium for leasehold-to-freehold land from 15% to 10%, and to 5% for self-redevelopment on government-owned plots. Additionally, the approval process has been streamlined.
Redeveloping cessed structures is still difficult, though. The Rent Control Act, which restricts the amount of rent landlords can collect, applies to many small, dilapidated buildings. Buildings are left in poor condition as a result of landlords being disinclined to maintain them.
Gulam Zia, Senior Executive Director at Knight Frank India, describes cessed building redevelopment as a complex issue. “Mhada collects the cess, but since many landlords refuse to pay repair charges—despite collecting low rents of ₹25-100 per month—these buildings are often abandoned.”
However, according to Amit Jain, Chairman & MD of Arkade Developers, developers who are knowledgeable about the finance, regulatory environment, and tenant negotiation process will be in a good position to take advantage of these prospects.
Despite the government’s ambitious plans, experts remain skeptical. “There are always surveys happening, but whether they will lead to actual policy changes or projects remains uncertain,” concludes Zia.
Mumbai’s push for reconstruction has a lot of potential, but whether these projects actually change the city’s housing situation will depend on how well they are carried out and how clear the regulations are.
Source: Business Standard
