The much-hyped slum rehabilitation authority (SRA) scheme of the Maharashtra government is in doldrums. This follows a steep slump in the real estate market. One of the biggest players in SRA schemes said, “I have decided to pull out completely. It just doesn’t make sense to get involved in these schemes anymore.” With many SRA projects in limbo, it will be many more years before the city would be able to rid itself off its slums. As many has 1,100 schemes have been sanctioned by SRA in recent months.
However, CEO of SRA Shrikant Singh, said there was no cause for alarm. There is a down-slide in all sectors and SRA is no exception. “But if the demand for flats picks up, those under SRA will be the first ones to be sold as they are cheaper than the ready reckoner rates,” he added. Ready reckoner rates are the rates for flats as determined by the state government and vary for each municipal ward.
Under SRA, a builder had to obtain the consent of at least 60% of occupants in a slum, relocate them in transit camps and then give them pucca flats measuring 300 sq-ft for free. In the space thus vacated, he could build flats for sale in the open market with additional floor space index (FSI). Said Ashutosh Rane, who has undertaken several SRA projects: “The entire economics of these schemes was based on the profits to be made from the free-sale component. With property prices on the downslide and a general freeze in demand for flats, there is absolutely no incentive to go in for SRA projects anymore.”
He said it cost at least Rs 4,000 per square feet on an average to put up an SRA project. “As free-sale SRA flats sell at prices less than those prevailing in non-SRA projects, there is hardly any profit to be made anymore,” he said. Also in view of the banks’ reluctance to give housing loans, there is no way a purchaser can even buy a SRA flat.
It takes four years on an average to implement an SRA project as obtaining the consent of slum-dwellers and building transit camps takes time. Only after this, a builder would be able to start constructing free-sale flats and during these four years, he would have to borrow finance at interest rates of over 25%. The fall in property prices is acting like a big speed-breaker for SRA developers.
For example, Sahana Builders, which is in the process of implementing a mega SRA project at Worli since the past four years, has built several flats with various accessories to house hundreds of slum-dwellers and spent a few crore rupees to build a nullah according to a BMC requirement. The firm is still to start building free-sale flats and it will be a few years before it starts getting returns.