Developers are avoiding redevelopment projects – proposals down by 50% in the past year.

Redevelopment of housing societies, once a capital spin-off for most of the builders in Mumbai, has almost ended. In addition to a sluggish real estate market, developers say projects such as these, which earlier gained huge revenues, are no longer profitable because of the BMC’s high premiums and construction expenses.

Throughout the city, developers have either abandoned the redevelopment projects after entering into a contract with housing societies or requested to renegotiate them.

A senior official in the BMC Department of Development Plan admitted that proposals for new housing redevelopment have fallen by more than 50% in the last year. This also affected municipal coffers really hard. In 2016, BMC’s collections of development costs and premiums paid by the builders would be up to Rs 5,000 crore per year. This is now falling to approximately Rs 3,200 crore.

The Bandra-Khar-Santacruz Belt has also endured astronomical prices, where redevelopment projects boomed in the last ten years. “This belt of developers, once charged Rs 60,000 to Rs 70,000 per sqft for new apartments in revamped buildings, has been cut off,” said industry sources.

Attorney K K Ramani said that he knows that developers have reneged at least seven society agreements. “They ask society to renegotiate and are cutting back on additional areas they have promised to build in the new structure.” The redevelopment scheme is passing through a crisis that began in 2015, said Ramani, a real estate law expert. “In Bandra-Khar, property prices have fallen and construction companies do not have much incentive for redevelopment,” he added.

Builders generally provide 30 to 40 per cent extra space in societies for apartment owners, apart from a corpus and rent until the new building is ready for alternative accommodation. These considerations are not feasible, said, developers.

The redevelopment of small plots under 1,200 sqm resists and is not commercially viable for developers. “These reasons impair the transactions. The planning, parking constraints and huge marketing costs are the results of wafer-thin or non-returns,” said real estate consultant Sunil Bajaj.

In Chembur, a leading constructor could not begin the redevelopment of a major plot (10 acres) because it is not feasible financially.