Mumbai eases laws for overseas investment
When Indian Finance Minister Palaniappan Chidambaram presented his budget for 2005-06 in Parliament in February, the construction industry was already semi-euphoric. His long-term vision for Mumbai, India's commercial capital, made it even happier.
'I would like Mumbai to become another Shanghai, which is today considered China's showpiece. And I intend introducing legislation that will make infrastructure-building that much easier,' he said.
Just a week earlier, the Commerce Ministry had relaxed the laws for entry of foreign players, implying that the government was keen on doing away with archaic laws such as the Urban Land Ceiling Act that had stifled the growth of Mumbai.
The liberalisation of foreign direct investment (FDI) in real estate had evoked interest in India among foreign investors, including the US-based CB Richard Ellis (CBRE), which manages investment worth more than US$15 billion worldwide in the real estate sector.
CBRE president Brett White, who visited India recently, said: 'We have received several inquiries regarding investment opportunities in India. India as a brand is well established in the international market. If the government were to create the right environment, investments will pour in. The recent FDI legislation, for example, is very attractive.'
The central government decision to reduce the mandatory minimum area for allowing FDI from 40.4 hectares to 10.1 hectares has been welcomed by investors as more practical, especially from the point of view of land availability in metropolitan centres.
The Maharashtra state government has done its bit by moving a proposal to offer 50 per cent additional floor space index (FSI) for redevelopment projects.
Niranjan Hiranandani, managing director of Hiranandani Constructions, said: 'This would result in increasing the FSI available to redevelopers from the present 2.5 to 3.75, and effectively enhancing the profitability and viability of such ventures. Entire areas are languishing today because the economics do not justify reconstruction of individual buildings.'
However, it could also result in burdening the already groaning civic infrastructure. There are 15.5 million people in Mumbai. And the water, electricity, roads and housing are proving grossly insufficient to cater for their basic needs. Construction industry representatives say greater emphasis needs to be placed on redevelopment, with dilapidated structures being replaced by modern high-rises.
Raheja Constructions chairman G L Raheja said: 'After all, whether one has five big towers or 25 smaller structures within a certain radius, the number of families residing there and the resultant drain on the infrastructure would be pretty much the same.'
Rajeev Sabharwal, managing director of ICICI Homes, which gives housing loans, said: 'Even the myth about high-rises needing more parking spaces because they attract the affluent classes no longer holds true because space allotted in projects that target the middle class is filled to capacity these days.'
Water scarcity is a major problem in Mumbai, but high-rises have got used to supplementing the municipal water supply through water tankers.
Many builders say this problem is present in sections of modern Shanghai as well and is not an easy one to solve.
In the past decade, many of Mumbai's traffic problems have been sorted out by the construction of flyovers that move vehicles swiftly over crowded junctions.
The decentralisation of what used to be the central business district on the southernmost tip of Mumbai island had helped decongest this part of town.
