Properties in Dharavi moves on from slum to residential hotspots

The real estate market in Mumbai is experiencing a significant boom, but not in its suburban or traditional posh regions. The realty market is thriving in the teeming slums, which houses more than 60% of Mumbai’s population. Dharavi, one of the shanties in Mumbai has been experiencing a significant hike in property prices due to its strategic location.

The informal property industry in the slums of Mumbai is estimated to be around hundreds of crores. This has contributed to the spur of property prices in Dharavi. According to JLL, a 450 sq ft property in the slums of Dharavi (Asia’s second largest slum cluster) would fetch more than 1 crore to a seller, even if it is not situated in Mumbai’s middle class hubs. Market reports confirm that in the last few years, property rates in Dharavi have hit the roof, even when there has been a slump in real estate prices in the prime locations of the city.

Rising Trend

The prices of such properties are likely to startle the residents of tall towers, adjoining central Mumbai and Lower Parel locations. Unlike the hotspots in Mumbai, a 80-100 sq ft house in Dharavi may cost around Rs 25 lakh, which is beyond Rs 31000 per sq ft.

Dharavi, a brimming slum covering an area of 557 acres between Mahim and Sion, is a home to more than 3 lakh people. Geographically located at the center of the city, Dharavi houses a number of small scale industries such as embroidery, recycling, soap, bakery, making clay pots, leather etc. This adds to the number of reasons for the continuous increase in property rates in the slum dwellings.

Market overview

While the prime locations of the city suffers from slackening property rates that fell down to 14% in the first quarter of 2013, Dharavi has witnessed a high demand in residential properties due to its cheaper price sustained by the immigrant labor force such as plumbers, domestic helpers, daily wagers etc. Possibility of redevelopment of the slum according to the 1998 plan makes this area attractive to investors.

According to property agents, a shanty home, having a size of 12 ft x 35 ft, can earn a price of Rs 1 crore – Rs 1.4 crore. Proximity to railway station and main road also adds to the number of reasons for high premium of the houses in Dharavi.  Property advisors of Knight Frank further corroborate that this slum can have its own realty index with its own set of rules and regulations.

Difference in property transactions

The rates of the houses in this area that have wooden or tin roofs, with no attached bathrooms, have almost doubled in the last few quarters. Home buyers, who are on the lookout for a house in Dharavi are generally approached by agents, a majority of which do not own a registered office.

To add to it, a number of rules which are implemented in real estate transactions of the city do not apply in property transactions in Dharavi. To buy a property in Dharavi, one would not require to do any formal registration and will not have to pay any stamp duty whatsoever. The deals are based on sale agreements, power of attorneys and NOCs.

Reason for the hike in price

Property prices have increased mainly due to the scarcity of land in Mumbai. The government’s plan to re-develop the slum has also pushed up the property prices since 2004. Dharavi Redevelopment Plan, that was initiated in 1998, aimed at the reconstruction of the slum and offering 225 sq ft free of cost houses. It was a step, mainly taken towards rehabilitation of the residents dwelling in the slum since 2000. Because of DRP, the value of the properties in the slum have soared high since buyers expect more value for their homes in future.

Dharavi Price Trends

The price for a multistorey apartment in Mahim, Dharavi, ranges between Rs 25000- Rs 27000 per sq ft. Market experts further confirm that there has been a hike of 14% in the property rates of Mahim in the last few quarters.Some of the ongoing projects in this area include Kamanwala Mahim and Lakshachandi Shimmering Heights. 1BHK, 2BHK and 3BHK flats are generally offered to home buyers in this area.

The main USP of a property in Dharavi location is that it can be used as a commercial or a residential property, according to the benefit of the buyer. The price of residential properties in the region is likely to witness an escalating path in future and experience a price appreciation significantly.