“As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce.”
These words belong not to some radical socialist, but to the patron saint of classical economic thought – the Scottish philosopher Adam Smith. Here, Smith refers to the sticky problem of economic rent or the monopolistic control over land that allows landowners, simply on the basis of their ownership, to extract away value created by others through productive activity.
In ordinary language, rent is what we pay for the temporary use of something. Economists adopt a more expansive definition: an unearned income derived simply from the ownership or control of a resource, over and above the cost of making that resource a factor of productive activity.
A baker, for instance, earns by producing and selling bread, which is the normal profit for her efforts and investment. The rent she pays to her landlord, however, in addition to what the landlord needs for the upkeep and management of the shop, is economic rent. This will be higher if the shop is close to an important train station or near a residential area. It is the public and private investment in the neighbourhood, and the resultant economic activity it facilitates, that earns the landlord this windfall income. One of the central problems of urban policy, therefore, is to find ways to capture this unearned income from rentiers and reinvest it in the form of common infrastructure and services.
The city’s planning system provides this redistributive opportunity. However, planning can also be configured to create greater opportunities for extracting rents, concentrating wealth and perpetuating inequality, and hence it is important to pay attention to how the city’s plans affect land supply, structure land uses and (re)distribute land values.
Over the decades, Mumbai’s planning system has become a tool to alienate more and more high-value land to private developers, transfer costs of development on new home buyers, enable the government and property developers to extract rents and to create an infrastructure that benefits the very few while neglecting the needs of the very many.
Development planning in Mumbai
It has been six years since the Municipal Corporation of Greater Mumbai (MCGM) began preparing the third iteration of its 20-year Development Plan (DP). Public ‘suggestions and objections’ have been invited four times for various parts and during various stages of its preparation. In February 2015, the first version was released, but sent back for ‘corrections’ after widespread opposition. The revised version was released in 2016, reviewed by a Planning Committee in 2017 and sent to the state government for sanction. The state government has now – superseding powers of the local authority – made numerous changes to the plan, and public reactions have been invited yet again.
However, the DP is just one among the many plans, projects and interventions that affect development outcomes in Mumbai. The multiple central and state level agencies operating in the city all influence how the city is shaped – often in contravention to, or independent of the DP. Over the decades, the DP has become a document that is preoccupied only with land use zoning, land reservations, floor space indices (FSI) and building bye-laws, and remained largely indifferent to infrastructure provisions that are affected by land development: water supply, transport, sewerage, waste disposal, flood control, pollution control, environmental health etc. With the exception of public transport, very few, if any, systematic surveys and studies in these sectors are carried out for the preparation and modification of the DP.
The consequences of this blinkered approach over the decades have increasingly come to light in recent years: the 2005 floods that was the result of land reclamation and failure to plan drainage and flood control systems; the Elphinstone bridge stampede, a failure of the planning system to upgrade infrastructure in consonance with changing land uses; the fire in a restaurant in Kamala Mills, the result of poorly devised and enforced fire safety norms; and the recent findings by Doctors For You of the high rates of TB in rehabilitation buildings – a consequence of repeated and discriminatory ‘relaxations’ in building bye-laws for low-income dwellers.
Elphinstone bridge stampede. Credit: PTI
All of these are tragic indictments of the city’s parochial planning system, that has reduced ‘development’ to making reservations, assigning construction permissions such as FSI and Transferable Development Rights and relaxing bye-laws. Yet, given its limited scope as a ‘land use plan’, let us look at Mumbai’s DP, by focusing on its proposals related to land supply, affordability, incentive structures and redistribution of land values.
Unlocking land for ‘affordable’ housing
In 2007, the Maharashtra government repealed the Urban Land Ceiling and Regulation Act (ULCRA). Ever since it was passed during the Emergency in 1976, this highly-flawed piece of legislation, that was meant to redistribute urban land, was made out to be the single biggest reason for the city’s inability to produce affordable housing. Planners and policymakers railed against this ‘restrictive’ law that constricted land supply, produced artificial ‘scarcity’ and inflated real estate prices.
However, when the much-criticised ULCRA was finally repealed, it failed to register even a blip in the city’s ever increasing property prices. Obviously, neither the passing of the ULCRA nor its repeal helped achieve any of the supposed welfare aims that its proponents or its detractors promised. Similarly, the opening up of the city’s textile mill lands was supposed to expand the supply of residential floor space and bring down prices. The opposite happened.
Whatever be the reasons for the failure of these promises, it is clear that the argument of increasing land supply to make housing affordable has faltered time and again. Yet, The DP aims to achieve a bulk of its ambitious one million housing units by opening up 3,330 hectares of new areas, set aside earlier as No Development Zones (NDZs, totaling 2,100 hectares), Recreation and Tourism Development Areas in the north western suburbs of Gorai-Manori and Uttan (1,100 hectares), along with the city’s salt marshes (130 hectares) that are currently classified as ecologically sensitive areas under the Coastal Regulation Zone (CRZ-I).
Credit: Adam Cohn/Flickr (CC BY-NC-ND 2.0)
Even if we put aside the more difficult and critical questions of infrastructure provision, social impacts and environmental risk, will opening up new land finally make housing affordable in expensive Mumbai, where average ticket sizes for a small one bedroom flats are upwards of Rs 1 crore?
There are good reasons to be sceptical. The DP defines ‘affordable’ only in terms of house sizes – 30 square meters is an economically-weaker section (EWS) house, 45 square meters is a low-income group (LIG) house and 60 square meters in a middle-income Group (MIG) house. Forty percent of these units will be replacement units – produced through redevelopment of existing squatter settlements, MHADA layouts and rent controlled properties. The remaining will be built largely on these new ‘unlocked’ lands, by providing incentives to developers. When these lands were set aside as NDZs three decades ago, these were peripheral lands, with little commercial value. Today, they are prime areas, and when zoned for residential use with attractive incentives, their potential values will be enhanced further, making these areas ready for landowners and developers “to reap what they never sowed”.
We must recall the development of the suburban Powai Area Development Scheme in the late 1980s, where 93 hectares of land was exempted from the ULCRA under the condition that these will be used to develop ‘affordable’ housing by its developer. The land was leased at Rs 1 per hectare, and the developer agreed to build half of the total built area as 40 square meters units, and the remaining half as 80 square meter units. In actual fact, as residents of Mumbai know, the scheme developed a luxury township, were many of these ‘affordable’ units were amalgamated and sold as large flats. The high court noted that the developer “blatantly, grossly and outrageously” ignored the essential requirement of constructing smaller flats for affordable housing.
According to the proposed Mumbai DP, ‘affordable housing’ will be produced through two methods: development of contiguous land parcels more than two hectares in area, called Special Development Zones (SDZ). Here, developers (or public authorities) will be expected to develop on or surrender to the Municipal Corporation (MCGM) 30% of the land area for affordable housing (with minimal regulation), and 28% for amenities, in lieu of the right to develop the remaining 42% of land with higher FSI as free-sale area. The other method is the development of reserved or unreserved plots, again with incentive FSI, if the landowner builds and hands over smaller units to the MCGM.
The Revised Draft Development Plan (RDDP) that was sent to the government in 2016 made a distinction between ‘Affordable Housing’ (AH) and ‘Rehabilitation and Resettlement’ (R&R). The latest draft combines the two into a single regulation. Minimum tenement density for such developments will be 325 units for every 1.0 FSI – which means that tenement density for a 4.0 FSI development can go up to 1300 units per hectare. This represents an unprecedented acceptance of residential overcrowding and deficient living conditions, with almost no consideration for the social consequences of such environments.
Over the decades, Mumbai’s urban development has been significantly influenced by its Development Plans, even though the implementation of these plans have been quite limited. Credit: Reuters/Vivek Prakash/Files
Land and social infrastructure
Over the decades, Mumbai’s urban development has been significantly influenced by its Development Plans, even though the implementation of these plans have been quite limited. Only 36% of the estimated implementation cost of the first DP prepared in 1964 was spent, and its achievement in physical terms was even worse. The 1991 Plan, in response to this poor performance of the first plan, introduced what are called market-based ‘planning instruments’ such as additional Floor Space Index (height of the building as per the size of the plot), Transfer of Development Rights (TDR) and Accommodation Reservation (AR). All of these instruments are incentives offered to landowners to achieve public goals – rehabilitation units, social amenities, roads, etc.
Despite their introduction, however, only 33% of the 1991 Plan’s proposals were achieved over 25 years. Ideally, this would call for a re-evalutation of these instruments, especially since their incentives have been enlarged over time through successive indiscriminate modifications of the DCR by the state government. However, Mumbai’s planners have surmised that implementation of the 1991 DP has suffered because incentives were not enlarged enough.
Take for instance the Revised Developmental Plan’s statement on how social infrastructure reservations can be achieved: “The RDDP 2034…proposes the most incentivized formula hitherto devised so that reservation would no longer be viewed as an unfair imposition but a rewarding experience [for landowners] beyond the normal unreserved lands and their potential.”
The reason why planning has become the art of offering such inducements to landowners and property developers is simply because they are in the business of actually realising its proposals. The modality of planning – based on the faith that unfettered activity of private interests will produce common benefits – that has emerged is straightforward.
To this way of thinking, favoured by policymakers, it is only by alienating land to private developers that social urban goals can be achieved: slum dwellers will get ‘free’ housing, even if in highly compromised living environments, only if private developers get land. Schools, health centers and other essential social infrastructure can only be created if landowners are allowed to exploit their property over and above permissible limits. Affordable housing can only be achieved if the city’s ecologically fragile salt-marshes are handed over to house-builders to make wind-fall profits. Informal settlers displaced to make way for “world class” infrastructure will be resettled in R&R townships built by developers in the peripheries, and in exchange they will be allowed to sell TDR in high-value areas.
Land-based financing and implementation
But, the DP’s approach of development, that finances social and physical infrastructure only through new developments or redevelopment has two serious downsides – first, that the cost of producing infrastructure will be largely borne by those who will buy new housing or commercial space. This makes residential and commercial space even more unaffordable. Second, that because provision of infrastructure and housing is dependent on market production, the achievement of development goals will suffer if market activity declines or if projects do not seem viable.
Most of the DP’s implementation (amounting to an estimated 93.5% of the cost) will be achieved in ‘partnership’ with the private sector, through the accommodation reservation route. In other words, the wagon of social development has been hitched to real estate speculation. The experience of this form of extraction of amenities through cost-subsidy has been quite dismal. Apart from the low implementation of the 1991 DP mentioned earlier, the performance of the Slum Rehabilitation scheme is instructive: over 20 years, the scheme has produced only about 160,000 units despite its ambitions of producing 800,000 units in five years.
The city’s Municipal Corporation envisions the DP as a major revenue source – earned through imposing premium charges, fungible compensatory FSI and deviation fees. All of these are ways by which a part of land value is appropriated by the MCGM and the government. The key questions to ask here is how effectively does the planning system capture land value increases, especially those affected by its proposals and interventions? And more significantly, how equitably are these reinvested in the provision of public goods and services?
Apart from the low implementation of the 1991 DP mentioned earlier, the performance of the Slum Rehabilitation scheme is instructive: over 20 years, the scheme has produced only about 160,000 units despite its ambitions of producing 800,000 units in five years. Credit: Reuters
In reality, the city’s planners have been eager to subsidise special interests rather than common ones. The MCGM plans to spend 450 crores to build a 36 km fenced jogging and bicycling track along the Tansa water pipeline in the northern suburb, after having dispossessed thousands of families that resided there. It is obvious that this is infrastructure for a very small number of leisure bicyclists. Similarly, it plans to spend thousands of crores on car-oriented infrastructure projects such as the Coastal Road that is meant to inflate land values in poorly-populated north-western suburbs of Madh-Marve, rather than investing in the transport needs of most of the city’s population. Locational affordability requires new land areas to be served by affordable transport; the MCGM is instead seeking to starve and privatise the city’s affordable public bus service. In other words, the planning system is oriented increasingly towards servicing elite developments, as opposed to redistributing benefits through the provision of subsidised housing, transport, healthcare and education.
Speculative planning
The RDDP had spoken about rental housing, the Planning Committee report considered slum upgradation as an option (though only as an appendix). The latest draft released by the government for public scrutiny does away with both. The promotion of homeownership, and an incentive driven (re)development approach has turned planning into a speculative enterprise: heavily invested in promoting market activity, and with the goals of planners increasingly intertwined with those of real estate players.
This also has resulted in a fundamental transformation of the social conception of housing. A house has become less a place to live, more a financial asset or a means of accumulating wealth. Our planning system has made us all either speculators in real estate, or inescapably dependent on real estate speculation.
Things can be different, but will require a fundamental shift in our approach towards land and economic rent. Expanding public ownership of land is one response, that allows rents to be socialised. Community land ownership (or land trusts), by taking land off the market disconnect the value of a home from the land it sits on – it allows affordable housing, democratic control of land use, as well as reinvestment of rents into building community infrastructure. Similarly, around the developing world, programmes for reducing housing poverty have focused on bringing informal homes into the formal market by providing tenure security and facilitating settlement upgradation.
Without such measures that seek to capture and redistribute land values, it is unlikely that Mumbai’s planning system will ever deliver adequate and affordable housing. The DP’s approach of opening up more land, hiking up incentives and weakening regulations yet again aims to serve Mumbai’s powerful real estate machine. It is based on nothing but a quantitative view of human life, devoid of any qualitative concerns. Like the previous three cycles, even this time there may be many ‘suggestions and objections’ to the latest version of Mumbai’s DP. But the aspects that must concern are more general: the incremental encroachment of the public city by a privatised one; the production of highly deficient living environments and the increasing role of the planning system in the perpetuation of social and spatial inequalities.
Hussain Indorewala teaches planning and housing theory at the Kamla Raheja Vidyanidhi Institute of Architecture and Environmental Studies (KRVIA) in Mumbai.