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Mumbai: Started 2 yrs ago to speed up redevelopment projects, loan scheme yet to take off
The Indian Express  |  November 1, 2019

Neeraj Tiwari Mumbai

Former housing minister Prakash Mehta had launched the scheme in October 2017 for developers to complete redevelopment projects such as Slum Redevelopment Authority (SRA) projects and Maharashtra Housing and Development Authority (MHADA) projects.

 

To speed up redevelopment projects in the city, the state government had in 2017 kicked off a loan scheme for developers facing paucity of funds to complete their projects. Two years later, however, not a single project has been issued a loan under the initiative. Developers claim that to avail a loan, 50 per cent of the sale components will have to be reserved for affordable housing, which makes most of their schemes unviable.

 

Then housing minister Prakash Mehta had launched the scheme in October 2017 for developers to complete redevelopment projects such as Slum Redevelopment Authority (SRA) projects and Maharashtra Housing and Development Authority (MHADA) projects.

 

To launch the scheme, the government had signed a Memorandum of Understanding (MoU) with the State Bank of India (SBI) to provide loans to promoters of schemes that had run aground either owing to the paucity of funds or because the developer was not able to complete the project.

 

According to the terms of the MoU, while the SBI would provide loans for the construction of free-sale apartments, the Shivshahi Punarvasan Prakalp Limited (SPPL) would extend credit for construction of the rehabilitation component.

 

The SPPL is fully owned by the government. “To start the process, the SRA had to give Rs 500 crore to SPPL, which was handed over in 2017”, said a senior SRA official.

 

SRA schemes work on the cross-subsidy model and incentive FSI — developers construct homes for sale in the market as well as tenements to rehouse slum dwellers free of cost, with the free-sale apartments subsidising the cost of rehabilitating slum dwellers.

 

SBI officials said the bank has received only four proposals for such a loan, of which three are in the final stages of getting approval. SPPL General Manager R G Salve said the company has received only nine proposals seeking loans for construction of the rehabilitation component. Six were rejected as they did not meet the stated conditions. Up till now, not a single project has received funding. Salve also added that developers are deterred since the scheme reserves 50 to 60 per cent of homes for affordable housing.

 

The Slum Redevelopment Authority said 1,513 schemes are ongoing in Mumbai, of which 1,039 were given no-objection certificates in 2004 or earlier. These schemes have thus been pending for more than 15 years, with lakhs of slum dwellers awaiting rehousing. An SRA official said more than 45 per cent of SRA schemes have been delayed because of unavailability of funds for developers.

 

A senior SRA official added that most of the schemes are very old, so developers have to make alterations to the plans. This is also a reason for the low number of proposals. The SBI offers loans based on project viability at an interest rate of 9.5 per cent, while SPPL offers loans at an 8.75 per cent interest rate.