HBS Case Study : Dharavi- Developing Asia’s Largest Slum
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Transcript of HBS Case Study : Dharavi- Developing Asia’s Largest Slum
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DHARAVIMEP VI – Group 5
ABHISHEK PANICKER . KEDAR HUDDAR . KOUSHIK GANGULY . PUSHKAR SABNE . RAKESH KADARKARAI
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Case setting■ March 2009
■ Dharavi Redevelopment project (DRP) - Government estimate: 3 billion– 40 million sq.ft of commercial space and 30 million sq.ft of residential development
– Contribute Rs. 20,000 per family for further maintenance, addtl 20,000 by RP
– For every 100 square feet of free housing, the builder was allowed to build and sell
133 square feet
– Construct & Maintain all buildings & public areas for 15 years
■ Bid for five sectors, awarded for max one sector■ Stage 1 - $ 10,000 for EOI application
– 100 developers■ Stage 2 - $ 3.5 Mn security deposit per sector
– 19 developers selected
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Guidelines■ Prequalification - Experience in 1 township development
– unutilized borrowing capability of $105 million
– average annual turnover of $85 million.
■ minimum $9 per square foot of the free-sale component area as a “premium” to the SRA
– 10% premium on award, 20% BG, 70% after free sale
■ Bidder’s premium - three economic variables
– the cost of construction,
– expected market prices
– cost of capital
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Way aheadRisks
■ Project estimate – 57,000 free houses– Possible to increase to 90,000
■ 300 sq.ft per family - free, option to buy 100 sq,ft – at cost
■ Disagreement over height allowed, FSI: 4.0 compared to 3.1 in municipality
■ Land prices @ RS 7000 / sq.ft : Neighbouring Sion area: Rs.12,000 / sq.ft
■ Land rates 300 % in 2 years
– prices down 25% last year
■ Government floor for Bidder’s Premium is Rs. 450 / sq.ft
Options
– meet the government’s minimum “bidder’s premium
– Submit a proposal well above the minimum
– elect not to compete
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Scenario analysis
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Consideration for slum dweller
■ Allocation & size of housing / work space
■ Tendency to rent-out and shift to another slum
■ 80% earn livelihood from within slum
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Id Risk Element Probability Impact Risk Rating Risk Mitigation Plan
Risk rating after
mitigation1 Regime change Possible Major Critical - -
2 Land Acquisition from private owners
Unlikely Moderate Medium Market rates to be givenLand acquisition rule to be deployed
Med
3 Agitation by people staying on rent
Likely Major Critical Provide safe dwelling to everyoneUse proper ID card to identify (Aadhar card)
High
4 Land prices continue to fall Possible Major Critical Hold for prices to surge, Mumbai prices will surge
Med
5 Resistance from informal (unregistered) business
Likely Major Critical Provide one stop license to all the vendors, govt. to form a committee to do the same1. This will increase govt.
revenue in tax collection2. Illegal activities can stop
Med
6 Delay in Environmental clearance
Unlikely Moderate Medium To be taken upfront from the govt.
Low
7 No cap on additional purchase on construction cost for commercial establishments
Most likely Major Critical Cap to be introduced Low7
PROJECT RISK
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Most Likely
Likely
Possible
Unlikely
Rare
Prob
abili
ty
Insignificant Minor Moderate Major Extreme
Impact / ConsequenceLow Medium High Critical
7
3,5
1, 4
2, 64
3
6 57
Risk Rating
8
RISKS INVOLVED (Pre and Post mitigation)
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THANK
YOU