Navtej Nainan ( is currently a PhD scholar with the University of Amsterdam.
Series 1 
PERSPECTIVEEconomic & Political Weekly EPW may 24, 200831receiveTDR. FSI for plots which consumed TDR was increased from 1.00 to 1.4 and TDR plots reserved in residential zones were allowed to be used on residential zones and the same is for commercial zones.Holders of TDR receive a paper certi-ficate issued by the municipal commis-sioner of Mumbai giving the details of the land owner, the area and location of the plot which has been surrendered to the municipal corporation, the quantity of TDR and the zone in which it is issued. The simplicity of theTDR mechanism is perhaps its biggest weakness as it has been conceived and created with a simplistic understanding of Mumbai’s land prices and land markets. The only land market knowledge with the planners and bureau-crats who introduced this mechanism seemed to be that land prices fall towards the north of Mumbai. By allowing the use of TDR only to the north of the generating plot they tried to avert further congestion of the island city and pushed growth to the suburbs. Perhaps this incomplete knowledge of land markets was a legacy of the earlier phase of planning with its roots in the command and control economy, where land was understood to be owned, controlled and developed by state. How-ever, 16 years after the formulation of the TDR mechanism, the same excuse holds no ground. From 1993 to 1997, two types of TDR certificates were being offered by the MCGM, one for those land owners who lost their lands in road building activity and the other to those who lost land to public amenities such as schools, open grounds, hospitals, etc. Road building and construc-tion of public amenities are direct respon-sibilities of the MCGM [Balchandran 2005]. Its dependency on the TDR mechanism for acquiring lands for amenities and roads has made it one of the key members of the building boomers network. Over and above the TDR offered in exchange of land, TDR was also given to builders/contractors if they would undertake the construction of services and amenities such as roads, schools and hospitals.In 1997, Maharashtra’s Shiv Sena-BJP government further liberalised the TDR instrument and offered it to developers in exchange for carrying out slum redeve-lopment project for high density slums suchas in Dharavi and for PAP housing. Under slum redevelopment projects, TDR was offered for surrender of lands as well as for construction, so both the land owner and the builders were com-pensated by giving themTDR certificates equal to the area they had surrendered or constructed upon.The introduction of slumTDR in lieu of constructing slum/PAP housing has had a negative impact on amenity reservation TDR and roadTDR. As slum/PAP TDR is cheaper than amenity reservation and roadTDR, builders prefer it as they benefit from higher profits by using theTDR in high income areas. With the advent of slum TDR, the value of reservation TDR decreased (Figure 2). Further, if the value of one type of amenity TDR (road, reservation or slum) falls, then the land owners and developers are likely to be dissuaded from producing that amenity. Thus a delicate balance has to be maintained between the demand and supply of these TDRs to keep the prices attractive so that the private sector keeps constructing amenities. As the planning authority for Mumbai, the MCGM is required to make policies which will ensure that differentTDRs are in demand thus perpetuating a high construc-tion growth scenario for the city. With the advent of slum/PAP housing TDR the new mechanism was partly disas-sociated as compensation for land acquisi-tion and used as a means to pay back builders for housing constructed by them. Of the total 31 PAP townships constructed only eight were constructed on land owned byMMRDA, while the rest were constructed by offering TDR to private land owners. Of the total Rs 4,526 crore cost of theMUTP, 57.5 per cent was a World Bank loan and the rest is contributed by the state government in carrying out 75 per cent of the resettlement of thePAPs using the TDR mechanism. This huge number of state-sponsored high rise housing construction is unprecedented in modern times. The World Bank’s ‘Management Response Report, 2004’, congratulates the govern-ment of Maharashtra for developing a financial mechanism to offset the cost of construction related to resettlement and says that “this financial mechanism is making the resettlement programme affordable for the government”. Thus the state has chosen to raise funds not through taxes but from a share of the development. Development charges and TDR are the new and significant means of capital invest-ments for the MCGM as well as government of Maharashtra. The scale of the MUTP operations is so huge that in 2003, when only a part of the PAPTDR of 85,000 sq mt was released into the market, its price crashed from Rs 850 per sq feet to Rs 500 per sq feet [Singh 2003].The use of the TDR mechanism enjoys wide consensus across local and state governments. While the local government benefits fromTDR by using it to construct amenities such as roads, schools and health posts, the state government is freedfrom raising its share of grants for large projects such as the MUTP andMUIP. When this sort of a situation develops, the government’s interests get entangled withthose of the building boomers and the government itself becomes a member of the building boomers coalition. The fungibility ofTDR certificate also makes it possible for owners to sellTDR in parts, as per their convenience with the result that TDR can also be hoarded creating scarcity in the market and artificially increasing prices. M Ward as Rehabilitation Ward In the 1960s M ward (east and west) was a sleepy village known for its villas and hills. It was also used to relocate displaced poor residents of the island city as lands on which they lived were being taken over in the 1950s for urban development. Lotus Colony is one such community which was displaced to M ward from the western suburb of Bandra. M ward also houses one of Mumbai’s two solid waste dumping grounds. In 1972, a large dalit population Figure 2: Three Types of TDR Generated in the City of Mumbai between 1993 and 2003 (in lakh sq mtrs)765432101 2 3 4 5 6 7 8 9 1011Source: Balchandaran (2005).Reservation TDRSlum TDRRoad TDR
PERSPECTIVEmay 24, 2008 EPW Economic & Political Weekly32migrated to Mumbai – and to the M ward – to escape the drought that hit rural Maharashtra. Large chunks of land in Mwardare also occupied by small and large industries. This ward also houses two state-owned petroleum refineries: Bharat Petroleum and Hindustan Petroleum, state-owned fertiliser factory, Rashtriya Chemical and Fertilisers, the government of India’s Bhabha Atomic Research Centre and also the Tata Power Station. Each of these large units also have their staff quarters here, making this ward a mix of poor and middle class housing along the main roadsand bungalows near the Chembur railway station. Despite this population mix, Mumbai’s single largest dalit agglomeration lives in this ward. M ward also happens to be one of Mumbai’ poverty hot spots, and has perhaps the largest number of households living in poverty [Baud and others 2007]. A World Bank panel investigating the MUTP found in 2005, that in selecting the Mankhurd resettlement site in M ward, “no consideration was given to the proxi-mity” of the site to Mumbai’s largest solid waste dump or, “the implication of this…the environment assessment did not consider the ambient environmental and social conditions when identifying site for resettlement” [World Bank 2005]. This researcher’s findings suggest that there was no conscious decision to select M ward for PAP housing. A chance combination of low land prices, TDR market dynamics, and availability of Ulcra lands along with struc-tured activities of politicians to increase FSI has led to PAP housing clusters emerging in the M east ward of the city.Availability of Land Six PAP townships in M east ward (two each in Anik, Lalu Bhai Compound and Gautam Nagar) have come up on land which was exempted from land acquisition under the Urban Land Ceiling and Regula-tion Act of 1976 (Ulcra) for construction of low income housing. According to the Ulcra urban surplus lands (above 500 sq mt) were to be transferred to the government at a nominal compensation to house low-income families. In reality, only a small fraction of surplus lands were transferred to the government and much ofitcame up for development only in 1985 under the changed policy which permitted a land sharing mechanism between low income and high income housing. Meanwhile, lands changed hands and the new owner-builders preferred to wait till theFSI of the area was increased and profitsunder the TDR com-pensation mechanism would be introduced.Ironically, the same lands which were to be surrendered to the government at a nominal price for public housing under the Ulcra finally did come to the government as housing for PAPs after 30 years in exchange for TDR. The land owners have been able to reap huge profits from TDR offered in exchange of surrendering their lands and in a way have immensely benefited from speculation. The policy of decongestion and moving industries out of the city has opened up many more areas for residential use. Out of the seven PAP township projects in M ward two were earlier used as park-ing spaces for ship containers, and three had industries which shut down. In the decade of the 1990s, the FSI of M ward has been changed twice. In 1991, the FSI was changed from 0.5 to 0.7 and then again in the late 1990s, under chief minister Narayan Rane, of the Shiv Sena the FSI was further liberalised to 1. This coupled with deindustrialisation resulted in entry of many new land plots into the market and drew builders to this otherwise sleepy, smelly, neighbourhood. A ward- wise analysis of where slum TDR has been granted shows that 64 per cent (21,74,478.41 sq mts) of all the TDR generated in lieu of slum rehabilitation has been granted in M ward. Dictates of the MarketAnother reason for selecting M ward as a TDR supplier was because the TDR generated here could be used towards the city’s north-west, in areas where the rich stay. Theemergence of a middle class with significant surplus incomes, as a result of liberalisation has created a phenomenal demand for luxury and super luxury housing in Mumbai. Data shows that between 15 per cent and 16 per cent of theTDR generated in M east ward (slum TDR) has been consumed in K west and H west wards respectively while only 3.5 per cent has been consumed within M east. Juhu in K west as well as Bandra and Santacruz of H west are seeing much construction as old buildings and bunga-lows are expanding vertically or just being broken down to be built anew.Thus it is the market, that is, the demand for housing from the high-end segment in a particular location and the availability of relatively cheaper industrial lands inpredominantly slum-dominated areas 
Slum Reservation Road 
PERSPECTIVEmay 24, 2008 EPW Economic & Political Weekly34parties. The introduction of TDR has thus rescued the Maharashtra government from taking politically harsh decisions that would hit tenants/residents of old buildings in the island city. Resistance from island city dwellers to paying higher property taxes amongst other factors has led the state government to depend on a construction boomin Mumbai’s northern suburbs as a source of TDR generated amenities. Subur-ban building boomers are happy to construct high income housing in the north western suburbs and low income housing in the north eastern suburbs. Island city dwellers benefit from more and better infrastructure in their part of the city. This process also pushes up real estate prices in the island city.Clearly,TDR is a much more attractive mechanism to building boomers than the old-fashioned lengthy low paying system of being compensated by the state for surrendering their land for public purposes. The state government has manipulated TDR to such an extent that it has replaced tradi-tional revenue sources and has emerged as a parallel legal currency without disturbing the existing urban tax structure. As in all commodities that are actively traded, cartels are said to control the TDR market. Made up of a handful of builders, the TDR cartel has half of its members active in M ward itself. These cartels hold on to the TDR and then let it out in dribbles thereby control-ling the price.TheTDR mechanism is also a boon for the Ulcra-affected land owners who get a handsome compensation which has high sale value and is linked with real estate markets in the north-western high priced residential areas of the city. Short-sighted officers of the MMRDA find nothing wrong with this as, according to them, “ultimately the land meant for housing the poor has come to the poor”. The question really is: When and on whose terms?Note 1 The FSI rules are laid down in the development control regulations of the city and can be amended through a process laid down in the Maharashtra Regional and Town Planning Act.ReferencesBaud, I S A, K Pfeffer, N Sridharan and N Nainan (2006): ‘Matching Knowledge to Urban Govern-ance: Mapping Deprivations in Three Indian Mega-Cities’, Mimeo. Baud, I S A and Navtej Nainan (2007): ‘Negotiated Spaces’ for representation in Mumbai: Ward Committees, Advanced Locality Management and the Politics of Middle-Class Activism, Mimeo. Balchandaran (2005): ‘TDR: A Strategic Tool for De-velopment’, MCGM, MumbaiBombay First, Vision Mumbai (2003): Transforming Mumbai into a World Class City .Jain and Bhatt (2005): ‘Stamp Duty, Ready Reconker for the City of Mumbai’, Bombay.Jan Hit Manch and others vs State of Maharasthra and others (2003): Writ Petition No 637, High Court of Bombay.Karnik, Ajit (2002): ‘Perspectives on Civic Finances: A Study of Brihanmumbai Municipal Corporation’, University of Bombay.Logan, R John and Molotch L Harvey (1990): ‘Urban Fortunes: The Political Economy of Place’, Univer-sity of California Press.Mehta, Jaswant B (1983): ‘TDR: A Vital Instrument of Town Planning’, Peata, Mumbai.MCGM (1985): Report on the Draft Development Plan of Mumbai, Bombay.MMRDA (2003): Population and Employment Profile of Mumbai Metropolitan Region, Mumbai.Patel, Sujata and Alice Torner (1995): Bombay Metaphor of Modern India, Oxford University Press,New Delhi. Patel, Sujata and Jim Masselos (2003): Bombay and Mumbai: The City in Transition, Oxford University Press, New Delhi.Ramasubban, Radhika and Crook Nigel (1995): Bombay Metaphor for Modern India, Oxford Univeristy Press, Delhi.Singh, Gurbir (2003): ‘Land Slide: TDR Rates Crash 38 Per Cent in Mumbai’, Times News Network, December 19.Shrinvasan, Rukmini (2007): ‘S Mumbai MLA’s Block-ing Reforms on Property Tax’, The Times of India, July 12.Varghese, Gigil (2007): ‘Mumbai Defines Property Tax Reform’,Hindustan Times, February 9.World Bank (2005): Report no 34725, The Inspection Panel, Investigation Report: Indian Mumbai Urban Transport Project.Third Asia Link Workshop in Law and Economics, July 2008Indira Gandhi Institute of Development Research (IGIDR), MumbaiIGIDR is organizing an intensive training program in Law and Economics from July 21 to July 30, 2008, as part of the activities under the Asia Link Program on Human Resource Development in Law and Economics in India and Europe. Three short courses, namely, Competition and Regulation from Law and Economics Point of View, The Law and Economics of Corporate Law and Corporate Governance, and The Law and Economics of Tort Law will be taught by Professor Dr. Thomas Eger (University of Hamburg), Dr. Alessio Pacces (University of Rotterdam) and Dr. Tim Friehe (University of Tuebingen), respectively. Each course will have an evaluation component and grades (on a four point scale) would be given. Workshop completion certificates will be given to only those who successfully complete all three courses.We invite applications from students, and junior faculty interested in participating in this training workshop. Specialization in Economics, Development or Law is desirable. IGIDR will provide boarding and lodging to the selected participants. In addition,selected outstation participants will be paid train travel allowance (3-tier AC) on furnishing the tickets. Applications (with a brief resume, email id and contact phone numbers) should be sent to The Registrar, IGIDR, Gen.A.K.Vaidya Marg, Goregaon (East), Mumbai 400 065 by post or by fax (022-2840 2752) or by email:lawecon@igidr.ac.in byJune 16, 2008. Please add “Law and Economics 2008” header to your envelope or fax/email message. 
