On slums and slum resettlement

Dilip D’Souza has a very thought-provoking article in the Washington Post about Mumbai’s slum dwellers.

He has also posted the article on his blog.  I found myself taking over his comments section, and even after writing a whole essay there, I still had not voiced all that I wanted to say.  Obviously, the only thing to do at that point was to blog about it.

I’d love to hear all your comments on my opinions, so please fire away and let me know even if you think I’m barking down entirely the wrong tree.  Dilip, if you are reading this, that goes for you too.

Dilip’s main point, as far as I can tell, in simple terms is :

(i) Cross–subsidizing housing for slum dwellers does not work because it involves building free/ subsidized homes for slum dwellers and building a lot of for-profit homes (to offset the loss on free homes).  Developers do not want to build too many for-profit homes lest the glut forces a drop in home prices. So therefore, they will always build very few free/subsidized homes.

(ii) On the other hand, if developers build slowly, then housing prices remain high and slum dwellers will sell off their newly built homes and move back into (other) slums.

So either way, cross-subsidization is doomed to fail.

I really liked the article, and I agree with Dilip on cross-subsidization being doomed to fail. What I would like to point out is the bigger picture.  This is not an issue with cross-subsidization or Mumbai’s soaring real estate market.  It also does not matter whether the resettlement is done by selling free/ subsidized homes built by private developers or by the government.  It is an issue with the very idea of slum resettlement.

My point is, resettlement of slum dwellers has never been successful in any Indian city.   It does not matter what method you adopt, whether it is cross-subsidization or forcible clearance.   Slum resettlement  will never make slums vanish from cities.

To understand why I am saying this,  let’s look at cross-subsidization first.  What are some of the dynamics that happen when a slum dweller gets an offer for free or subsidized housing ?

1. From the slum dweller’s point of view, any profit he makes from selling his new free/ subsidized apartment is a free lunch.  He is used to the slum lifestyle, and can easily join another slum as long as there is one within a reasonable distance. He would rather make a profit by selling the apartment and using it for other priorities like education/ healthcare/ durable goods.

2. There is also the social aspect. People in slums interact much more closely with each other than people in apartments. Slum dwellers tend to miss their old, “communal” lifestyle and move back into slums after selling/ renting their apartments. This NY Times article by Anand Giridharadas talks about how some slum dwellers feel “caged” like poultry in apartments.

3. Also, people in slums usually think shorter term. Their need for money is more immediate. So even if their apartment will appreciate over the longer term, they would rather make a profit now by selling it since the money would be much more useful.

The issue is, slum dwellers themselves usually never feel an urgency to move up into apartments. There is no overriding cost involved (social or economic) that makes them want to stay in the apartment at the cost of giving up the immediate profit they can make by selling it.

The other issue is the presence of a nearby slum.  As long as we are not eradicating all slums simultaneously, it is very easy for a former slum dweller-turned-apartment owner to move into another slum.

Then there is the option of forcible clearance.  Apart from being autocratic, discriminatory and plain callous, it never works.  There is no point in forcing slum dwellers to move to the edge of the city when their jobs are in the city.  Unless the exurbs offer attractive employment opportunities (which they almost never do) these former slum dwellers will still pour into the city every day, spending much more than they can afford on transportation alone.  This article in Frontline sums up why this approach can never succeed.

In both cases, what we really end up doing is moving slums around the city.  The conditions that the people live in don’t change much.  It’s just that instead of occupying prime land, slums occupy less desirable areas. For now.  In a few years, those areas will also become much more desirable, and then the whole process will start again.

What, then, is the solution?

If the government really cares about slums (let’s assume it does care about the people and not just the prime land), there are only two things it needs to do:

(i) Improve infrastructure in existing slums:  The issue with having slums is not that they are an eyesore and are occupying prime land. The bigger issue is the appalling lack of basic amenities and the spread of diseases. The government should provide basic infrastructure to slums – water, electricity, toilets.  Most slum dwellers already use electricity – except that they use it illegally and don’t pay for it.  Providing electricity and charging them (even nominally) is actually a step forward.

(ii) Develop the exurbs by offering incentives to factories to move out of the city:  For instance,  if leather-related companies were offered incentives to move out of Dharavi to Navi Mumbai, soon, some of the slum dwellers in Dharavi will follow them.  If the new leather companies are set up in planned areas with infrastructure, then we can avoid a new slum coming up in Navi Mumbai.

The government can also identify which parts of the city are likely to grow and proactively ensure that the basic infrastructure is in place in these new areas.  If necessary, the government can also partner with local employers to part-finance the costs of developing the infrastructure.

In essence, there is no quick fix to the problem of slums occupying prime land.  Slum resettlement is an organic process, which will evolve as opportunities shift outside the city.

But I am not crossing my fingers and waiting for the day that any government will adopt such a far-sighted approach to the problem of  slums in our cities.   Especially when it means doing nothing about prime land.

For of course, slum resettlement is not about improving the welfare of the slum dwellers.  It is really about improving the welfare of a variety of  other vested interests.


13 thoughts on “On slums and slum resettlement

  1. Interesting post – I read the article in the Post as well (but didn’t blog about it; I had a feeling you would. :p)

    I agree with your thoughts on the camaraderie in slums and the other issues there.

    In any case, as far as the two suggestions you have: developing the slum’s infrastructure – not sure how much it would resolve. The reason for the slums is the lack of employment opportunities in the villages. And that’s where your second suggestion makes sense. However, Bombay did try the “develop the exurbs” approach with Navi Mumbai, and it hasn’t been a success.

  2. There is another way to address the slum problem. This one is the non-subsidy one. It has been floating around for a while but for some reason not apparent to me, has no takers at all.

    It is based on the fact that a slum dweller rarely, if ever, gets his dwelling for free. There is a “bhai” or slumlord who has to be paid a substantial amount as rent or as purchase price depending on whether it is leased or purchased. Currently, in Malad, where I live, this price is Rs. 1250/- per month for a 100 sq.ft. unit with electric supply and access to a communal toilet.

    Let us assume that a large building with say 500 units of 225 sq. ft. each is built. With basic amenities, this building will cost about 90 million rupees. Let us say we rent this out at 1250 per unit per month. The revenue is 7.5 million/ annum. This works out to 8.3% p.a. return. LIBOR is around 4%. All that is needed to be done is to get some free government land, sound adminstrative and legal framework and government guarantees and the job is done. Easier said than done, I know, but it has the advantage of not requiring any government spending or subsidies. And the lease periods should be finite. No nonsense about people owning a place just because they happen to live there.

    Actually, if we make the ground floor of this building as a shopping complex and sell it, we should get about 16000 sq.ft. (assuming a 7 storey building). Sell it for Rs. 10,000/sqft, which is a reasonable price for shopping space anywhere in Bombay and you get 160 million which means you’re actually making a profit. You can afford to house the people for free even.

    If we say 4 million people to be housed this way in Bombay, we’re talking 800,000 dwelling units or an investment of about 144 billion rupees or 3.6 billion USD. Unless I’ve goofed up in the number crunching.

    To put this in perspective, it is less than the amount Vijay Mallya is planning to spend on his aircraft acquisition.

    Area required for 4 million people is about 100 million sq ft or 4500 acres. Thats about 9 square kilometers. An area 3 km by 3 km.

    I’d say we have the money, we have the land and we have the people.

  3. The presence (or absence) of slums is part of an Economic Theory called ‘trickle down effect’.

    The Slum dweller is an ‘Internal Refugee’. He doesnt belong to the metropolis that he resides in. He is a migrant from some other part of India. He comes to the city in search of livelihood. He is unable to find opportunities to earn in his village. The bulk of India’s growth is happening in the cities. If we do a demographic profile of the slum dweller in Mumbai (by region), you will find that he is largely from those states which have a lower Development Index.

    Some of the things that we need to focus on are (not a complete list)

    – Reasons for failure of Agriculture. This is a major cause why farmers migrate to cities in search of alternative livelihood.

    – Even the slum dweller knows that his next generation need not live in the slums if his kids are properly educated. he is willing to spend on Education. The Government must provide the infrastructure. There is a lot of policy framed by successive governments about increasing Govt’s education budget in the 10th Plan to 6% of GDP. The Tenth Plan ended in 2007 – the budget has not yet crossed 2%

    The Slum inhabitant is not a fixed number. Building any infrastructure for Dharavi is not an end by itself. The existing inmates will move to whatever is provided, but their place will be taken up by more migrants. This will continue unless we address the root cause – livelihood in the villages. Clearly, the trickle down effect isnt working yet. The inequality between the haves and have-nots is increasing. Simon Kuznet postulates (http://en.wikipedia.org/wiki/Kuznets_curve) that inequality will initially increase and decrease subsequently. Can we afford to wait that long ?

    In my view, the solution lies in India’s villages and not in the cities.

  4. Vinod: No, not Dinesh D’Souza 🙂 Dinesh will probably inform all slum dwellers that they have sinned and say that slums are all due to the “cultural left”.

    Narendra Shenoy: Your argument is exactly the same argument for cross-subsidization that Dilip D’Souza talks about – he explains why it will never work. (Free government land is also a subsidy).

    Again, we are only talking about resettlement here, but the slum dwellers will only move if employment opportunities are available in the new place.

    Vivek and BPSK : I agree, to look at this issue comprehensively, we should also look at the issue of why people migrate into cities in the first place.

    I agree that failure of agriculture is a big cause. Lack of proper irrigation, GM crops, lack of crop insurance or financing, and many more issues that we in the cities are not even aware of because the press devotes so little space to rural India.

    Education and health care are also not available in the villages. The government should definitely address all these issues and improve infrastructure in rural India. Improving rural infrastructure and creating tax incentives should definitely move some businesses into villages/ small towns and create more employment opportunities in rural India.

    But until all this happens, people will continue to pour into the cities, so improving the existing infrastructure in slums should also happen simultaneously.

    My second suggestion also addresses the issue of new migrants. The government should proactively create planned areas (with employment opportunities nearby) where new development can take place, so newer migrants have better conditions to live in, and so they don’t occupy existing slums.

  5. Lekhni: you should email a link to this excellent post to Dilip? (If you don’t have his email address, I can forward it to him for you.)

    Having said that, do you have any references to back your claim there being more interaction among slum-dwellers, or is it purely anecdotal? (I am curious and not questioning this claim, so please don’t get my tone wrong.)

  6. km: No, I do not have Dilip’s email id. Do you think I should email? I’ve already taken over his comment section, now he might wonder at my spamming him as well 😛

    I read a news report some time back about former slum dwellers missing the interaction in their new apartments and going back to their slums. This was either in Mumbai or Delhi, and I can’t find the article now, or I would have linked to it.

    Edit: I have found the article now, and I will link it up in the main post also.

  7. ..to add to what you have suggested lekhini, i think there needs to be some sensitization to the long term benefits of retaining the new apt. A hugely difficult task – most slum dwellers and indeed a lot of the lower socio-economic strata tend to be exceedingly myopic. The only thing which i can see would be if they were given an allowance to stay within the complex – and am not sure whether that is a really viable and possible solution.

  8. I kinda agree, how many times have we heard of people initially moving from a slum to govt. subsidized housing only to return back to their original habitat and renting out their subsidized apartment. They have the benefit of getting extra rental income courtesy the govt. of India.

  9. I suppose due to the Egypt anchor dropping fiasco, I have not had broadband for several days now, and that has prevented me from coming here earlier to leave a comment.

    Thanks for this post, which explains some things a lot more clearly than I could have. A couple of clarifications: I don’t at all believe you “took over” my comments section, and I would never consider email from you spam.

    My basic point in this comment is to agree with this: resettling slum residents has never worked, and the way it is pursued now, it will never work. Slums will persist as long as it’s assumed that the way to address the issue is to remove the slums and shunt residents “out” (wherever that is); as long as job opportunities in rural areas continue to lag; as long as rental housing in cities remains expensive and in short supply; and as long as slum residents are seen as “encroachers”, somehow superfluous to the urban economy instead of an integral part of it.

    You’ve covered much of what I’d have liked to say, so I won’t repeat. But as for solutions, I would add that slum residents should somehow get secure title to their land.

    I have also heard from some slum residents who have moved into buildings how they miss the social interaction they used to have. But for at least some of the families I spoke to, the convenience and benefits of their new flats were weightier considerations.

  10. Although all that you have written seems quite reasonable and logical on what actual evidence do you base your reasoning on. You say that resettlement is not advisable – have you spoken to slum dwellers who have been resettled how they felt about it? I do not know much about the topic but my maid is one of those slum dwellers who was resettled. She now travels one hour everyday to get to work. I said ‘that must be tough, they shouldn’t have forced you to move out’. She said no, she was happy with the resettlement, now she can leave her little daughter at home and not worry about lecherous neighbours. She feels much safer, and it is cleaner than the slum was. I think instead of drawing our own ‘rational’ conclusions about issues, we need to go and ask the people what they want and offer them choices and options. Let there be resettlement colonies for those who wish to move and stay there and at the same time improve the conditions in the slums themselves to whatever extent possible. Both are important – you do not have the resources to resettle millions of slum dwellers and nor are all of them willing to do so. Its not an either-or, both things need to be done – resettlement and improvement of slums.

    We keep looking for solutions because the obvious solutions are too ardous. We think we will find some simpler, easier solution to this great issue. But its as simple as:
    1. Providing resettlement options
    2. Improving infrastructure to whatever extent possible in existing slums
    3. Keeping an eye out for potential slums
    4. Going to the root of the matter – overall progress and development
    5. Land rights for slum dwellers allowing upgradation and access to basic utilities

    One solution wont work for all slums, or even for all people within one slum – the slum-dwellers need to be involved in the decisions and planning and be given options, choices and empowered to improve their lot.

  11. The idea of application of cross subsidization is totally understood and presented in wrong sense here. We see slums along major transportation routes and nodes, where a functional distribution of population density (high rise) is needed to accommodate large population in smaller areas. The developers today thrive on this idea for making huge profits. But what slums here gives to them is large high value space being wasted, due to unplanned low density (unmanaged) development. Hence, its a win win situation for the developers to acquire the land even at a very high price along with providing 25% of the dwelling units to the slum dwellers. So, its not the cross subsidization, its the common sense.

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