Impact of Mumbai (India) Textile Mill Land Development on Land Use and Real Estate Markets
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Impact of Mumbai (India) Textile Mill Land Development on Land Use and Real Estate Markets Piyush Tiwari Anil Kashyap Shashwat Tewary © 2006 Lincoln Institute of land Policy Lincoln Institute of land Policy Working Paper The findings and conclusions of this paper are not subject to detailed review and do not necessarily reflect the official views and policies of the Lincoln Institute of Land Policy. Please do not photocopy without permission of the Institute. Contact the Institute directly with all questions or requests for permission. ([email protected]) Lincoln Institute Product Code: WP07PT1 Abstract Mumbai has around 2.5 Square Km of land in the heart of the city (8 Km from the CBD) which is owned by 58 cotton textile mills. Since mid seventies a number of these mills have been declared as sick (loss making) units. Urban Land (Ceiling and Holding) Act 1976 prevented owners to sell the land for real estate development. During the last five years, a number of land transactions and large scale commercial real estate development on mill land have taken place. This paper analyzes the institutional and economic factors that have caused the transformation of mill lands from a centre of economic activity to a degenerated belt and again, post 1991, as a regenerated area of economic activities. Sequential changes in the Development Control regulations since 1991 have allowed mill owners to exploit the commercial potential of the land either through a sale or development by themselves. In this context, this paper analyses the impact of development on mill lands on other micro- markets in Mumbai. About the Authors Dr Piyush Tiwari is Senior Lecturer (Property) at the University of Aberdeen Business School, UK. He has published more than sixty papers on issues related to real estate and infrastructure. Other professional responsibilities of Dr Tiwari are Director, Asian Real Estate Society and Associate Editor, International Real Estate Review. Dr Anil Kashyap is Lecturer at School of the Built Environment, University of Ulster, UK. He has past working experience as Divisional Town Planner for 8 years with State Government of Haryana, India. Shashwat Tewary is a professional lawyer working with a leading law firm in the UK. He holds a Law degree from National School of Law, Kolkata. Contact information Dr Piyush Tiwari Senior Lecturer University of Aberdeen Business School Edward Wright Building Dunbar Street Aberdeen AB24 3EH Tel: +44-1224-272359 Fax: +44-1224-272181 Email: [email protected] Acknowledgements Authors’ are grateful to Akshaya Kumar, Nayan Shah, Vishram Patil, Fali Pooncha, Arvind Nandan, Suresh Menon, Manisha Grover and Sambuddha Chakraborty who spared their time to participate in semi-structured interviews. We thank Raphael Bostic, Roz Greenstein and participants at the October 2006 seminar organized by the Lincoln Institute of Land Policy. Thanks are also due to Lincoln Institute of Land Policy for funding the project. Table of Contents 1. Introduction 1 2. Methodological Approach 4 3. Emergence of Textile Mills as Poles (Prior to 1980) 6 4. Decline From Poles to Enclaves 7 Factors Inherent to Textile Mills 8 Land Use and Planning Policies 8 Industrial Location Policy 9 Spatial Planning Restrictions 10 Urban Land (Ceiling and Regulation) Act, 1976 10 5. Re-emergence From Enclaves to Poles of Activities 11 Globalization, Economic Liberalization and Shift in Economic Base 12 Population and Demographic Trends 13 Shift in Strategic Planning Objectives 14 Regulatory Regime Shift 14 Changes to the Development Control Rule 58 14 Changing Consumer Demand 16 Impact 16 Changes in the Development Control Rules Permitting Commercial Development 16 Textile Mill Owners Response 17 Response of Other Stockholders 18 Land Use at Neighborhood Locations 19 6. Impact of Development on Textile Mill Lands on CBD and Suburban Property Markets 19 7. Expanding Land Use and Market Outcomes on Textile Mill Land in Mumbai 25 Supply, Demand and Prices 26 Market Risk, Uncertainty and Information Availability 29 Product Innovation, Market Expansion and Novae Investors 30 8. Conclusions 31 Impact on Urban Form and Property Market 32 Local, Spatial Impacts and Viability of Fringes of Pre-existing Cores 33 References 34 Impact of Mumbai (India) Textile Mill Land Development on Land Use and Real Estate Markets 1. Introduction There are fifty eight cotton textile mills located in the city of Mumbai, which occupy nearly 0.5% of the Greater Mumbai’s land area of 468 Square Km. Half of these cotton textile mills have been under public ownership and the remaining is under private ownership. As a land use class, located as a cluster, they are one of the largest (along with the Mumbai Port Trust) land owners in Mumbai. Together these mills occupy a large chunk of land area abutting traditional central business district (CBD) of Nariman Point-Churchgate (southern tip of Mumbai). The location of mill land is commercially important considering the geography of Mumbai, which is a bell- shaped coastal city with limitations on land. Textile mill lands are located between the traditional CBD and suburbs. After being the driver of growth and employment for almost a century, cotton textile mills in Mumbai degenerated after 1980. The land remained commercially underutilized for more than a decade. A series of land use changes since 1991 have permitted the land to be developed for commercial purposes. These changes have created huge potential for development activity on former textile mill land since 1991. It is important to position cotton textile mill land within the context of Mumbai Metropolitan Region (MMR). The Region extends over an area of 4,355 Square Km. and comprises of Municipal Corporation of Greater Mumbai (southern edge of Greater Mumbai is also called Mumbai Island), Thane, Kalyan, Navi Mumbai and Ulhasnagar, 15 smaller municipal towns, 7 non-municipal urban centre and 995 villages (MMRDA, 1996). Mumbai is a bell shaped coastal city (Figure 1), like slice of a cake with an internal angle of 30 degrees. The thin end of the slice is the traditional CBD, where much of the employment is concentrated. The wider end of the slice is around 40 Km north from the CBD. Highlighted area within the circle is the location where cotton textile mill lands are located. The grey shaded area is the ‘no development zone’. The region above textile mill lands is defined as suburban area or suburbs in this paper. Mumbai Island comprises of the CBD and the Worli – Parel (where mill lands are located) belt. The ownership of textile mills prior to 1991 is shown in Figure 2. There are 58 cotton textile mills in this cluster or which 26 were under public ownership (25 under National Textile Corporation and 1 under Maharashtra State Textile Corporation) and the remaining 32 under private ownerships. Until 1980, textile mills had been key economic drivers for almost a century. However, following 1980, many of these mills became economically unviable. Since 1991, after a series of land use changes, mill lands have been redeveloped for commercial (retail, office etc.) and residential uses. Large landowners and associated land use play an important role with in the economy of a city and have profound influence on the neighbourhood land uses and property market outcomes. Martins and Sewaya (2006) argue that large landowners have acted sometimes poles (attractors of people by creating economic activities and generating employment) and other times as enclaves (by locking large land into restricted use, which hinders the continuity of urban fabric). The development associated with textile 1 mills in Mumbai suggest that this location has gone through phases of (i) emergence as poles (ii) transformation into enclaves and (iii) re-emergence as poles of economic activities. Figure 1: Mumbai Metropolitan Region (MMR) and location of textile mill lands Note: Grey shaded area is ‘No development zone’ Source: Correa (1996) 2 Figure 2: Textile mill location by ownership Note: Light Brown – MSTC mill; Dark brown – NTC mills; Black – Private Source: Correa (1996) 3 The objective of this paper is to analyse following issues: (i) The forces that have operated and caused various phases in mill land transformation from poles to enclaves and again re-emergence as poles. (ii) An important characteristic of poles is that they are the places which attract people, through generation of employment and economic activities. The land utilization is efficient and land uses are best possible uses. Poles have positive externalities on neighbourhood. Enclaves generate negative externalities in the form of low land values and decline in economic activity (Martins and Sewaya, 2006). In this context, this paper tries to analyse the impact of textile mill lands on neighbourhood economic viability and property values during various periods of time. (iii) After more than a decade of degeneration, since 1991, land use change policies were introduced which have allowed mill lands to be used for commercial purposes. These changes have permitted the addition of huge commercial space close to the CBD. This raises a number of questions: • What happens to the urban form and property market outcomes in a city when a large scale development takes place in the heart of the city? • What are its local and spatial impacts? • Is the viability of fringe areas in the pre-existing core compromised? Rest of the paper is structured as follows: Section 2 presents the methodological aspect of this research. Section 3 discusses the key drivers which led to the emergence of cotton textile mills as poles prior to 1980. During eighties, the economic decline of cotton textile mills began. Section 4 discusses causes and impact. Section 5 analyses the factors which were responsible for re-emergence of textile mills (or more appropriately location of textile mills) as poles. Section 6 discusses the impact of mill lands development post 1991 on other locations and section 7 provides institutional explanation for the observed impact.