Because housing is so expensive, about two-thirds of Mumbai’s population live in slums or on the streets. This has been true for decades and remains true in ready-for-boom-time India. Indian politicians have concocted countless schemes over the years to “redevelop” slums, which they consider eyesores. For a variety of reasons, they’ve never managed to deliver on their promises. But one idea that took off decades ago still fuels the construction boom in Dharavi and throughout the dizzying, maddening city of Mumbai.
The concept, called “cross-subsidy,” is simple. The government invites developers to build flats to be sold to slum-dwellers at subsidized prices. In return for their participation, the government loosens zoning regulations, usually in the same area, so that the developers can build other larger and plusher apartments to sell to middle- and upper-class people at the market rate. The profit that developers make on these sales will pay for the subsidized units — a nice marriage between government policy and private profit-making. Or so the theory goes.