For Mumbai To Emerge As An International Financial Centre, Land Use Regulations Must Change
The finance ministry and the Maharashtra government are now working on land regulations to build an International Finance Centre (IFC) in Mumbai, a proposal which has been a topic of debate for a long time. The commerce ministry intends to build an IFC in Mumbai's Bandra Kurla Complex (BKC) . But before that the government wants the norms that apply to special economic zones (SEZs) apply to the IFC, too.
In Mumbai where urban land is scarce, this will prove to be a difficult task. Officials of the Maharashtra state government think that they can either ease the land use regulations in the BKC or use the land in neighbouring areas, too, for building the IFC. If this materialises, the centre in BKC will get tax holidays and exemptions from dividend distribution tax (DDT) , capital gains tax, and securities and commodities transaction taxes.
The attempt to build an IFC in Mumbai, and to make the city an international financial centre is different. But many experts greet the proposal to make Mumbai an International Financial Centre with skepticism. This is because Mumbai is not seen as a pleasant city to live in, like London. Mumbai's floor area restrictions are among the worst in the world and transportation networks, weak. Commuting time is too much and houses are too congested. Mumbai has a long way to go before becoming an international financial centre.
As the infrastructural woes of Mumbai are extreme, critics are right. Stable, reliable power supply is not yet the norm, even though Mumbai is much ahead of most of the other Indian cities in this aspect. It is not just that Mumbai lacks excellent transport networks to the rest of India and the world, it also is not well-connected locally, South Mumbai and Navi Mumbai, for example. Mumbai is yet to have a wide mass transit network like Delhi's Metro system. The local trains are overcrowded, and many people die on the railway network every day. There is still not sufficient water supply for residential and commercial purposes. Even though a flood in 2005 caused heavy destruction, Mumbai is still not equipped to handle such disasters.
But the biggest constraint of all are the land-use and zoning regulations in Mumbai. This is true of land acquisition norms, too. SEZs like the IFC are opportunities to profit from acquiring and converting land for commercial or industrial purposes. People who give up land for building SEZs usually find the process unjust because developers and firms make much higher profits through unfair means. Resolving such issues would even allow the government to function more efficiently. Emirates in the Gulf, for example, find it easier to do away with income and corporate taxes because the revenues from selling land, and from other resources are high enough. This is especially important because Mumbai is a landlocked city. To attract large international firms, the government may have to offer such advantages.
If land use regulations are not repealed, there will be too many restrictions on where, how and which multinational corporations can be build in BKC. This will raise the cost of land, of accommodation and exert greater stress on Mumbai's crumbling infrastructure. If firms are allowed to build tall buildings, the IFC in Mumbai would not need much land anyway.