It’s midday and India’s largest slum, Dharavi, is buzzing. Locals are cooking, men are fixing rusty pipes and barbers are busy with their clients. Everywhere there are children running around, boys playing cricket and girls helping their mothers with housework. The whole spectrum of life is here. Slap bang in the middle of Mumbai, this is home to an estimated one million people. Across the train tracks from Dharavi, air- conditioning units whirl in Worli’s many office blocks. Professionals at computers work in finance, media or the law. Just like in the slums, many have been drawn to Mumbai by the prospect of work and higher wages.

The success of both groups is intertwined. The professional classes require services such as domestic help, convenience food, laundry and transport, creating jobs for those in the slums. But unwittingly, their needs are coming into conflict – and the reason is under their feet. As the city’s population and salaries grow, land prices are spiralling upwards.

Mumbai is not alone, however. All the major metropolises in India have millions of people living in slums, usually in central locations. And these are often the only remaining source of land for urban property developers to cash in on.

The numbers are staggering. About 60% of Mumbai’s population – or about seven million people – live in slums. Meanwhile, an estimated 500 people move to the city every day, usually ending up in slums or other temporary housing.

For example, the surface area of Mumbai and its suburbs is almost 500km2, but only 90km2 of it is usable, the rest being protected forest, government-owned land, salt-leached caverns or other unusable land, according to real-estate research firm Liases Foras. Although the government does own a chunk, most of the available land is privately owned.

It isn’t a lot for a city of more than 20 million. Mumbai is India’s densest city with 27,000 people/km2, and brokerage Anand Rathi Research says the city would need an additional 30km2 of residential developments by 2021. Most of this is likely to come from what are currently slums.

But acquiring the land needed for development isn’t easy. Slums are highly political. Everyone – politicians, developers, NGOs, bureaucrats and landowners – has a finger in the pie.“Slums have large populations, which means votes. A slum dweller wouldn’t have electricity, water and proper sewage facilities, but they would have a voter ID card, and politicians know this and play to their advantage,” says one developer, who prefers to remain anonymous.

On the other side, those living in slums say developers are conspiring with government officials and that no one cares about the rights of the poor. For activists, it’s an opportunity to speak up for the disadvantaged, says the developer. “There have been various conflicts between developers and slum dwellers for over a decade,” he adds. “It’s a continuing struggle and more NGOs are getting involved.”

Then there is the issue of what to do with all the people when the land is bought. Under a much-debated slum- rehabilitation policy, developers can snap up land for commercial development in exchange for building or providing free houses for slum dwellers.

The Maharashtrian state government, for example, wants to redevelop Dharavi at a cost of more than $2bn and convert it into modern housing, with shopping centres, hospitals and schools. But to get clearance, hundreds of thousands of homes will have to be provided.

Under a slum rehabilitation system, anyone is entitled to free housing, but only if they have lived in the area to be cleared before 1995, and in some cases before 2000. So anyone wanting to develop on slum land has to offer a solution for the residents.

As Arun Chitnis, from consultancy Jones Lang LaSalle, explains: “If it is a private project, this may not present a problem. However, if it is a government initiative, only those who were residing in the area before January 1995 are eligible.” Yet it is almost impossible to prove who has moved to an area and when, as there is no central body that maintains records. “As things stand now, their status needs to be verified by diverse – and invariably conflicting – information from ration cards, electricity bills, shop licences, voter ID cards and property-tax records,” says Chitnis. As a result, most of Mumbai’s slum dwellers could be ineligible for a free home, and would probably end up in slums elsewhere or living on the streets.

But despite issues with slum dwellers, several Indian companies are working with slum-land projects already. Last year in Mumbai alone, at least 80 were granted permission, according to the Slum Rehabilitation Authority (SRA), a local body overseeing such developments.

More than 50% of the upcoming realty projects in Mumbai, spread over 8,600 acres (34.8km2), are slum- redevelopment schemes, Anand Rathi Research noted in a recent report. For instance Unitech, a developer based in Gurgaon, near Delhi, is developing the 140-acre (0.6km2) Golibar Maidan project in Santa Cruz with a local partner.

Almost 35% of Indian real-estate company Ackruti City’s project portfolio comes from slum redevelopment in Mumbai. It is developing a 108-acre (0.4km2) slum in the heart of Mumbai, located in Sion, which will eventually be used for residential and commercial use. Another Indian developer, HDIL, has undertaken one of the largest slum projects, this time for Mumbai International Airport.

But many of the projects are hampered and delayed, the airport development being a classical example. The site is a short distance from Dharavi, more than 270 acres (1km2) in size and home to nearly 90,000 families who need new homes. The project was meant to start more than two years ago but so far only a handful have been moved successfully; the majority are unwilling to shift.

Many cite the trauma of relocation and lack of employment opportunities as reasons for not wanting to go. The Supreme Court has said that only those who purchased or built a house at the site before 1 January 2000 will get new houses. But up to 40% are not eligible for one, and these people have bitterly opposed the move, causing various standoffs and protests.

Despite all the controversies, slum-redevelopment projects are considered to be the most profitable in the real-estate business, and with prices rising inexorably, it does present itself as an attractive opportunity for investors, despite the headaches. Mumbai is, after all, the world’s seventh most expensive city – right after London and ahead of Shanghai when it comes to the cost of accommodation, according to human- resource organisation ECA International.

Jones Lang LaSalle’s Chitnis says that investing in a slum-development company is as good as investing in any real-estate project and that there are no ethical issues. “Developing slum land is perfectly legal as long as all permissions have been obtained,” he adds. “There is a Slum Rehabilitation Act in place and its policies and regulations are clearly defined.”

Many even believe that a slum-free Mumbai is possible. “It could become a reality very soon, since many slum pockets are being redeveloped under the SRA and many are making good progress,” says Kiran Hemani, chairman of the architecture and development group K Hemani.

He adds that developers are planning to move residents from the slums to vertical housing. “Those living in shanties will get a permanent house, and they will inculcate a civic sense and a better standard of life which will lead to a drop in crime.” Additional rewards include social status, a cleaner environment and proper sewerage, he says.

But architect Mukesh Mehta, who is well known in India for speaking out on sustainable housing, disagrees. If slum dwellers are moved beyond the city limits, he claims, Mumbai’s infrastructure will collapse. “If all of them come to work in the city using public transport, which is already overburdened, it won’t be able to handle the load.”

According to Hemani, the solution is basic high-rise housing costing as little as a million rupees (€14,500) a unit. “High blocks of flats [can have] more generous housing density and create more space for the street level. People are able to [adapt] to the new living spaces rapidly,” he says. “And the slum residents are the most flexible of people.”

But despite the low-cost housing on offer, in the past 12 years only 100,000 homes have been built under the scheme. According to data from the SRA, 35% of those rehoused have returned to slums because the maintenance costs in their new homes are too steep.

Chandivali, a massive complex of 185 high-rises in Mumbai’s suburbia, is one various experiments to house the slum dwellers out of town. Built just four years ago, it is considered worse than the slums the residents came from, and the quality of life is poor. As The Times of India reported this year: “Filth and garbage lies strewn across the complex. The drains are often clogged. Residents recently had the drains cleaned out, with the result that sludge and excreta has been lying on the road inside the complex.”

Mumbai architect PK Das says high-rises built for slum dwellers present more headaches than the slums themselves. “There are always problems with water supplies in cheap housing complexes because the infrastructure is creaky and old,” he adds. “Besides, the maintenance of these types of houses would be too costly for the people who live in them. You can’t build cheap housing and just dump people in it.

“Three-storey housing is a possibility, as long as it’s properly subsidised, maintained and made affordable for the poor, in a place where there is employment available.”

Everyone admits that moving people is difficult, not least because they may lose their livelihoods. In Dharavi, about 80% are self-employed in leather, recycling, garments and pottery. “Part of the genius of slums is in the tight networks and communities their inhabitants have formed,” says Das. “If you are going to provide housing for them, you have to make sure these communities stay intact and that their businesses move. Otherwise they won’t stay.”

At the heart of the issue are people like Dharavi resident Abraham Sharna. “I have lived here all my life,” he says, sitting in a doorway and smoking a cigarette. “Where would I go? My family and friends are here. I wouldn’t want to go anywhere else. This is my home and I like it here.”