The 25-page case study titled 'Dharavi: Developing Asia's Largest Slum', details the history of Dharavi and examines ongoing efforts to forge a public-private partnership between the state government and for-profit developers to transform the slum into a neighbourhood with residences, improved services and economic opportunities.
The study by HBS assistant professor Lakshmi Iyer, lecturer John Macomber and research associate at the HBS India Research Center Namrata Arora, considers the potential risks and rewards of approaching an area like Dharavi with a new model - "slums as lucrative and socially entrepreneurial business opportunities".
"The basic idea is that the slum dwellers are living on very valuable land in one or two-story shacks. If you build multi-story buildings, you can give them accommodation and still have space to sell so that it will be a for-profit project," Iyer said of the study.
Dharavi, featured in the Oscar-winning film Slumdog Millionaire, is home to an estimated 700,000 people living on just 551 acres.
It embodies the characteristics of a slum as defined by the United Nations: inadequate access to safe water and sanitation, poorly built housing, overcrowding and insecure residential status, associate editor of the HBS Alumni Bulletin Julia Hanna said in a report.
The case opens with a fictitious developer, Rance Hollen weighing the cost of capital, construction and expected market prices for developed units in the slum.
It examines concerns like cost of construction, cost of capital, revenues from sale of units as well as political risks, foreign exchange risk, market risk and execution risk.
Further, the discussion covers social aspects including whether the slum should be redeveloped at all, whether it should be redeveloped by government or by the private sector and whether the redevelopment should happen in large chunks or in smaller increments.
Other issues include timing of the project and whether this model, if successful, can be extended to other slums in Asia.
"There are three huge trends occurring in the lifetimes of our students: urbanisation, resource scarcity and the private financing of public infrastructure. When those three factors come together, they alter conventional conceptions of 'real estate' and the built environment," Macomber said.
The case has elicited a broad range of responses from students of HBS' Managing International Trade and Investment course.
While some said they would walk away from the deal, others thought that it was a worthwhile risk to take, particularly since the project could inspire similar such developments, Hanna said.