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Now the slumdogs really are millionaires

The Mumbai district of Dharavi used to be one of the poorest in Asia. But then the developers arrived

Souresh Satrape has received so many offers for his tiny, two-roomed home that they no longer surprise him.

Just a few years ago, his cramped house with a concrete floor set in the middle of one of Asia's largest and most notorious slums may have fetched between 200,000 to 300,000 Indian rupees (£2,600 to £3,900). But in recent weeks, the 32-year-old and his family have been receiving offers for three times that much.

"It's a pukka house, a permanent place. I have been offered 900,000 rupees, but I haven't taken it," he said, adding: "I know the true value. I know that similar houses are being sold for 1.5m rupees."

The Mumbai slum of Dharavi, where parts of the film Slumdog Millionaire were shot and probably one of the most densely populated places on the planet, is undergoing a remarkable property boom. In the last six months, as many as 7,000 of these tiny homes have been bought up, and there are keen and ready buyers for anyone else willing to sell.

The reason for the boom is an ambitious £1.8bn plan to redevelop the overcrowded, ill-smelling slum and turn it into office blocks and apartments. Under the rules of the scheme, those residents who have lived here since before January 2000 will be eligible for free 300-sq-ft apartments on the edge of the new development.

With the area set to become a business hub in a vast city where land is as scarce as silence, the value of such properties will almost certainly soar. As a result, many residents are cashing in on the shanties, selling up to investors and moving out to other parts of the city.

Yet according to the current regulations, those buying properties in the hope of qualifying for a new flat won't be eligible. As a result, officials say they are inundated with people trying to alter details on the deeds of properties they have bought.

"We have observed that people are coming into our office and saying 'Can I change the name that is on the register'," said Dinesh Prabhu, of the NGO Mashal, which has carried out an 18-month survey of Dharavi's 60,000 structures. "We know that so many people are selling their homes to newcomers. Maybe 7,000 have been sold."

Indeed, a recent report says a survey carried out in one of Dharavi's five zones had found that almost 70 per cent of the residents had moved there since January 2000 and therefore ought not to be eligible for a free apartment under the rules of the Dharavi Redevelopment Plan.

Already faced with potential developers dropping out of the scheme because of the economic slowdown, officials overseeing the plan have yet to deal with the problem of who will be eligible for a new flat. The government official heading the project, Gautam Chatterjee, declined to comment.

The uncertainty has created added anxiety for those among the population of 350,000 people squeezed into an area covering just 200 hectares who are looking for something better. Amid the dank, dark alleyways there is little sanitation, few clinics, no privacy and an unavoidable sense of claustrophobia. Remarkably, Dharavi, where director Danny Boyle and his team worked for several weeks, is also very productive. Reports estimate that the area earns £300m a year from cottage industries located in homes and workshops that produce everything from shoes to popadums.

A report by the United Nations Development Programme notes that Dharavi has now been supplanted as Asia's biggest slum by Orangi Township in Karachi. But it describes how chemicals used by local tanners still flow through the open drains of Dharavi, and "outbreaks of malaria, leptospirosis, diarrhoea, dengue and hepatitis are just some of the diseases attributed to poor water and sanitation facilities" in the slum.

Hardly surprising, then, if Dharavi residents see a property boom as a godsend. Nitin Bansode, whose family of five occupies two small rooms in a decaying but still much-envied apartment block, said that before the boom their home was worth around 900,000 rupees. Now they were getting offers for 1.4m rupees. Yet he too was holding firm: "When it's finalised, it will be worth 4m rupees [£51,000]. That is why we don't sell it now."