High-rise or hovel - it's all hot property Bombay becomes world's hottest property

Bombay/ office rents highest in world

FOR SALE: a one-room shanty in Bombay's Mahim Creek slum. No electricity, no running water, no view, except of children splashing in an open sewer. Price: £11,000, with a few old tyres heaved on to the roof for ballast, to keep the hut from flying away in the monsoon squalls.

Whether you are searching for a hovel or for a high-rise in the exclusive Malabar Hills colony, Bombay has become the third most expensive city in the world. Indeed office rents are the most expensive, surpassing Hong Kong and Tokyo, and at an average £93.10 about £50 more per square foot than prime space in the West End of London.

In Nariman Point, where many corporations have headquarters, office space sells for £450 a square foot. A shopfront property which sold six months ago for £800,000 was bought this month by Standard Chartered, for £1.1m: 15 days later it sold it for £1.7m. Estate agents say property values last year tripled.

Some attribute this dizzying increase to Bombay's gangsters, who have moved into the profitable business of land-grabbing. Others believe India's opening to investment after 40 years of economic isolation has set off a property spree among foreign companies and overseas Indians wanting to invest in Bombay - built on islands surrounded by swamp and the Arabian Sea, with no easy way to expand. More than 13 million Indians have piled on to these islands looking for jobs, and every year another 100,000 climb aboard.

Bombay probably has more millionaires than London, but many middle-class Indians - a teacher, say, earning £150 a month - cannot begin to afford these rents. Many are forced to move out to satellite suburbs a two-hour train ride away. These new estates can be nightmares: sloppily built concrete blocks rising out of malarial swamps.

When the East India Company leased grazing land back in 1750 on Colaba Point, now Bombay's most sought-after downtown area, it paid only £20. In the same area today, a three-bedroom flat with temperamental plumbing and power shortages, in a new 22-storey skyscraper, sells for more than £2.24m.

Discouraged after months of house-hunting, many foreign bankers and executives of multinational companies are trying to persuade their head offices that it is cheaper, and less hassle, to stay in five-star hotels. "You get so litle for the money you pay," complained one banker. "The lifts don't work, and the bathrooms are green with mould, even in the best places." Anyone choosing one of the upper-storey flats in a Malabar Hills skyscraper (price more than £1.5m) may also have to put up with vultures dropping a human nose or ear on the balcony - from the nearby Parsee Towers of Silence, where corpses are left to be picked apart in a "sky burial" by birds.

Even if you have the cash, you are not necessarily assured a flat. Some housing colonies will not tolerate meat-eaters. The smell of a frying steak wafting across from a neighbour's kitchen fills many Indians with revulsion. Some Muslim tenant groups will not allow television. In a city as crowded as Bombay, people either become militant in retaining caste and cultural identity or drown in the multitude.

Despite communal riots in January 1993 that left 500 dead, Bombay is still the place Indians dream of going to. It is a dream that gathers colour and dimension every time an Indian goes to the local cinema; Bombay is more than garish backdrop for most Indian films, it is the leading character.

Bombay's port, which handles half of India's foreign trade, and its factories - generating more than 30 per cent of Gross Domestic Product - exert a strong pull on Indians in the countryside, desperate for work.

As in any lifeboat, though, those in Bombay are desperate to stop more outsiders crawling aboard. An extreme right-wing organisation called Shiv Sena this week begins its rule of Bombay, with support from the Bharatiya Janata Party. Shiv Sena's chief, Bal Thackeray, a former cartoonist who says he admires Hitler, has gained a strong following among locals by promising to drive out immigrants from Bombay, especially the millions of Bangladeshi Muslims who are pouring in. During the city's 1993 Hindu- Muslim riots, his Shiv Sena thugs led mob raids on many Muslim neighbourhoods.

Mr Thackeray's no-nonsense militarism appeals to many native Bombay citizens who think that Shiv Sena may clean out the city's corrupt bureaucracy. Bombay's underworld gangs have put up £300m of illegal buildings. As one former municipal commissioner, S S Tinaikar, recently declared: "No builder can function now without paying huge amounts of protection money to gangsters."

Political insiders claim Shiv Sena is just as dirty. Many of the slums burnt down during the riots were soon bulldozed away, and the valuable land grabbed by underworld chieftains. Not surprisingly, many foreign companies wanting to do business in India are giving Bombay a miss and heading for other less costly or corrupt cities, such as New Delhi, Bangalore and Madras.