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KAI RYSSDAL: The first three rules of real estate are pretty well known, I’d wager. It’s that old joke about location. But what if the most desirable location happens to hold Asia’s biggest slum? The Indian government wants to turn that country’s financial capital, Mumbai, into a world-class city.

Step one: Remake that slum into luxury apartments and offices. Step two: Figure out what to do with the people who live there. Miranda Kennedy has the story.

Miranda Kennedy: At first glance the slum, Dharavi, looks like anything but hot real estate. Its 500 acres of ramshackle shanties are teeming with millions of residents. Electrical wires dangle between the huts. But Ashish Kalra sees the place differently. He points out the industrial park and commuter trains nearby.

Ashish KALRA: Mumbai is probably one of the world’s most expensive real estate. Commercially it has a great advantage.

Kalra is head of a New York-based investment firm called Trikona Capital. He says Mumbai is to India what Manhattan is to the U.S. for real estate. And like Manhattan, Mumbai is an island, so there’s nowhere to go but up. But to do that, Kalra had to relocate some of the city’s 7 million slum dwellers.

KALRA: So you take existing stock and you provide lower income housing. Unlike the rest of the world — where in Paris there were ghettos built outside, or New York — you have to build it within the same radius.

Kalra’s invested a billion dollars in upscale projects like this sleek, modern apartment building. He knocked down a two-story shanty and replaced it with a tower of exclusive units. The apartments here are million-dollar homes, with sweeping city views, marble floors, and 24-hour gated security. The demand for these expensive apartments is so great that they sold out before the building was even finished.

But to make room for these gleaming buildings, they first had to raze the slums, and then build a modest cement block-style housing complex for the former slum residents. It’s one of over 100,000 low-cost complexes recently built in Mumbai. It can boast concrete floors, elevators and running water.

In the slums of Dharavi, women wash clothes against slabs of concrete in streams of open sewage. Fifteen-year-old Shagufta Khan is perched on the rickety staircase leading up to her family’s one-room shack. It’s like a precariously balanced treehouse.

Shagufta says shes heard about the plan to rebuild the shanties here.

Shagufta KHAN [interpreter]: It would be a much better place to live in, because right now it really is not exactly a great place to live in. So I think that it would be nice if everyone gets a house in a tower or a well-maintained place.

But not everyone in Dharavi agrees.

Some residents are resisting the plan to take up the vertical life in apartment towers. They prefer their sprawling horizontal spaces, where families cook together and work and chat and wander between compounds.

In Mumbai, Im Miranda Kennedy for Marketplace.