Bulldozers destroyed a string of tiny stores near my home yesterday evening because they were illegally built. The shop keepers lost their possessions because their shops partially blocked the main road.
Unfortunately I'm sure they paid rent for those spaces, as does everyone in Mumbai; whether that space is legal or illegal. Even pavement dwellers pay rent, and sometimes it runs into huge amounts. For e.g. my maid paid about two lakhs for a tiny room in a slum in Thane, even though it was illegal. When the bulldozers arrive and raze everything to the ground, these people lose everything, their illegal rent/bribe, their things, and their space.
Who do they pay this illegal rent to, you ask. An excellent question which has several answers, most of which point to one thing - corrupt government officials aka "the system".
Another e.g. - We were studying mini-economies in Ahmedabad, and talked at length with a paani-puri wallah who also paid this "rent" to the local municipality officials. His stall was illegal but with the support of the local corrupt municipality official with a taste for paani-puri and a home owner nearby who supplied him with clean drinking water, he ended up with a small profit; just enough to support his family.