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1. I have made sufficient points that do not concern the location alone, although the location continues to be a major plus point. An NLU in Mumbai serves the sole purpose of having a law school in the city that houses the country's most important High Court and where some 80-90% of the corporate law jobs exist. Therefore, I am afraid I cannot agree with your characterisation of the location being overhyped.
2. I am surprised as to why an IIM did not spring up here but I do believe that law as a profession for both academic and practice purposes connects itself intrinsically with the location. This is why Leiden Uni, the LSE, King's, Georgetown and Columbia continue to sell their location as a major factor, and rightly so.
3. There is no limitation to the University increasing its intake. It already enrols as many as 120 students per batch, which is sort of the maximum they may ever want to. In any case a decent portion of the college and hostel remains empty, only to be used during Moots or the like.