PORTLAND — The latest changes for the India Street neighborhood include plans for the beleaguered Bay House condominium project to be built as apartments instead of condos, and the renovation of several existing buildings as work and living space for artists.

The $30 million two-phase Bay House development was approved in 2006 for the lot where the Village Cafe once stood at 46 Market St. and would have included 176 condos. While initial interest in the building was reportedly high and 30 percent of the condos attracted potential buyers, interest died in 2008 when the recession hit and the project could not find financing.

In July 2011, the Portland City Council approved an extension to the project’s conditional zoning permit until September 2012.

“The financing scenario in terms of finding funds to build the project has been the challenge,” said Town & Shore Realtor Sandy Johnson, who represents the property.

The new proposal is for 100 apartments instead of condos, and would still include first-floor retail space.

India Street Neighborhood Association President Allison Brown, who lives across the street from the project, said her group is frustrated with the Bay House delays. She expressed incredulity that the plan to build apartments instead of condos will have any impact on the project’s ability to attract financing.

“I have no reason to believe they’re going to build apartments any more than condos,” she said. “I wish they’d just sell (the property) to someone.”

She said the concept of rental apartments is even less appealing to the neighborhood group than condos, because renters don’t tend to stay in the area or maintain their property with the same care as owners.

Brown said the neighborhood struggles from a lack of consistency caused by the number of contract zones the city has approved for the area.

“The city needs to re-evaluate its plans. We have all these little contract zones and it’s very difficult to change it. There’s no consistency,” she said.

While the group opposes the Bay House project, Brown said it will likely support a recent proposal to renovate a small neighborhood isolated when the Franklin Street arterial was built.

A group of developers has joined forces with a Portland businessman to redevelop the block of buildings between Franklin and India streets, and turn the area into  artist-compatible living and working space.

Developers Collaborative signed a letter of intent last week with Donald Sussman, owner of Hampshire Street Properties, to partner on the redevelopment of buildings at 167 and 169 Newbury St., 32 and 40 Hampshire St., and 96 and 100 Federal St. Sussman is married to U.S. Rep. Chellie Pingree, D-Maine.

“They are mostly residential buildings, although some used to have little shops on the first floor,” said Portland attorney Tom Federle, who represents Hampshire Street Properties.

Federle said the group is in the very early stages of deciding what to do with the properties, but that the focus is on creating an arts-compatible business space that could also contain residential space aimed at artists.

One of the developers involved, Peter Bass, owner of Portland-based Random Orbit, has made a name for himself creating artist-friendly spaces, including Peloton Labs, 795 Congress St., which is an open-concept office where small businesses, freelancers and independent workers join by paying a membership fee, and can utilize work space, common areas and conference rooms.

He is also working on converting the former Sacred Heart School on Mellon and Sherman streets into live/work space for artists.

The challenge of the Hampshire Street Properties is how isolated the buildings are from the rest of Portland, Federle said.

“It’s part of a little neighborhood that used to be part of a bigger neighborhood before Franklin (Street) was built,” he said.

Now, some of the buildings are falling apart and will have to be torn down and replaced. Others, he said, could be renovated and redeveloped.

“The two on Newbury Street have some real fundamental structural issues,” Federle said, although he stressed that the company has not yet decided which buildings will come down and which will be replaced.

All in all, though, the plan is to have more residences than are currently there when the project is finished.

“I think there’s room there for a denser, more urban design,” he said.

The group plans to spend five or six months putting together a plan, doing a feasibility study and then getting feedback from the neighborhood before presenting the project to the city, Federle said.

Emily Parkhurst can be reached at 781-3661 ext. 125 or eparkhurst@theforecaster.net. Follow her on Twitter: @emilyparkhurst.