Dawn finds Old Delhi's Chhota Bazaar a place of cool repose. Along the neighbourhood's convoluted network of alleyways, a short rickshaw ride from the ramparts of the Red Fort, a handful of sleep-dazed shopkeepers begin unlocking metal shutters. The odd schoolboy or itinerant dog saunters past while a flock of pigeons wheels on the breeze, silver-white plumage shimmering in the early morning sun.

At one address, however, the sounds of labour indicate the working day has long begun. A steady stream of men file through a tall, arched doorway, many bent double under bags of sand and loads of timber. On a skeleton of bamboo scaffolding overhead, more men hack at crumbling plaster and mix mortar with pointed trowels.

A shiny new placard next to the doorway reveals this to be the Seth Ram Lal Khemka Haveli. To the family living here, this time-honoured building has been home for nearly 100 years. For the architect overseeing its restoration, it has been the site of a truly unique project.

Haveli Dharampura, boutique bolthole in heart of Old Delhi

Wandering Old Delhi today, surrounded by dilapidated architecture and a cacophony of commerce, it's hard to envisage this as the former home of the Indian ruling classes. But if you know where to look, frequently concealed behind grime and detritus, the occasional carved entrance or delicately sculpted column still hints at this time-worn enclave's venerable past.

Formerly known as Shahjahanabad (the city of Mughal emperor Shah Jahan), Old Delhi was founded in 1639. As the epicentre of the Mughal dynasty, it once boasted streets of majestic havelis, or mansions, each vying to outdo the others in scale and sophistication.

"It was from these fortified mansions that the Mughal aristocracy once oversaw vast swathes of the Indian subcontinent," says guide Raj Dhar.

In Persian, the word haveli means "enclosed space". But havelis did far more than surround a plot of land, with a complex structure designed to facilitate the occupiers' daily routine.

The vast majority of havelis were entered through a massive arched gateway, protected by a thick wooden door. This door typically remained locked, with a smaller portal giving residents and visitors access to the inner courtyards. A wall divided the outer mardana (men's courtyard) from the inner zenana (women's courtyard).

No original haveli has been built for more than a century. According to government figures, about 500 Old Delhi havelis still stand, with most dating back to the last years of the Mughal empire, in the mid-19th century. Most are now ramshackle or ruined.

"It's heartbreaking to witness the condition of these buildings," says Dhar. "Most local people think they're old-fashioned and not worth preserving. Divided up amongst multiple owners and families, they lie neglected and slowly rotting away."

When Devkinandan Bagla, current owner of the Seth Ram Lal Khemka Haveli, first approached Aishwarya Tipnis back in 2012, the young Delhi architect was initially taken aback.

"The first time I inspected the building I was a bit overwhelmed," she says, with a laugh. "It was in a pretty horrible state. Rising damp, subsidence, cracks, a general lack of proper maintenance."

With one eye on selling up and moving to a modern apartment, Bagla wasn't even sure he wanted the building renovated at all. Quickly deciding that she had no choice but to restore the building to its former glory, Tipnis' first job was to persuade the owner.

"To be fair, he quickly became enthusiastic when we explained what we wanted to do, and how much it would cost," says the architect, a graduate of Scotland's University of Dundee. "I think he and I have both fallen in love with this building over the last few years."

Occupying one corner of the central courtyard at the Seth Ram Lal Khemka Haveli is a curious contraption. Incorporating an old tractor engine, which powers a rotating metal arm and wheel, its rough-and-ready appearance belies its practicality.

"Here we have our one-of-a-kind lime mortar mill," says Tipnis, with a grin. "I wanted to use traditional materials for this restoration, but in India you can't simply go and buy lime mortar off the shelf. This is our improvised, budget solution."

Once the owner was on board, the next step in Tipnis' restoration process was to win government approval. After detailed plans were drawn up and submitted, permission for the restoration took a year to come through.

Making good use of the downtime, Tipnis visited several other conservation sites to build up her expertise. She then trained up a team of labourers in conservation techniques, before work on the haveli finally started, in late 2013.

"From that point onwards everything has been restored in a historically accurate way," explains Tipnis. "Part of the idea behind this project has been to show that havelis can be authentic, practical, attractive living spaces, and that restoring them doesn't have to leave you penniless."

While a handful of other Old Delhi havelis have been brought back to life as museums or hotels, the Seth Ram Lal Khemka project is the first that will remain a home after restoration has been completed. That should be sometime this year.

"Of course, my wife wanted things such as air conditioning and a modern kitchen incorporated in the design," says Bagla. "But the spirit and beauty of the building remains. I'm no Mughal-era prince, but it already feels like my family and I are living in a piece of history."

In a society that urgently wants to modernise, protection of architectural heritage is a contentious issue. There are currently more than 220 World Heritage cities, from Acre (in Israel) to Zanzibar (in Tanzania), yet not a single one is located on the subcontinent.

"This is because in India our understanding of urban heritage, and how it can bring in valuable tourism revenue, is still lacking," says architect A.G. Krishna Menon, founder of Delhi's Indian National Trust for Art and Cultural Heritage (Intach).

India's Ministry of Culture first asked Unesco to consider Delhi as a World Heritage City back in 2012. Last May, a month before the UN agency was set to make a decision, the bid was suddenly withdrawn.

"I think some people feel that by acquiring World Heritage City status, Delhi will hamper its own growth," says Menon, a passionate conservationist. "As the sites put forward in the nomination - which included the whole of Shahjahanabad and its havelis - cover just 2 per cent of Delhi's total area, this argument seems a little spurious."

According to Menon, it is unlikely that Delhi's bid will be resubmitted in the next couple of years due to the scheduled nomination of other Indian cities. Nevertheless, he remains relatively upbeat about the future. Last September, the government announced a plan to provide grants and loans to haveli owners for their sympathetic conversion into museums, galleries and guesthouses.

"Those in power are now, thankfully, taking tentative steps to conserve Old Delhi's havelis," says the architect. "At Intach, we continue our efforts to change this city's mentality towards urban heritage. It will be a long and demanding challenge."

But the good news is that the process has started. As Tipnis' ongoing restoration has already shown, where there's a will, there's usually a way.