Maharashtra hikes incentive FSI, property rates in suburbs may rise
Image Credits : DNA
In the latest move of Maharashtra state government it is likely to see that realty rates in Mumbai suburbs may rise again, after the final notification of state government through which Maharashtra state government is planning to hike the additional premium charges and development rights with an aim to generate more revenue for exchequer, which is currently cash-strapped.
The Maharashtra Government’s Urban Development Department (UDD) modified regulation 32 of DCR (Development Control Rules) on December 4 with an aim to hike the optional incentive of FSI (Floor Space Index) for the suburb of city from 0.33 to 0.50. Floor Space Index is an indicator that how high a real estate developer can build a plot; the ratio of the total constructed area and the size of the plot. Apart from that the additional FSI will come out at a cost as state is hiking the premium with the rate of 60 percent of the current ready reckoner rates. Earlier, it was linked with ready reckoner rate of 2008. However; now state hopes to mop up around Rs 3,500 crore to Rs 4,000 with the premium received which can be shared equally between the civic body and the state government. Real estate developers are saying that hike in premium will directly increase the realty rates in the suburbs of Mumbai, as the cost of the additional FSI works out in the range of Rs 4,000 to Rs 12,000 per sq feet. The more they added that it will get passed to the buyers as in present time realty market in Mumbai is more sluggish and increase in rates are likely to pose a challenge.
How Transfer of Development Rights will generate revenue for state government?
According to Paras Gundecha, Chairman and MD of Gundecha Group, “There is no incentive and it will jack up the cost of projects in real estate sector and at the end we as the real estate developers will be forced to increase the selling rates”. On the issue of increase in premium, real estate developers are saying that it will also lead them to increase in the cost of TDR (Transfer of Development Rights) certificate. The suburbs of Mumbai city have a base FSI of 1 and it allow to use TDR 1 that can be brought from the market. Transfer of Development Rights is floating FSI generally generated on the residential projects of slum or whenever; land owners lose their plot for reservation for an amenity, which can be used for suburbs. In the year 2008, the state government has first introduced 0.33 as incentive FSI for suburbs to reduce the monopoly of the TDR lobby with an aim to help the government, so that they can earn more revenue from transferring development rights. In present, the cap of FSI is continues to be 2.
In March 2015, the CM Devendra Fadnavis had proposed to increase the FSI for the Maharashtra suburbs and for that he issued notice to hike FSI by 0.60. Apart from that after going through multiple objections and suggestions from the public, the FSI was hiked by 0.50 and it is expected that additional FSI will not be applicable at BKC (Bandra Kurla Complex), as it is the part of the slum rehabilitation schemes, so these areas are coming under CRZ (Coastal Regulatory Zone). The suburb regions of city have a base FSI of 1, however; the construction projects can utilize the TDR of 1 and it will include the incentive FSI 0.50 with the cap of 2.
