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.

Image Credits: DNA

The MMRDA (Mumbai Metropolitan Region Development Authority) is all set to process the auction of land in BKC (Bandra-Kurla Complex) with an aim to fund its some of infrastructure projects.

In past MMRDA has funded many infrastructure projects by selling different land parcels, but after 2007 its fist time when MMRDA decided to invite bids to fund its infrastructure projects. According to spokesperson of MMRDA, “We intend to sell 21,807 sq mtrs of residential space in G block (north) of BKC and 12,500 sq mtrs of commercial space in G block of BKC. MMRDA has decided to appoint consultants for the valuation and documents preparation in the process of bidding”. In Mumbai, the FSI (floor space index) for commercial and residential space is 4 and 3 respectively.

It is expected that in next few months consultant will prepare the whole road map for bidding invitation and rest of the process. According to one of the MMRDA official, “We hope that auction will start at the beginning of second quarter of 2016. We expect that we will get rate of Rs 4 to 5 lakh per sq mtrs, however; it also depends on the available built-up area, as there are more restrictions, due to which we have sought relaxation”.

MMRDA is planning to lay 118km of Metro lines with the cost of Rs 35,000 crore and MMRDA has already sanctioned work for Dahisar (Rs 5,566 cr) to DN Nagar Metro; Phase I, Metro II (Rs 4,737 cr) and Dahisar-East to Andheri-East Metro VII corridor. It will also have the pride for MMRDA to fund Rs 23,136 cr for Metro III or Colaba-Bandra-Seepz and its proposed extension between Kanjurmar-Seepz, which will cost around Rs 1,700 cr. However; it is expected that for Metro III it will get the bank loan for 88 per cent of the total cost from Japan International Cooperation Agency.

According to officials, “From many years we did not sell land because of downturn in the market, but now scenario is getting better and we need funds for crucial and most important projects. Earlier, MMRDA had tried to sell land with the rate of Rs 3 lakh per sq mtrs, but many felt that price was too high in 2010”.