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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.

New depreciation formula, the taxes on old properties 

Recently, Maharashtra State Government circulate new circular, which aims to increase the stamp duty revenue with the help of change in method of calculation of depreciation in old residential as well as commercial building  and it has caused a flutter in the real estate industry of Mumbai.

As per the statement of legal experts, The department’s November 4, 2015 circular showed that property value has rise by up to 35 percent. Consequently, it is the combined liability of both seller as well as buyer of the property as it can increase by up to 75 percent when they pay stamp duty¸ capital gains tax and income tax. Apart from that it could also do the negative impact on the real estate market in the Mumbai city as well as in state. A realtors’ body, National Real Estate Development Council (NREDC), recently wrote to the finance minister of state by stating that people will find it hard to sell and buy immovable property in an in an already “depressed and a very slow real estate market”. The more he added that “This circular will change the method of calculation when it comes to the depreciation of property in respect to the old buildings and due to that we increase the value of all kinds of constructed properties”. However; the real estate experts warned that this change in the method of calculating depreciation will also add substantially to the cost of premises and it can make the property even more burdensome for those who want to buy property.

Till now the state government guidelines were specifying that buildings age will be taken into the consideration and due to that the value of the building can be depreciated due to the age of building.  However; in present, land is no longer a consideration for calculation of depreciation. According to Lawyer Anil Harish, a real estate specialist stated that this new method of calculation of the property will increases the ready reckoner value of at least by the 30 percent because the depreciation is not allwed after certain level. And therefore it will increase the stamp duty directly amount.  The more he added that the circular now allows that depreciation to a lower extent and due to that the value of premises will be higher for any property and it would increase the quantum of the stamp duty without any confusion”.
According to Ashok Narang, the property consultant “This circular will have a negative impact on the real estate market and the volume of business in real estate in the city Mumbai as well as in state because it will create little more complications for valuation of property for computation of capital gain tax as well”. It will draw a impact on property buyer as they have to pay the excess stamp duty while the seller has to pay additional amount for the capital gains tax. However; government will receive additional revenue by increasing the stamp duty in long run, it will dampen the number of transactions.

How new rule will hit the real estate market?

According to the circular of November 4, 2015;

If you have a 150-square-metre office, which is equal to the 1,614 square feet and it is located at the 4^th floor of a 30-year-old building in the area of Veer Nariman Road, Zone 2/16 of Fort division.

So the value of land will be;

1. As per old method of calculation:

For commercial building the rate per square metre * Area of office * Depreciation factor for age of building

Rs 5, 01,300 * 150 * 0.6 = Rs 4, 51, 17,000

Total value of the property = Rs. 4, 51, 17,000 (Rs 4.5 crore)

2. As per new method of calculation:

Rate per square metre of open land * Area of office

Rs 2, 19,400 * 150 = Rs 3, 29, 10,000

Rate per square metre of commercial building Less Open land rate * Area of office * Depreciation factor for age of building

Rs 2, 81,900 * 150 * 0.6 = Rs 2, 53, 71,000

Total value of the property = Rs 5, 82, 81,000 (Rs 5.8 crore)

Conveyance Certificates to housing societies

Soon after Devendra Fadnavis joined as the Chief Minister of Maharashtra, he had promised a stringent legislation to provide basic services to the citizen in a time-bound manner. “For efficient and transparent governance, we will provide 110 services in a timely manner”, he had told the Legislative Assembly.

In a landmark decision taken on September 19, , the Maharashtra State Government has declared that housing societies will get deemed Conveyance Certificates within 6 months of date of application. A senior bureaucrat has confirmed that the Govt. has issued an order under the Maharashtra Right to Public Services Act to make it mandatory to provide the said document within six months of application. This is a huge relief for those housing societies already knocking at the doors of co-operation department for the deemed conveyance. Under this act, if an official fails to provide the information or service within the stipulated period, he is liable to pay a penalty.

“Now, a cooperative society will be registered within 2 months, money lender’s license & renewal will also be done within 2 months of date of application”, the bureaucrat said. “An official order for the purpose has been notified on Saturday”, he added.

Guardian minister_Thane_Ekanath Shinde

This project will need more than Rs. 30, 000 crore and it will be prepared on the model of German technology. After construction and execution, this road will cut the travel time by 80 minutes (from 90 minutes to 10 minutes). It is expected that this tunnel will deviate from Tikujiniwadi to Ghodbunder Road and it will cover more than 15 kms under the ground through Yeoor and Sanjay Gandhi National Park. It will also connect the WEH (Western Express Highway) at Borivli as currently, Thane and Borivali, which is located in North Mumbai are separated by chain of hills (most of the chain of hills are the part of the national park).

Eknath Shinde, who is Guardian minister for Thane and the minister for Public Works Department (PWD), announced that Maharashtra State Government is planning to enhance the connectivity of Thane with rest of the Mumbai. Shinde has announced a special six lane underground road which will connect Thane and Borivali and apart from that he has also received an approval for other flyover projects within the Thane region and for that Maharashtra State Government has granted Rs 517 crores. He also stated that roads are the important part of infrastructure as well as for the progress of city, but it is also essential to focus on the maintenance of road services. The more he added that in future the regions like; Kasarvadavli, Bhayanderpada, Anandnagar, and Mulund Toll Naka will have the mushrooming flyovers, which will help people to travel in less time as well as they will help to decrease the traffic issues.

Now MSRDC (Maharashtra State Road Development Corporation) is ready with preliminary reports and they have appointed consultant to execute the project. Apart from that State Government of Maharashtra, has also approved the widening of Kalyan – Shil road and KDMC road (Kalyan Dombivli Municipal Corporation) also needs the maintenance work.