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Suburban builders can buy 33% extra FSI from govt; rates to fall?
Mumbai: Chief minister Prithviraj Chavan on Thursday cleared a long-pending proposal that will allow suburban developers the option to purchase 33% additional FSI (floor space index) from the state government instead of buying the more expensive TDR (transfer of development rights) from the open market.
Builders with projects in the suburbs rejoiced on hearing the news. One of their biggest grouses against the CM was his delay in approving the proposal, which was first announced by the government in 2008. They hinted that property prices in the suburbs could reduce if the premium turns out to be cheaper than the TDR prices.
The Rs 2,500 crore-a-year TDR market is controlled by a clutch of politically-connected developers. The entire construction industry in the suburbs is dependent on this TDR cartel.Extra FSI earning to fund infra projects
Mumbai: The government expects to collect around Rs 1,000 crore a year by charging a premium for allowing builders in the suburbs to avail of 33% extra FSI. It will share half the amount with the BMC. The money will be used to augment Mumbai's infrastructure. The premium will be based on the ready reckoner rate for land. FSI defines the permissible built-up area on a plot.
The permissible FSI in Mumbai's suburbs is restrictedtojust1,but a developer can load another 1 FSI by buying TDR from the market. "The maximum cap of FSI 2 for projects in the suburbs still remains," said Ashish Kumar Singh, secretary to the CM's office. Industry sources said the current price of TDR is Rs 2,500 a square foot.
The government's premium based on the ready reckoner rate could be mostly in the range of Rs 1,800 to Rs 2,000 a sq ft, except in areas such as Bandra, Khar, Santa Cruz and Powai. In these areas, the government premium may turn out to be more expensive than TDR because the land rates here are astronomical.
But a developer said the Bandra-Khar belt has never been the common man's market. "But property prices in areas beyond Andheri in the western suburbs and Mulund in the eastern belt could reduce," he said. Builder Sandeep Runwal said he expects TDR prices to dip following the CM's decision. "Home prices will become affordable," he said.
An industry source said the demand for TDR was around 12 lakh square metres every year. "However, this year the TDR demand is down by 70% because of the slowdown in the property market," said the source. At present, roughly 25,000 sq m of TDR is available in the market, most of which is held by a couple of slum redevelopers.
What is FSI?
FSI refers to the buildable area on a plot of land. An FSI of 1 means the area of construction should be equal to the area of the plot. For example, a plot of 10,000 sq ft can only have a built-up area of 10,000 sq ft and no more. FSI for Mumbai suburbs is 1, but another 1 FSI can be loaded by buying
TDR. This means a plot of
10,000 sq ft can have a builtup area of 20,000 sq ft. What is TDR?
The transfer of development rights (TDR) policy was launched in 1991 to decongest the island city. Owners whose plots were marked for playgrounds etc or whose land was needed for roadwidening, could surrender their land and get an equal amount of space in the suburbs. Slum TDR was introduced in '97. Builders redeveloping slums for free will receive slum TDR, which can be used north of the scheme
Times View
It is perplexing why the CM delayed approving the .33 FSI proposal despite the state government issuing an ordinance last year. For once, builders were justified to bitterly complain about this dithering, especially when it would earn the government several hundred crores a year as premium. Thursday's decision does not increase FSI in the suburbs, hence the policy will not further burden the already over-stretched civic infrastructure.
