Govt Nod for Many Projects may Trigger Supply Glut, Fear Builders

Sudden go-ahead will lead to competition and a possible price crash, feel Mumbai developers

Mumbai builders who were crying hoarse about approvals not coming from the government now fear that a sudden go-ahead — expected soon for hundreds of projects — will create a supply glut in the market, leading to competition and a possible price crash. 
According to industry sources, the approvals would start gathering momentum after the new development control rules are detailed. This could happen as early as the first week of January, before the announcement of the Brihanmumbai Municipal Corporation elections in 2012 as the authorities might want to beat the implementation of the election code of conduct. This code restricts governments to announce any public policy after election dates are made public. 
Since the Prithviraj Chavan government came into power in November 2010, developers in Mumbai have found it hard to get project approvals. The Adarsh scam that broke in the city in 2010 has also had a bearing on the minds of bureaucrats and politicians, many of whom have slowed down decision making. 
Poor sales have led to a 40-month inventory backlog in the city. 
The last one-year has seen almost no new approvals being given for real estate projects in Mumbai. "The moment the clearances are given, a lot of supply will hit the market and competition could lead to a possible price crash," says Kalpesh Mehta, a director at Rohan Lifescapes, which builds projects in south Mumbai. Among major changes, the proposed new rules would allow developers to construct an additional 25% of the permissible floor space index in lieu of a 100% premium to be paid to the civic authority. 
According to sources, following public objections and suggestions, the amended development control rules are now awaiting chief minister's nod. "The year 2011 saw merely 25% approvals coming in compared to the last few years. All the pending approvals once cleared can create some glut and lead to correction for some time," says Manoj Daisaria, an architect, member and former president of Practicing Engineers, Architects and Town Planners Association. 
Civic authorities, though, cannot alone be blamed for the number of pending real estate project files. "Many developers have also not been pursuing their applications given the current market scenario," says Daisaria. 
However, not every developer is of the view there will be a supply glut. "Most developers may reapply for approvals with revised project plans in line with the new development control rules. Apart from that, clearances and project launches would take place in a phasewise manner," says Sunil Mantri, chairman, Sunil Mantri Realty. 
Crash Course 

• THE APPROVALS WOULD START 
gathering momentum after new development control rules are detailed, say industry sources 

• THIS COULD HAPPEN AS EARLY AS 
the first week of Jan, before the announcement of BMC elections in 2012 as the authorities might want to beat the implementation of the election code of conduct 

• CODE RESTRICTS GOVERNMENTS 
to announce any public policy after election dates are made public 

• THE LAST ONE-YEAR HAS SEEN 
almost no new approvals being given for real estate projects in city

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Hear out flat buyers before razing lily ponds, says HC

Mumbai: The HC on Wednesday said municipal commissioner 

Subodh Kumar should have given a hearing to flat purchasers of a Juhu building before directing the demolition of lily ponds and deck areas in the tower. A division bench asked the civic chief to decide the case afresh. 
    Justice P B Majmudar and Justice Mridula Bhatkar gave their vedict on a petition filed by Shravan Developers and its managing director Praful Satra, challenging the BMC commissioner's July 30, 2011 order directing demolition of lilyponds and certain deck areas or in lieu to have equal upper floors demolished by working out the Floor Space Index (FSI). The 11th floor can be constructed within permissible FSI by paying a penalty. In their judgment, the judges said no fault can be found in Kumar's order as taking a fresh decision regarding the construction should be considered. But he was required to hear concerned parties."In our view the Commissioner was conscious of the fact that the agreements to purchase were executed by some of the flat owners. In our view, at least their say was required to be taken into consideration, especially when it is argued by them that even if the FSI is to be adjusted it should be adjusted from the area which is meant for the eleventh floor,'' dictated Justice Bhatkar for the bench. 
    The judges said whether the lily ponds can be said to be an amenity or architectural feature or not is to be decided by the Commissioner since the court is not an expert on these aspects. They directed the commissioner to take a fresh decision to find out whether lily ponds are an amenity and as per the Development Control Rules (DCR) and in accordance with law. 
    The judges said parking decks have to be in conformity with rules and it should not violate DCR. It was contended that the car parking and manoeuvring areas in the high-rise is more than flat area. The judges ruled BMC's stand that the area will be misused in future "is not sustainable as speculation cannot be a ground for penalty.'' They directed the petitioner and flat-buyers to represent their case before the commissioner on January 5 and directed the commissioner to take a decision within four months.

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Decision on redevpt plan for suburban buildings soon: CM

Decision on redevpt plan for suburban buildings soon: CM

Nagpur: Chief minister Prithviraj Chavan on Wednesday indicated that a decision on a proposal to offer incentives for the redevelopment of old and dilapidated buildings in Mumbai suburbs and Thane could be taken soon. 

    During a discussion in the legislative assembly on Wednesday, Chavan said he would convene a meeting in this regard and inform the House about the outcome on Friday. MLAs from the treasury and the Opposition benches participated in the discussion.     Legislators also 
pressed for a policy to regularize the 5,500-odd illegal structures in Thane as was done in Ulhasnagar. Chavan said the government would clarify its stand on the issue on Friday. 
    Shiv Sena leader Subhash Desai criticized the government for delays in implementing the recommendations of the Afzalpurkar committee report which dealt with the grant of a higher floor space index (FSI) for dilapidated suburban buildings. 
    The FSI is a development tool which defines the extent of construction permissible on the plot. 
The committee had submitted its report in 2000. Another panel appointed to review the recommendations presented its findings in 2007. The panel recommended a higher FSI for cluster redevelopment. It also suggested adoption of an area-based approach for open space development instead of the uniform open space ratio insisted upon at present. 
Congress member Ashok Jadhav also raised the issue. With higherFSI offered for dilapidated cessed buildings in the island city, Jadhav criticized the government for "having two different set of rules" for city and suburban buildings. 
Sena's Eknath Shinde threatened to launch a hunger strike inside the Vidhan Bhavan premises till the government announced a concrete policy on Thane structures. Sources said a committee appointed to suggest an action plan for Thane buildings has sought another month to submit its findings. 

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NRIs Home In as Falling Rupee Makes Realty Cheap

Struggling builders net a windfall, plan to tap more 'Indians' abroad

The spiraling rupee is resulting in a windfall for builders around the country who were struggling for more than a year to sell new homes. In a three-day property show in Dubai last weekend, Indian builders were able to generate bookings for homes valued at over $50 million (around . 250 crore), which has prompted them to hop to other cities with large Indian population like London, New York and Singapore. Ever since the rupee started depreciating there has been increased activity by the non resident Indian (NRI) buyers as they pay in dollars. 
The benefits of the rupee depreciation, if added to the discounts being offered by developers, makes new homes in India cheaper by almost 30% in dollar terms. At the Dubai show, 70 companies including Unitech, Hiranandani Group, Vatika, Nirmal Lifestyle, Ansal Housing and Ireo showcased their 200 projects from Mumbai, Pune, Gurgaon and Ahmedabad. 
"International real estate investment destinations, especially Europe and the Middle East are increasingly becoming uncertain. This, along with sharp depreciation in rupee, is attracting more NRIs towards Indian property markets," said Niranjan Hiranandani, managing director of Hiranandani group. 
Since August, the Indian currency has weakened nearly 20% against the US dollar. This, in addition to developer and project specific discounts has provided benefit of 25-30% to NRIs who are considering this as a good bargain. "Dirham, the currency of United Arab Emirates, being fixed to the US dollar is also helping Indian property market receive more attention from investors and buyers from the region," Hiranandani added. He expects the NRIs contribution in company's revenue to jump over 8% in the ongoing financial year, as against 3-4% earlier. "In three days most of the buyers have shown interest in paying the entire amount upfront to get the benefit of current currency rate. Of these, 53% people have booked these properties for own use while rest have bought with investment objective," said Sunil Jaiswal, chief executive of Sumansa Exhibitions, which organised the Dubai show. 
The Maharashtra Chamber of Housing Industry (MCHI), the representative body of developers from Mumbai and the Mumbai Metropolitan Region, is planning to organize a property exhibition in Dubai between January 12-14. And developers, who are witnessing fall in sales volume from local homebuyers, are hopeful of a strong rebound from there. 
The MCHI exhibition in Dubai will showcase around 300 properties developed by around 35 developers. "Prospects of sales to NRIs are bright this year, and therefore we are going to Dubai, London, Singapore, Doha and Hong Kong," said Zubin Mehta, CEO at MCHI. He expects the Dubai show to generate 15-20% higher bookings than last year's exhibition that saw bookings around . 70 crore and 
    housing finance companies business at . 107 crore. 
While Sumansa Exhibitions is also looking at organising more property exhibitions in international cities with Indian population many developers are also looking to enter into a tie up or set up their sales and marketing offices abroad. 
The Upside 

• Rupee depreciation has made new homes in India cheaper by almost 30% in dollar terms 

• Builders sold homes worth $50 billion in a property show organised in Dubai recently 

• Increased interest by NRIs has prompted builders to organise such exhibitions in other cities with large Indian population

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Builders skirt SC order, sell parking slots

Ravi Kukreja (name changed) received an ultimatum from his builder last month. He was asked to pay Rs 6 lakh in cash before November 30 for a parking slot in an upcoming residential building in Goregaon (W). "If I missed the deadline, the amount would increase to Rs 8 lakh from December 1," said a shocked Kukreja, who has booked a 1,700-sq-ft apartment for Rs 1.2 crore. "The builder's staff warned me they would cancel my booking by month-end and return the money. I have decided to fight it out,'' he said. 

    In Kharghar, a developer asked Sandeep Shah to shell out Rs 5 lakh for parking. "The apartment we booked is itself Rs 45 lakh. There is no choice but to pay up,'' he said. In Vashi, another builder is charging Rs 15 lakh for a single car park. 
    Residents of Mumbai and surrounding regions face daily frustration due to improper parking infrastructure. Even when the infrastructure is there, they are unfairly charged too much for it. It was no surprise then that the respondents in The Times Of India-IMRB Quality Of Life Survey rated parking facilities as poor in all eight mega-cities. Delhi's and Mumbai's facilities were considered the best, but the cities scored a poor 2.1 and 2, respectively, on a scale of 1 to 5. 
    Across Mumbai, builders continue to charge flat buyers for parking slots, despite the Supreme Court ruling in 2010 that developers cannot sell parking areas as independent units. These areas are "common areas and facilities" for flat owners. The judgment rejected the argument of a real estate development company that it is entitled to sell garages and stilt parking as separate units to owners who want to use them for parking. 
    "If a promoter does not fully disclose the common areas and facilities, he does so at his own peril," the court said. "Stilt parking spaces would not cease to be part of common areas and facilities merely because the promoter has not described the same as such in the advertisement and agreement with the flat purchaser. The promoter has no right to sell any portion of such building which is not a 'flat' within the meaning of Section 2(A-1) and the entire land and building has to be conveyed to the organization. The only right that remains with the promoter is to sell unsold flats." 
    The SC passed the judgment while dismissing the appeal of promoter Nahalchand Laloochand Pvt Ltd, which challenged the Bombay high court's ruling that under the Maharashtra Ownership Flats Act a builder cannot sell parking in the stilt area as independent flats or garages. 
    Since the apex court order, builders now demand cash, said advocate Vinod Sampat. "Some prominent builders ask buyers to write the cheque in the name of a loss-making company they own, but which has nothing to do with the building project,'' he said. 
    Property consultant Kishore Narang said rates differ from area to area. "It could be Rs 3 to 4 lakh in Dahisar. In the Bandra-Santa Cruz belt it could be double that,'' he said. Real estate sources said stilt parking in a new building in a far-flung suburb like Borivli could be as high as Rs 7 lakh. In the Nepean Sea Road area, a closed garage in an old skyscraper could go for Rs 35 to 40 lakh. On Pedder Road, a builder quoted Rs 1.5 crore for an area demarcated for parking in a premium residential highrise. "It is another matter that this parking area will later be used for another purpose," said a source. 
    In new buildings in the Bandra-Khar region, a car slot could fetch a builder Rs 10 to Rs 15 lakh. In Nariman Point, each open-tosky space in a good building fetches Rs 15 lakh while basement parking goes up to Rs 20 lakh. In the Bandra-Kurla Complex, some builders charge Rs 15 lakh for "stack parking''. 
    Several builders, not wishing to be identified, said they can't let go of this revenue. "Either we take the money in cash or increase the price of the flat, or quote a lumpsum rate,'' one said. 
    But Sampat said parking is free of Floor Space Index (FSI) and for builders to charge for something not in the FSI is unethical. A developer said they incur costs for building stilt, basement or podium parking and this has to be recovered. 
    Last year, some unscrupulous builders hit upon a new plan to cash in on parking. With the connivance of BMC building proposal officials, they got plans sanctioned for parking decks on each floor and then sold the space as part of the apartment. However, the BMC recently stopped passing such proposals after the modus operandi was exposed by TOI.

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Bill to grant eviction powers to civic chief

REDEVPT OF CIVIC PROPERTY

Mumbai: The state government is all set to introduce a new bill that could influence redevelopmentof civic properties in Mumbai. 

    A bill granting rights to the municipal commissioner to forcibly evict persons occupying properties earmarked for redevelopment or repairs is likely to be introduced during the winter session of the state assembly, which begins on December 12. 
    According to the provisions of the bill, initiated by the state urban development (UD) department, the municipal commissioner (or his representative) will be permitted tocarry outforcibleeviction of persons occupying such properties after service a notice on them. 
    It states that the commissioner will have to right to serve eviction notice on individuals occupying properties which are required to be demolished or earmarked by corporation for special repairs or reconstruction or a redevelopment scheme. A show-cause noticewillbeservedon an individual who does not evict the premises within 15 days of the first notice being served. The commissioner (or his representative) will have the right to carry outforcibleeviction if an individual does not respond to the show-cause notice within 15 days. 
    Amendments will be introduced in the Mumbai Municipal Corporation Act and the Bombay Provisional Municipal Corporation Act (which is now being referred to the Maharashtra Municipal Corporation Act) to enable the provisions. 
    UD department officials said that existing provisions regarding such powers are vague. The movecould influence redevelopment of several civic properties in Mumbai. The BMC is among the biggest landlords in the city. Many of its properties arelargetractsof land situated in prime areas.

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On track: CST-Kalyan high speed corridor

Plan Visualized On The Lines Of Churchgate To Virar Project; Pre-Feasibility Work Proposed

Central Railway has sought the railway board's approval for a pre-feasibility study to construct a Chhatrapati Shivaji Terminus-Kalyan highspeed corridor, on the lines of a similar project conceived for Western Railway between Churchgate and Virar. The proposal was submitted on Thursday. 

    A senior railway official told TOI on Friday that the prefeasibility study may find a mention in the railway minister's budget speech, after which consultants will be appointed to carry out a pre-feasibility study for this project. According to rough estimates, it may cost Rs 16,500 crore. 
    Rail Indian Technical and Economic Services (RITES) may be appointed to carry out the survey at a cost of Rs 9 crore. It will take at least a year to complete the survey. 
    The pre-feasibility study will identify the alignments through which this 55-kilometre route will traverse, the location of stations and other infrastructural needs for the project. It will also provide initial estimates of the cost involved in execution of the corridor, which will see trains plying with air-conditioned coaches. 
    The state government is keen on the project as development of a high-speed corridor is seen as essential to meeting the growth in traffic due to rapid development in the extended suburbs between Thane and Kalyan. 
    On the suburban railway system, the average annual growth in passenger traffic is 3-4%. In 2010-2011, approximately 3.9 million passengers travelled in suburban trains per day on CR compared with 3.7 million in the corresponding period of the previous year. Due to conversion of all the services to 12-car trains, the number of commuters per coach has decreased to 227 per coach from a staggering 293 per coach in 2007-08. 
    The peak hour load of passengers per coach may decline in the short term after 72 new rakes begin to get inducted in the railways fleet by 2015. Of these, half will be handed over to WR and some will be deployed on Harbour as well as Trans-Harbour line. 
    The official said, "With the addition of new rakes, the situation may improve for a few years. However, in the long run, we will have to open new corridors to reduce the peakhour load as the passenger traffic will continue to grow, but capacity-building on the existing infrastructure will come to a halt due to lack of space and engineering constraints. In such a scenario, it does make sense to have a highspeed corridor that will partially take the elevated route." 
    The railway has already stepped up efforts to implement the Churchgate-Virar high-speed elevated corridor, besides approving a detailed study for the Panvel-Navi Mumbai corridor to provide connectivity to the proposed Navi Mumbai Airport. 
LOCAL ISSUE 
INCLUSION OF MORE 12-COACH RAKES ON THE CENTRAL RAILWAY MAIN LINE AS WELL AS HARBOUR LINE HAS TRANSLATED INTO EASIER COMMUTE FOR PASSENGERS IN THE CITY 
Current status of elevated highspeed corridor projects in the city 
CHURCHGATE-VIRAR Estimated cost: Rs 15,000 crore The state government and the ministry of railways have created a joint task force with senior bureaucrats as representatives to deal with issues related to land acquisition and the mode of funding for the 60-km corridor 
CST-PANVEL | Estimated cost: Not yet decided MRVC has approved a detailed feasibility report for the project, which will provide rail connectivity between South Mumbai and the proposed international airport at Navi Mumbai. RITES will be carry out a survey on the proposed project within 12 months

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Civic body U-turn on ALM role change

Mumbai: The Brihanmumbai Municipal Corporation (BMC) has decided to include aclause in the amended draft guidelines on Advanced Locality Management (ALMs) under which issues like hawkers, illegal constructions, encroachments and parking will be brought under the purview of ALMs. 

    The civic body had recently modified the draft guidelines to the effect that ALMs would mainly deal with disaster and solid waste management. TOI was the first to report about the modified draft guidelines on December 2. ALMs across the city were up in arms against the suggested modifications. 
    Adelegation of members from different ALMs met additional municipal commissioner Mohan Adtani on Thursday to voice their concerns on the guidelines, which they said curtail their rights to take up pressing issues like hawkers and illegal constructions. 
    Adtani said, "We will make it mandatory for ALMs to cover issues like hawkers, drainage, parking and illegal constructions as we have received many objections from residents. The clause will be included in a day or two."

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Bonanza for BMC as bldrs seek extra FSI

Mumbai: Suburban builders have filled up the BMC's coffers by Rs 100 crore in the past few weeks by paying a premium to procure 33% additional FSI (floor-space index) for their construction projects. FSI defines the permissible built-up area on a plot. 

    Since the beginning of November, the BMC received 44 proposals—31 from the eastern suburbs and 13 from the western suburbs—from developers. Although Mumbai's realty market has remained stagnant, the BMC and state government estimate they will both earn over Rs 1,000 crore annually from developers who want to utilize this additional FSI. This windfall will be utilized to augment the city's infrastructure. The state and civic administration will share the amount equally. 
    The premium is levied on the basis of the ready reckoner rate of land, which is fixed for different areas in the city. Interestingly, the BMC is currently charging builders premium based on the ready reckoner of 2008. An architect said the 2008 ready reckoner rates are 15% to 35% lower than the 2011 rates. However, the BMC will approach the government to revise the rates to the existing one. 
    In October-end, CM Prithviraj Chavan cleared a long-pending proposal that allowed suburban developers the option to purchase 33% additional FSI from the state government instead of buying the more expensive TDR (transfer of development rights) from the open market. 
    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 was dependent on this TDR cartel. The permissible FSI in Mumbai's suburbs is restricted to just 1, but a developer can load another 1 FSI by buying TDR from the market, which is controlled by this cartel. 
    By allowing builders to purchase 33% extra FSI from the government at a cheaper rate, the state has reduced a developer's dependence on the TDR market by 33%. 
    To give an instance of how the state's policy has helped, an architect designing a residential building in Chembur, said. "The current rate of slum TDR is in the region of Rs 2,500 a sq ft, but the premium we paid to the BMC based on the ready reckoner rate in Chembur worked out to a little over Rs 1,000 a sq-ft.'' The difference worked out to around Rs 37 lakh. A builder with a project in the eastern suburbs is believed to have saved Rs 18 crore by going for the government's FSI instead of buying TDR. 
    Builders hinted that property rates in suburbs could dip if the premium turns out to be cheaper than TDR prices. The government's premium based on the ready reckoner rate is expensive in areas such as Bandra, Khar and Powai as land rates in these areas are more expensive than TDR rates. 
100CR WINDFALL 
The additional .33 FSI is optional and nontransferable. It can be used only on the same plot The total FSI in the suburbs (including TDR) will be restricted to 2 Premium to be shared between state government and BMC on 50:50 basis No vertical extension of existing building by utilizing .33 FSI shall be permitted with erection of columns in the required marginal open space

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Realty Gains Scale New Highs in Small Towns

Demand in tier II & III cities shows an uptrend on rising affluence, aspirations of buyers

   The industrial town of Rudrapur, 220 km from Delhi on the way to Nainital, isn't exactly the kind of place that you would start talking about. But Sanjeev Srivastav, managing director of real estate developer Assotech, won't quite agree. He's got a lot to talk about this little town, and is happy his firm had launched a project in this tier-III town four years ago.
At a time when builders in metros and tier-I cities are staring at falling sales and rising supply, tier-II and tier-III cities are doing quite well — both in terms of demand and prices. Rudrapur, for instance, has seen prices appreciating by more than 80% in the past three years, something even Mumbai — the hottest property market in the country — has not managed during this period. And if you do a quick scan of the tier-II and tier-III cities, you will find many such Rudrapurs, which are showing steady price appreciation, as affluence and economic growth trickle down to smaller towns. "Moderate income class is growing in these cities. Their aspirations are now well supported by expanding credit availability, even if non-subsidised, and relatively lower land prices; all of this is helping smaller property markets to remain stable," said RV Verma, chairman and MD of National Housing Bank, the housing finance regulator.
In fact, demand in cities like Bhopal, Faridabad, Lucknow, Bhubaneswar, Ahmedabad and Surat is still holding up and rates are showing an uptrend, unlike in metros where sales numbers are pretty dismal with most builders resisting any correction so far. Property prices in Bhopal and Faridabad have jumped nearly 25% in the past one year; rates have also gone up in cities like Lucknow, Ahmedabad and Surat. This was revealed by NHB Residex, the residential pricing index, maintained by the National Housing Bank. "These cities will not fail you, returns here are stable and much better than metros over the long-term," said Srivastav of Assotech, that has several projects in Delhi and the National Capital Region (NCR).
"Speculative elements come into picture in larger markets like Mumbai and Delhi, while in tier-II and III cities there's no speculation. This helps in stable and steady price appreciation than volatile price movements," said Lalit Kumar Jain, national president of Confederation of Real Estate Developers Associations of India (CREDAI). This growth in tier-II cities and smaller towns can be attributed to rising investments across industries including information technology and ITES, rapid industrialisation and opportunities arising out of it and improvement in infrastructure and urban governance.
Bhubaneswar, for instance, may not qualify to get the benefit of the government's latest decision to allow foreign direct investment in multibrand retail since it does not have the stipulated minimum population of 10 lakh, but it's a hot property destination with three top IT companies — Tata Consultancy Services, Infosys and Wipro — having set up their campuses there. Shailesh Puranik, managing director of Puranik Builders, that has been operating in both Mumbai and tier-II city Nashik for the past 35 years, sums up the situation aptly.
"Demand is less, but steady. Rates do not appreciate very quickly here, but they do not decline sharply either." Given the proximity of these cities to metros, it usually has a ruboff effect as industries consider these locations as an alternative.

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