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