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