FSI Rule Changes to Infuse Transparency in Real Estate Sector, Feel Developers

The Maharashtra government's decision of standardising the process of floor space index (FSI) usage and approval for Mumbai and suburbs has cheered most developers and home buyers. Realty developers have welcomed the amendments that would now curtail discretionary powers of civic officials and result in bringing down corruption. 

Industry experts are of the view that this clarity emerging out of the amended Development Control Regulations will spur new project launches in Mumbai that have almost been on hold for over a year. 
"It will not only establish a levelplaying field for the developer community, it will also reduce arbitrary decision making. We expect this move to result in bringing about an element of certainty among the home buyers. It is expected to bring about stability in property prices," said Paras Gundecha, president, the Maharashtra Chamber of Housing Industry. And this should be a reason for home buyers also to cheer as the much-awaited price correction can be expected now if the approvals are expedited. 
"If implemented properly in true spirit, this will prove to be a game changer for Mumbai…this will ensure the transparency in processes, but we also need to speed them up especially at highrise and environment committee levels to free up the stock," said Sandeep Runwal, director of the Runwal Group. 
Developers may not mind marginal correction. At least the business cycle that had come to a standstill will resume now and property volumes can move higher pushing the cash flow, analysts said. 
"The notified DC Rules will result in greater transparency, which will give a boost to organised development in the city of Mumbai," said Boman Irani, chairman and managing director of the Rustomjee Group. However, he also stressed that commercial development needs to be treated at par or better than residential development. 
Under new DC Rules, announced on Tuesday by chief minister Prithviraj Chavan, in any new construction the areas of balcony, flower beds, terraces, voids, niches, etc, will now be counted in the FSI given to the builder. Earlier these areas were not part of the FSI granted to the builder. To compensate for the loss of free FSI areas, the government has allowed compensatory fungible FSI to the extent of 35% for residential development and 20% for industrial and commercial developments. 
This fungible FSI will be available at 60%, 80% and 100% of the ready reckoner rates for residential, industrial and commercial developments, respectively. Fungible FSI will be usable like any other FSI which can be used for making flower beds, voids, etc, or can be used for constructing bigger habitable areas. No premium will be charged for fungible FSI to be used for the rehabilitation component under redevelopment of cessed buildings.