New DCR push land rates down

Mumbai: The new development control rules (DCR) which restrict unabated building concessions and the amended public parking policy, which substantially curbed benefits for builders, have slowly started affecting land valuations in Mumbai. Experts said the city's land prices, the highest in the country, are bound to fall in the months to come, but warned that flat prices were unlikely to decline. 

    In the past few years, developers bought land at astronomical prices as these concession policies could be manipulated to offer unusually high construction rights to builders who could bribe their way through. Since 2005, some of the country's most expensive land transactions were concluded in the city because of the bonanzas they offered. 
    Property market sources said the sale of the 17-acre Mumbai Textile mill land at Lower Parel has been delayed after these two policies were amended by civic chief Subodh Kumar and approved by the state government. 
    DLF, the country's largest real estate company which paid Rs 702 crore for the defunct mill in 2005, is quoting Rs 3,000 crore for the land parcel. But there are not many takers. HOUSING MATTERS Realty rates may become more realistic now 
Mumbai: New DC rules and the amended public parking policy are affecting land valuations in the city. For instance, prospective buyers are not willing to offer more than Rs 2,000 crore for the Mumbai Textile mill land at Lower Parel, as earlier construction benefits no longer exist. 
    "The owners are expecting Rs 3,000 crore but no offer has come close to that figure yet. With the new DCR, the property's valuation has taken a hit,'' said a prominent developer interested in the central Mumbai property. 
    DLF's high valuation is mainly because the state government had earlier cleared its proposal under the public parking policy. The developer was to receive additional floor space index (FSI) for building a multi-storeyed public car park and hand it over to the civic administration free of cost. 
    But after the BMC reviewed the policy, the FSI benefit was severely restricted. "If DLF fails to receive parking FSI, its land valuation will not cross Rs 1,500 crore,'' said another developer, negotiating with the real estate giant. 
    Another property whose valuation has been affected is the landmark 1.5-acre Famous Studio at Mahalaxmi. The studio has been on the block for some time and D B Realty had almost concluded the deal for Rs 500 crore over a year ago before it fell through. But sources said the valuation is down to less than Rs 300 crore now after the new building regulations were recently approved by the state government. The 70,000 sq ft plot has a saleable area of 1.5 lakh sq ft, as against the 5 lakh sq ft that experts were expecting before the new policy came in. Famous Studio owner Arun Rungta denied the property was for sale but those in the know said the deal was stuck mainly due to change in valuation. 
    Similarly, the Dunlop House property at Worli, which has been put up for sale, may fetch under Rs 300 crore, against the expected Rs 400 crore, sources said. 
    New building rules introduced early this month allow only 35% extra space in a residential project. Builders will pay a premium to the BMC for this "compensatory FSI''. These areas were earlier not counted in the FSI but many builders who could manipulate the system were able to virtually double these free-of-FSI areas and sell them at the market rate to flat buyers. 
    Senior solicitor Parimal Shroff said the new DCR have hurt business plans of builders and overall valuation of land. "The new policy has ended secret computations of builders and affected asset valuation,'' he said. "Land values were high as builders knew how much concessions they could procure and the quantum of areas they could load and sell to the buyer,'' he said. 
    Shroff said, "Builders have realized they can no longer receive these concessions.'' 
    Lodha Group managing director Abhisheck Lodha said land owners would now receive a lesser share of the overall value. "The larger chunk will now go to the government as premium,'' he said. 
    Knight Frank India chairman Pranay Vakil said land values will be more realistic now. "We were always surprised how people paid such high values. It made no sense as sometimes land value was equal to the sale price of the finished product,'' he said. 
    Pankaj Kapoor of Liases Foras, a real estate research firm, said the dip in land prices could be 30-40% in the island city, where land cost comprises 60% of the project cost. "Wherever the land cost is less than 30% of the project cost, we may not see more than a 15% fall in land prices,'' he said.