Mumbai: Real estate prices in Mumbai are unlikely to come down soon in spite of additional building rights being released by the city’s special planning authority, the Mumbai Metropolitan Region Development Authority (MMRDA).
Transfer of development rights, or TDR, is a certificate from the city administration that the owner of a property gets for developing public utilities such as parks, schools and hospitals.
Under the TDR policy, builders are compensated in kind if they surrender some of their land to the government for purposes such as widening a road, creating a park or slum rehabilitation. These rights can be sold to other builders or can be used for development by the builder himself in the suburbs in lieu of the plot that he has surrendered. TDRs cannot be exercised within Mumbai city limits.
Packed avenues: A view of Mumbai’s Nariman Point and Cuffe Parade. According to a recent CB Richard Ellis India survey, short supply of land in the city has pushed up rentals by 55% in the last one year.
For instance, if a property has been designated as a park in the city’s master plan, and the owner of that property develops the park and hands it over to the city administration, the administration will issue a TDR certificate that allows the owner to build on an equivalent area in one of the suburbs.
Most TDRs in the past few years have been generated from the redevelopment of slums, initiated by both the Municipal Corporation of Greater Mumbai and MMRDA.
Since MMRDA itself has constructed and relocated some of the slums, it holds a significant amount of TDRs, estimated at around 3 million sq. ft. An MMRDA spokesperson confirmed the figure and said the agency will continue to release parts of it periodically.
The authority has invited tenders for TDRs for around 250,000 sq. ft from two of its slum redevelopment projects, the Nesco plot on the Western Express Highway and the Nirlon plot, both in the city’s suburb of Goregaon East.
The agency has set a base price of Rs2,500 per sq. ft. “But we are not ruling out bids in the region of Rs4,000 per sq. ft,” said an MMRDA official.
Current average TDR prices are in the region of Rs2,900 per sq. ft, up from Rs2,400 per sq. ft last year. In the Bandra-Khar Road-Santa Cruz areas, TDR rates are about Rs3,000 per sq. ft, while in the more distant western suburbs between Jogeshwari and Borivali, the rates are at Rs2,700 per sq. ft.
The short supply of land in the city has kept real estate prices high. Rentals have risen 55% in the last one year and are now higher than in cities such as London, New York and Tokyo, said a recent survey by real estate consultancy firm CB Richard Ellis India. On the residential front alone, Mumbai has an unmet demand of 12 million housing units.
“The demand for land in the city is so much that any amount of TDR or land that comes into the city will be consumed easily. Unless a significant amount of land or TDR comes into the market at a go, there will be no impact on real estate prices,” said Aditya Sejpal, partner at VD Sejpal and Co., a real estate development company that also deals in TDR certificates.
Anshuman Magazine, chief executive officer, CB Richard Ellis India, agreed. “Just the fact that MMRDA is releasing additional TDR will not affect prices of residential flats or commercial premises in Mumbai, given that the demand is so high. Only when the lands released by the repeal of the Urban Land Ceiling Act (Ulca) come into the market in a year’s time will there be a real drop in prices,” he said.
Ulca was repealed in November by the Maharashtra state assembly. According to Pranay Vakil, chairman of real estate consultants Knight Frank India, over the next three to five years, between 15,000 acres and 17,000 acres (about 6,000-6,900ha) will be freed and come into the market across the state following the repeal of the Act.