Home / Companies / South Mumbai realty may soon get a boost

Mumbai: The latest blueprint for the development of Mumbai proposes to repeal a 24-year-old rule that led to a flurry of construction in the distant northern suburbs at the expense of the city’s upmarket south and central parts, which stand to benefit if the suggested change is implemented.

Builders typically seek to maximise earnings by adding more built-up area on the same plot. In Mumbai, a builder who might need more than the permitted floor space index or FSI—a measure of the construction permitted in an available plot—can purchase additional development rights from someone who has such rights.

Anyone who surrenders a piece of land in Mumbai for public purposes, say slum rehabilitation, can offer to rehabilitate the slum dwellers at his own cost and get land development rights (called transferable development rights or TDRs) in return from the municipal corporation.

The TDR is essentially a certificate that confers the right to build up to a specified area. The TDR holder can either develop the land himself, or sell it to any developer who needs additional FSI.

However, under the existing rule, if the TDR was generated in, say Andheri, its buyer can use it only while developing a property north of Andheri, say in Malad or Borivali. Over the years, this meant a lot of new TDRs being generated in the city leading to high-density neighbourhoods in the distant northern suburbs. The new development plan proposes to scrap this requirement.

This means a developer keen on adding floors in his Cuffe Parade development in south Mumbai can purchase TDRs generated in, say, distant Borivali.

There is a catch, though: the TDR prices will be linked to the area’s ready reckoner (RR) rates, which are set by the government every year.

The rates are highest in south Mumbai. Due to this, TDRs generated in high-value areas will also be absorbed in cheaper areas, and will arrest further strain on civic infrastructure in high-density pockets.

“FSI zones are being created and in each zone, TDRs can be consumed but it will be linked to the ready reckoner rates to create balance," said Vimal Shah, president of builders’ lobby MCHI–CREDAI, a tie-up between the Maharashtra Chamber of Housing Industry and Confederation of Real Estate Developers’ Associations of India.

Shah explained that for every 15 sq. ft of TDR generated in the distant suburb of Dahisar, for instance, one sq. ft of TDR can be consumed in Colaba in south Mumbai.

The move could give a push to real estate activity in south Mumbai, which commands some of the highest property rates in the country.

“In the last 30 years, northern areas of Mumbai have become high-density pockets because most of the development has happened there. That may change now," said Shah, who is also the managing director of realty firm Hubtown Ltd.

Introduced in the 1991 development plan, the TDR policy was amended in 1997 and linked to slum rehabilitation schemes, where the FSI incentive offered could be used as TDR.

“...Indexing will help to reduce distortion in the TDR market. The TDR generated in low-value eastern suburbs, was used in high-value western suburbs. This trend now will be controlled. And vice versa, if TDR generated in high-priced land is utilized in low-value land, it will have less deduction, which will encourage the land owners in high-value land areas to come forward for handing over of the reservations to the Municipal Corporation of Greater Mumbai (MCGM) in lieu of TDR," municipal commissioner Sitaram Kunte said in an interview.

TDR prices currently range between 4,500 and 5000 a sq. ft. If the proposals are finalized, these prices may go up.

The draft development plan has also suggested liberalising FSI rules in Mumbai.

It has proposed a variable FSI of up to 8 in different parts of the city. This means on a plot of 1,000 sq. ft, a developer can build an apartment or office complex of up to 8,000 sq. ft.

Housing Development and Infrastructure Ltd (HDIL) currently sells TDRs generated mainly from its suburban Kurla project.

Around 4 million sq. ft of TDRs are expected to be generated from the first phase alone, which will earn the company almost 1,600-1,800 crore.

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