Approval delays cripple Mumbai’s robust realty season

Approval delays cripple Mumbai’s robust realty season

Bangalore: Delays in project approval for real estate developers in Mumbai have dampened what is considered a robust season for property sales in the city.

While as many as 100 developers participated in the four-day property exhibition hosted by the Maharashtra Chamber of Housing Industry (MCHI) that ended on 9 October, only a few announced new projects, citing delays in getting approvals and clearances from the Brihanmumbai Municipal Corporation (BMC).

Builders could only showcase proposed projects without accepting bookings from customers at the property exhibition as MCHI had prohibited them from selling units at projects that didn’t have necessary approvals.

Traditionally, the period between Dussehra and Diwali is peak time for property sales.

BMC has withheld approvals to new projects in the past seven-eight months as it is in the process of restructuring the floor-space index (FSI) guidelines in the city. FSI is the permissible construction on a given plot. BMC recently issued draft FSI guidelines on which suggestions have been invited from developers, other stakeholders and the general public.

T.C. Benjamin, principal secretary, urban development, Maharashtra government, said that once BMC receives inputs on the draft guidelines and a report is submitted to the state government, it shouldn’t take much time for the government to arrive at a final policy document. “By end of October we should be able to take a decision," he said.

“Approvals slowing down has forced companies to defer project launches in a tight liquidity scenario, when developers want to launch fast and raise capital through sales," said Sunil Mantri, chairman and managing director of Sunil Mantri Realty Ltd, a property developer in Mumbai.

Most developers have a similar story to tell. The Marathon Group has at least four projects ready to launch as soon as approvals come in. The developer received approval for its residential project in Panvel after an 18-month wait.

Neptune Developers Pvt. Ltd is awaiting clearance for three projects and only recently started selling units at the second phase of an existing project.

“We expect sales offtake only in select projects within a broader trend of tepid volumes offtake in Mumbai as developers continue to play the waiting game," Aashiesh Agarwal and Adhidev Chattopadhyay, analysts at Edelweiss Securities, said in a note to clients.

Buyers, too, are staying away from the market as property prices have gone up by 10-15% this fiscal because of a lack of supply of new projects and as builders are charging a premium for existing and ready-for-possession projects, said analysts. Rising interest rates on home loans have also hurt demand, they said.

Indeed, some builders such as Usha Breco Realty Ltd have deferred the launch of new projects in the city, despite getting the required approvals, given the lacklustre demand.

“We choose not to launch till market sentiments improve and there is more clarity on interest rates," said Uday Dharmadhikari, chief executive of Usha Breco Realty.