Before the state assembly election that brought it to power, the Bharatiya Janata Party (BJP) promised affordable homes for all before the end of its five-year term. The number for the Mumbai region was later fixed at 500,000.
The Union budget 2016-17 proposed service tax exemption for houses up to 60 sq. mt. and 100% deduction on profits earned on affordable housing projects approved between June 2016 and March 2019, and completed within three years since approval.
Houses up to 30 sq. mt. in four major cities and 60 sq.mt in other cities are eligible for this benefit. However, given the slow pace of giving approvals in Mumbai, there are doubts if many developers will be able to meet these deadlines.
A housing department official, who requested anonymity, said these incentives were aimed at creating a stock of affordable houses, but it would be difficult for developers to meet the three-year deadline given the slow approval processes. He also pointed out that project delays will lead to cost escalation, making them unaffordable.
“The February 2019 deadline set by Maharashtra government is politically important for this regime because it has revived an old programme for budget housing that did not take off during the previous government’s tenure. Also, 2019 is the election year for both the central and state governments," said the official.
“The tax exemptions are welcome and there is nothing apparently wrong with the three-year time frame. But the problem is that municipal bodies typically take at least one and half year to issue all approvals. In most cases, the delay is even longer. So, a project that applies for approvals now is unlikely to have all permits in place before December 2017. Land parcels would be released after the approvals and actual construction would begin thereafter. So, this developer will have barely 14 months from December 17 to meet Maharashtra government’s February 2019 deadline," the official said.
He added all the projects that get approved in the next 18 months would be under severe pressure to meet this deadline. “If they get approved after June 2017 and completed in next three years, they would get the tax exemptions."
Sriram Mahadevan, business head of Mahindra Lifespaces’s under-construction affordable housing project Happinest in Mumbai’s extreme north-west suburb of Boisar, said a typical housing project in the Mumbai metropolitan region takes between 18 and 36 months to get all the necessary approvals in place. In an emailed response to Mint’s questions, Mahadevan said the delays lead to cost escalation.
“Single window, time-bound clearance is one of the most important requirements to reduce the cost of home ownership, since delays in approvals lead to cost escalation; delays can raise the cost of construction by up to 25%. As an industry, we have been making representations at various fora for the same," Mahadevan said.
Mahindra Lifespaces is looking to complete the entire project by financial year 2018, he said though the first two phases would be handed over by December 2016 and December 2017 respectively. Mahindra Lifespaces is selling one and two bedroom hall kitchen flats—measuring 522 sq ft to 762 sq ft—here costing ₹ 11-21 lakh.
However, the housing official quoted earlier said Mahindra Lifespaces can deliver the project in time perhaps because it had already received the approvals after the typical 18 to 16 months time-frame. “That is also the reason why Mahindra Lifespace is selling the flats at an affordable price. But that may not be the case with all developers who applied later or those are in the process to apply for approvals," the official said.
In January, the Greater Mumbai Municipal Corporation (MCGM) put in place a revised construction permits regime, which brings down the number of approvals from 119 to 58 and the period to issue all approvals from 365 days to 60.
Launching this initiative, chief minister Devendra Fadnavis, who holds the housing portfolio, asked all municipal bodies in Maharashtra to revise their permit systems to minimise delays. Fadnavis also asked developers to pass on the benefits of this revised regime to home buyers by adding to the stock of affordable housing. The state government in February also signed a pact with the Maharashtra Chamber of Housing Industry (MCHI)-Confederation of Real Estate Developers Association of India (CREDAI) to get 5.69 lakh affordable houses constructed in the Mumbai metropolitan region by February 2019.
MCHI Navi Mumbai president Prakash Baviskar said a majority of these projects are in the metropolitan region where the MCGM’s revised permits system was not effective.
“While the MCGM initiative was long overdue, it is effective only in Greater Mumbai when most of the affordable housing projects are located in the metropolitan region beyond the MCGM jurisdiction. These projects are at the mercy of local municipal bodies like the Navi Mumbai Municipal Corporation, City and Industrial Development Corporation (Cidco), and other municipal bodies who have not revised their permit systems," Baviskar said. He said the real bottlenecks critically affecting the affordable housing programme in Maharashtra have been slower approvals and an old development plan for the metropolitan region.
“Slower approvals have already stalled construction of nearly 20 lakh affordable houses in Navi Mumbai itself. Builders who are interested in this sector have land parcels that could provide these many houses but the land would be released only after they get all the approvals," Baviskar said. The MCHI functionary said he himself was awaiting approvals for projects to create 10,000 affordable houses. “In the last three years, Cidco has given merely 30 permissions as against nearly 1000 applications. Delay in getting approvals and land possession naturally leads to cost escalation and it does not remain an affordable project for the developer as well as the buyer," he said.
Another problem, according to Baviskar, is that the metropolitan region was still operating the development plan of 2011 which the Mumbai Metropolitan Region Development Authority (MMRDA) has not updated. “In 2016, we should be following an updated development plan for 2016-21 which factors in the housing sector needs and demand-supply situation," he said.