The Brihanmumbai Municipal Corporations move to monetise discretionary concessions has boosted its coffers with collection from fungible Floor Space Index (FSI) premium touching Rs 1,900 crore in the first six months this year. Builders seeking additional FSI for their residential projects are required to pay a premium to the civic body.
In the corresponding period last fiscal,it had collected Rs 1,600 crore.
Within just two years of its introduction,premium from fungible FSI has turned to be the third largest revenue source for the cash-rich BMC,octroi and property tax being the top two sources.
According to the budget estimates of the current financial year,the civic administration hopes to earn Rs 7,000 crore from octroi and an additional Rs 3,200 crore from property tax this year.
Earlier,builders were hesitant in paying premium as their projects were running into losses,but now they have digested the new scheme to pay premium in lieu of concessional FSI, said Shirish Sukhatme,President of Practicing Engineers Architects & Townplanners Association (PEATA) adding that despite a weak market,developers have been announcing projects and have no choice but to pay premium.
Major projects were announced by builders in the past few months especially in the luxury housing segment. These include big ticket projects by Lodha Developers,Omkar Realtors & Developers,L&Ts residential project in Powai and Godrej Properties.
The concept of fungible FSI was introduced in the revised Development Control Rules (DCR) in November 2011 by the then BMC commissioner Subodh Kumar. It aimed at monetising approvals which were earlier being given as concessions on discretionary basis by the municipal commissioner.
Earlier,civic chiefs could clear project with car decks,large flower beds,voids,lily ponds,which are otherwise not included in the buildings FSI. Later,they would charge home buyers for this additional space. These concessions allowed developers to build an additional 50 per cent to 80 per cent above the permitted built-up area,and earn money at a market rate by selling such spaces.
Civic officials said the money earned from the fungible FSI and other development charges from builders will be put in an infrastructure fund. This revenue will be invested in water supply,roads and other crucial civic projects which need additional funding, said a senior civic official. The new fungible FSI policy allows for 35 per cent compensatory FSI for residential buildings and 20 per cent for both commercial and industrial structures.
However,while the beginning of the year saw substantial premium collections,officials said builders were not announcing new projects due to a large pile-up of inventory. This is likely to affect revenue in the remaining part of the year, they said.