Developers in India’s commercial capital will now have the option of availing equated instalments for paying premiums and fees on construction. While instalment-based loans are a norm among homebuyers in Mumbai, an instalment facility for builders is an industry-first. The incentive is aimed at bringing down the high upfront costs in obtaining a construction permit.
With the residential real estate sector witnessing a prolonged slowdown, the Maharashtra Chamber of Housing Industry (MCHI-CREDAI) had earlier approached Chief Minister Devendra Fadnavis and municipal commissioner Ajoy Mehta for introducing a fiscal stimulus plan.
While the builder lobby’s demand for reduction in premiums was turned down, Mehta confirmed that the proposal for providing the instalment-based payment option had been finalised. It is expected to be approved in the next few days. “In view of a number of requests received from various developers and architects, it is now decided after due consideration to grant the facility of instalments in payments of fees, premiums, and deposit to those who have requested payment of such amounts,” the proposal states.
The facility has been extended for payment of premiums payable towards paid floor space index (additional FSI and compensatory FSI) and various concessions in town planning norms availed by a developer.
The option would also be available for charges collected by the building proposal’s department for allowing staircase/lift/ lift lobbies and other amenities free-of-FSI. But the civic body has clarified that the facility won’t be available towards payment of premiums towards the state government’s share in the paid FSI component.
“It won’t be granted for payment of development charges, fees collected for scrutiny of building plans, the labour cess, IOD deposits, and debris deposits,” clarified a senior official.
The perk, however, does not give the developers a carte blanche. Mehta clarified that the option would only be extended for proposals where the payables were over Rs 50 lakh, and the gross plot area for the construction was ove 4,300 square feet.
Further, Mehta said those availing the option will have to pay a 12 per cent interest on reducing balance from the second instalment onwards.
While low rise constructions (those below 70 metres) will be offered a total of three annual instalments, high-rises can use an additional annual instalment for making payments.
Besides, giving a leg-up to the construction sector, the municipality is also hoping that the option leads increases its own revenues from the sector, which have seen a sharp dip over the past three years. “It was felt that the construction sector urgently needed some fiscal stimulus. Allowing the instalment option was our best bet, since it also protects civic revenues, while giving builders some breathing space,” said Mehta.
While the civic body has incorporated some safeguards — holding back approvals for 15 per cent of the approved built-up area, charging 18 per cent penalty on delayed payment, and threatening demolition of the construction related to the defaulted payment following three months of default, some senior officials cautioned of cases where the flat buyers and tenants would have to pay a price for defaults by a developer. “The new option does not have a safeguard for a buyer,” one of them said.
26% dip in civic revenue
The Mumbai municipality itself has been hit badly by the slowdown in the construction sector. Official statistics reveal that there was a 26 per cent drop in the estimated civic revenue from the construction sector in 2016-17. While the civic body had targeted collection of Rs 5,349.42 crore, it managed to collect just Rs 3,941.8 crore. In 2017-18, while BMC has estimated a revenue of Rs 3,997.01 crore from the head, it has so far collected Rs 1,586 crore, statistics reveal.