WITH ITS push for “affordable housing”, the new ‘Development Plan (DP) 2034’ could increase the supply or stock of available houses, giving potential homebuyers more options to choose from, said real estate developers and experts. “In recent times, developers had stopped buying land as well as sign joint development agreement in the city, as they wanted rules to be finalised before arriving at valuation of land parcels,” said Anuj Puri, chairman of property consultants Anarock.
Others agree that the new DP will open up new pockets for development. “This is bound to create more supply and offer more choices for customers,” said Ashish Shah, chief operations officer of Radius Developers.
He added that the bigger question, however, is whether people are in the mood to buy. “The DP not only opens up hitherto undevelopable land but also offers incentive floor space index (FSI) for giving up part of the land for social amenities. But are these policies enticing enough for customers?” asked Shah.
The Brihanmumbai Municipal Corporation (BMC) has designed DP-2034 with the aim to provide 10 lakh affordable or low cost houses by the end of 2021. For this, the civic body has opened up no-development zones (NDZs), salt pan lands and tourism development areas for construction. If the owners of these lands agree to build low cost houses and social amenities on a third of the land and give up another third of the land for open spaces, they could have a floor space index (FSI) of 3.
“With these incentives, there is a clear push for creating supply, but charging very high premium is a self-defeating approach by the government. More houses may be available but they may not be cheaper,” said a trade expert and former member of Confederation of Real Estate Developers’ Associations of India (CREDAI).
In 2015, the state government had increased the premium on FSI to generate more revenue. The premium is roughly 60 per cent of the ready reckoner (RR) rates — rates published annually by government on which stamp duty is levied during sale or purchase of flats.
“Today, premiums and taxes make up for 35 to 40 per cent of the price of the flat. Moreover, premiums are related to the ready reckoner (RR) rate — as a thumb rule 50 per cent of the RR rate. Unless the RR rates or circle rates go down, premiums will remain high,” said Rajan Bandelkar, head of Raunak Group and vice-president of National Real Estate Development Council (NAREDCO).
The RR rates announced on March 31 have been kept unchanged since last year. Even as developers expected a downward revision in the RR rates, the government decided to neither increase or decrease the rates.
Some developers said that with the new DP, there will be more interest among developers in the affordable housing sector. “The changing market dynamics, in terms of the opening of new land banks and changing regulations, will determine prices for the affordable housing segment. Infrastructure status to affordable housing and credit linked subsidy scheme has developed an interest among developers as well buyers in this segment,” said Ankur Dhawan, chief investment officer of PropTiger.com.
The new DP is expected to breathe new life into the city’s commercial space market too. “Over the past few years, developers have shown lesser interest in commercial spaces because of the high gestation period. The DP intends to address this issue by introducing business districts and promising higher FSI. How well it will work is to be seen, though,” said Bandelkar.