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Mumbai: Eye on polls, government slashes construction premiums, doles out more FSI sops

Making major modifications to Mumbai’s newly approved development control regulations (DCR), the chief minister-led urban development (UD) department rolled out fresh built-up area sops and fiscal concessions to developers.

Written by Sandeep Ashar | Mumbai | Updated: November 14, 2018 12:10:18 am
Lok Sabha election 2019, Mumbai development control regulations, Maharashtra government, Floor Space Index, Devendra Fadnavis, Urban Development, Mumbai News, Indian express  Maharashtra Chief Minister Devendra Fadnavis. (Source: File Photo)

WITH THE 2019 Lok Sabha polls in sight, the state government on Tuesday doled out major sops to Mumbai’s real estate industry.

Making major modifications to Mumbai’s newly approved development control regulations (DCR), the chief minister-led urban development (UD) department rolled out fresh built-up area sops and fiscal concessions to developers.

In a move that will significantly reduce construction cost, the government slashed the premium rates that builders have to pay to avail additional floor space index (FSI). In a carte-blanche, these premiums were slashed for all residential, commercial, and industrial projects which are entitled to avail such additional FSI under the new regulations.

FSI is a development tool that defines the extent of construction. It is the ratio of built-up area to total plot area.

In a move that will benefit hundreds of redevelopments abutting small and medium sized roads in Mumbai, the government has now permitted utilisation of the compensation provided to land holders in the form of transferable development rights (TDR) for surrendering a portion of their land for road widening purposes over and above the permissible FSI. Incidentally, town planners in the UD department had strongly opposed this move earlier, even as the construction industry players had been lobbying for it.

As reported earlier in The Indian Express, Mumbai’s slum developers gained the most following Tuesday’s modification. Incidentally, questions are being raised even within the bureaucracy on whether fresh concessions could be extended as part of a notification of corrections to “typographical errors and mistakes” in a previous notification concerning sanction to the Excluded Part (EP) of Mumbai’s new DCR.

While the DCR had come into force on September 1, the government had approved major modifications to it on September 21. While these were to be implemented from October 24, the implementation date had earlier been pushed back to November 13 for making the corrections. Sources, however, admitted that the delay was also because of the fresh concessions and the sops that the government wanted to extend to the construction industry.

In May, while approving Mumbai’s new DCR, the government had stated that the builders would need to pay 60 per cent of the ready reckoner (RR) values of a plot to avail additional FSI available on payment of premiums over and above the basic FSI. But on Tuesday, this was brought down to 50 per cent. RR values are market values of plots as determined by the government. The government also reduced premium payable for compensatory fungible FSI in residential construction, from 60 per cent to 50 per cent.

Sources in the construction industry said this would significantly reduce the input cost for projects. Also slashed were premiums payable for incentive FSI in the case of specialised commercial projects, including the construction of information technology parks, biotech parks, and fin tech parks and commercial business districts. While the government’s town planner had earlier advocated collection of 80 per cent of RR as premium in the case of some of these, all such construction will now have to pay just 50 per cent of RR.

Interestingly, the latest fiscal sops come at a time when the Shiv Sena-led BMC, also India’s richest civic body, has estimated a loss in projected revenue to the tune of Rs 830 crore due to various revisions in the premium regime which had been introduced in the DCR before the latest round of modifications. “This will dent a further hole in the civic exchequer,” an official said.

Further ignoring opposition from the BMC and town planners, the government has also cut premiums payable for additional built-up area in the redevelopments of old dilapidated cessed buildings in the island city, tenanted suburban buildings, and cluster redevelopment schemes. Whereas in the case of slum redevelopments, while premiums have been retained at 2.5 per cent of RR values, concessions have been extended to builders by shifting the date of computation of such premiums to an earlier date; the time when the Letter of Allotment (LoA) or the initial approval was awarded to the project, while allowing the payment to be made after the building is completed and the occupation certificate is received.

The state has also waived off the requirement of premiums for fungible compensatory FSI utilised for the rehabilitation component in economically weaker section and low income group housing projects in Mhada-owned colonies.

Slum redevelopment projects are already seen as a goldmine for developers. Several luxury residential projects in the financial capital have sprung up on slum lands. On September 21, the government had made these even more lucrative by lifting the cap on maximum permissible FSI that could be utilised in-situ for slum projects, while also enhancing the minimum tenement size of a slum home from 269 square feet to 300 square feet. The cap had been lifted on the condition that open space norm relaxations won’t be permitted. But on Tuesday, the government withdrew the condition, which would enhance the saleable area footprint of a slum developer.

In another contentious move, the government allowed the Slum Rehabilitation Authority (SRA) the power to relax the norm regarding the minimum tenement density to be maintained in a slum project. To generate free additional housing stock to rehouse project affected people, slum projects are required to maintain a tenement density of 650 per net hectare. On Tuesday, the state gave SRA’s CEO the power to relax this up to 500 per net hectare in cases of hardship. Sources said that the move will lead to a significant reduction in the generation of PAP tenements.

Further, the government has now permitted clubbing of two or more slum schemes if both are located in the same half of the city. For instance, two SRA projects in the island city can now be clubbed together. Alternatively, two projects in adjoining civic wards can be clubbed as well. In case of projects involving construction of permanent transit camps for slum dwellers on private lands, the government has now ruled that ongoing projects, where TDR certificates have already been issued or where such applications have been made, won’t face indexation to market rates for a year.

Later, the TDR will be indexed at both the generation and the utilisation end. Fresh saleable area incentives have also been announced for builders redeveloped dilapidated cessed buildings and old suburban tenanted buildings. The minimum size of rehabilitation homes for all redevelopments has now been revised to 300 square feet. Land holders surrendering a portion of their land for public reservations have been allotted FSI benefit over and above permissible FSI.

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