THE BMC, the country’s richest civic body, is set to take a huge financial hit owing to the slashing of premiums payable for various construction-related activities in the new Development Plan (DP). According to initial estimates, new provisions regarding construction premiums will dent the municipality’s exchequer by Rs 830 crore. At the start of the financial year, the BMC had projected an income of Rs 3,948 crore from construction proposals, which is the third highest revenue grosser for the civic body.
Mumbai’s new DP, which came into being from September 1, has relaxed norms for compulsory open spaces around buildings. While builders were previously required to set aside an area equalling at least a third of the height of the building above ground level as compulsory open space to ensure proper light and ventilation, the new regulations have eased the norm to one-fifth of the building height.
An impact assessment exercise, conducted by the BMC, has found that this relaxation will also cause a 10 per cent decline in the income estimated from premiums. According to norms, the civic commissioner has the discretion to extend concessions in the open space requirements for ‘genuine hardships’ on payment of premiums, which are calculated on ready reckoner (RR) values. RR values are annual market values of a property as determined by the government.
Besides, the state government’s move to revise the revenue sharing formula between itself and the municipality over premiums being collected for additional FSI will lead to a bigger hole. While at one point, the BMC had been retaining two-thirds of the premium amount, the government, which has been looking at mobiling resources outside its own budget to fund big ticket infrastructure and development projects, has now reversed the formula. Under the new arrangement, the BMC will only be permitted to retain 25 per cent of the premium amount. While another 25 per cent will go to the state coffers, the government has ruled that the remaining 50 per cent will be ring fenced and equally shared for the Dharavi redevelopment project, and for road development projects implemented in Mumbai by the state-run Maharashtra State Road Development Corporation. “The revision of the sharing formula will cause another 11 per cent drop in revenue projections,” said an official.
The assessment exercise was conducted as the state government is under pressure from the construction industry to reduce premiums payable for availing additional floor space index (FSI) and compensatory fungible FSI in various development schemes. Contending that high premiums were impacting the viability and affordability of construction projects, the industry wants to government to slash the premiums. While the new development control regulation kicked in this month, the CM-led urban development department is in the final stages of sanctioning the ‘excluded part’ of these regulations. With this expected to be cleared in the coming few days, builders have heightened the demand for “rationalisation” of premiums.
But the BMC has indicated that it won’t be in a position to bear further revenue losses. However, indications are that the government may consider revising slabs (telescopic rates) of premiums payable for open space deficits. Sources also hinted that premiums payable for different activities under various development regulations might be rationalised, in a manner that does not hit the civic coffers. Meanwhile, sources said that a slum developers’ lobby has begun pushing for higher transferable development rights (TDR) benefits for projects where they hand over transit shelters for slum rehabilitation to the SRA. The government has already proposed an increase the in-situ buildable space and sale incentives for slum redevelopment projects.