Mixed reactions to realty rule change in state

The Maharashtra government’s move to amend Development Control Regulations in Mumbai has evoked mixed reactions.

Prabhudas Lilladher, the financial services advisory, says costs are expected to increase as builders would be required to pay a premium amounting to 60 per cent of the ready reckoner rate (RR) for availing the extra fungible floor space index (FSI).

Sunil Mantri, chairman of Sunil Mantry Realty, says giving 35 per cent extra of premium FSI was too little and 100 per cent extra should have been given, for payment to be shared between the state government and the city’s civic body. The sum generated would have been at least Rs 10,000 crore, he said.

However, Paras Gundecha, president of the Maharashtra Chamber of Housing Industry (MCHI), says the amendment would establish a level field for the developer community and also reduce arbitrary decision making. “We expect this move to bring an element of certainty among home buyers. It is expected to bring about stability in property prices,” he adds.

According to the DCR amendments, the areas earmarked for balconies, flower beds, terraces, voids and niches would be counted in the FSI, unlike earlier. To compensate for the loss of free FSI areas, fungible FSI to the extent of 35 per cent for residential development and 20 per cent for industrial and commercial developments has been allowed, for a premium. Fungible FSI would be available at 60 per cent premium for residential, 80 per cent for industrial and 100 per cent for commercial projects at the prevailing RR rates.

Kejal Mehta, analyst at Prabhudas Lilladher, opines, “Our initial calculations (show) without accounting for any changes in pricing strategies, margins could get hit by nine per cent on a standard project. However, we believe that since this FSI can be used to increase carpet area, new pricing strategies based on carpet area shall emerge. This amendment will not result in any extra area for the builder, as a typical project would have included 30-35 per cent areas like flowerbeds, balconies voids (free of FSI area) which is over and above the normal FSI.”

Mantri says restricting parking areas to 25 per cent of the total area was impractical when every flat buyer demands more of the facility. “The decision to reduce the side margin to 1.5 mtr (from the earlier three metres) is a positive move, which will facilitate redevelopment of property located in highly dense areas like Kalbadevi, Bhuleshwar and VP Road in south Mumbai. This will help to get many properties redeveloped in a congested area.”

According to Boman Irani, secretary of MCHI, amendments to the DCR would boost organised development in the city. He suggests having the rules treat commercial development at par with or even made better vis-à-vis residential development facilities, as this was the need of the hour. Irani said he greatly appreciated the efforts of state government and the Mumbai civic body in streamlining the processes in the form of rules that would ensure unscrupulous developers would get automatically eliminated.

Mehta said in the earlier system, a few developers could exploit loopholes in the system to make abnormal profits. Under the new rules, the discretionary powers of the municipal commissioner have been substantially reduced, paving the way fore a more level field in the sector.