Mumbai developers decline to be carpeted the state way.
Buyers of premium apartments in Mumbai now have to face a new reality, called ‘usable carpet area’.
After the state government started insisting that developers should strictly sell the flats on carpet area, developers have invented this term, defined as the built-up area minus the walls’ thickness. It includes balconies, terraces, drying areas, duct areas and so on. They’ve begun charging on this basis.
The government has already exempted areas such as balconies, terraces, staircases, clubhouses and others from the floor space index (FSI) calculation. FSI refers to the permissible construction allowed on a given plot of land. When developers pay for land, normally it is calculated on the FSI available on that plot.
In Mumbai’s suburbs, if a builder has 10,000 sq ft of land, he can construct only 13,300 sq ft, as the FSI is 1.33. However, he sells around 20,000 sq ft, including amenities such as club house, staircase, balconies, lift area, and so on.
The high-end apartments of Indiabulls, and DB Realty in south-central Mumbai come with large deck areas or terraces of around 1,000 sq ft.
“When developers sell these areas at full price, it is all profit for them,” says Pranay Vakil, chairman of property consultancy Knight Frank India.
Sometimes, the customer has to pay twice for the same facility. For example, many developers include a clubhouse while calculating saleable area. However, they again charge a membership fee.
Even the proportion of saleable to carpet area, referred to as ‘loading’ in real estate parlance, is increasing. Until about a year before, it used to be 33–40 per cent. Presently it is upwards of 70 per cent, say property consultants.
For instance, Indiabulls is charging a loading of 100 per cent in its projects in Lower Parel and the Lodha group is charging 70 per cent in its World Crest project in the nearby locality.
‘The market knows’
Developers defended the practice, pointing to the number of amenities they were providing. “Our loading is in line with the market, and we clearly state that to our buyers. As we add more amenities, the loading also increases,” says Gagan Banga, spokesperson of Indiabulls Group.
Emails sent to DB Realty remained unanswered.
Akshaya Kumar, CEO of Park Lane Property Advisors, says developers have aggressively bid for prime plots. “The acquisition cost is high and, hence, the need to squeeze every drop is paramount,” he said.
These developers have paid hefty prices to get prime properties in an auction. Indiabulls Sky Suites and Sky Forest are being built on the defunct Elphinstone Mills (7.76 acres, bought for Rs 441 crore) and Jupiter Mills (11 acres bought for Rs 276 crore), which the group won in an auction in 2005. The recently launched Bleu is on the Bharat Mill and Podar Mill property, which the group recently won this year for paying a combined price of around Rs 2,000 crore. The combined plot is 10.76 acres.
Lodha is constructing World One, touted as the world’s tallest residential tower, on the defunct Sriniwas Mills in Lower Parel. The 17-acre plot had changed hands over 15 years before but labour issues delayed the Lodha Group from starting development on the land.
Even the builders’ lobby has taken cognisance of the growing difference between saleable and carpet area and of realtors charging additional money for different features. The Maharashtra Chamber of Housing Industry (MCHI) has asked builders to sell flats only on the basis of carpet areas. “Customers should make their buying decisions on carpet area and other usable features such as balconies or terraces, if included in the project,” said Sunil Mantri, president, MCHI.
