HDIL, Ackruti stocks up on HC’s FSI verdict.
The Maharashtra government is considering filing a petition to challenge yesterday’s Bombay High court order dismissing the increase in floor space index (FSI) of 0.33 in suburban Mumbai.
The state government, in April 2008, had introduced an additional FSI of 0.33 for properties located in suburban Mumbai, that would have been available at a price from the government. FSI means permissible construction on a given plot of land.
A senior state government official told Business Standard: “We will take future course of action only after studying the high court order. Of course, one of the options is clearly approaching the apex court. This will be done in consultation with the law and judiciary department.” He made it clear that approaching the apex court would be also with an intention to curb the cartelisation of transferable development rights (TDR) and thereby a surge in its price.
The official, on the condition of anonymity, admitted that TDR was currently being resisted by five to six builders and developers. This has already resulted in hike in TDR prices to well over Rs 3,000 per sq ft from Rs 900 per sq ft last year.
Meanwhile, the stocks of Mumbai-based property developers, HDIL and Ackruti City, one of the major TDR (transferable development rights) players, shot up sharply today.
While HDIL stock went by nearly 7 per cent, Ackruti City’s stock registered over 3 per cent today. But the BSE Realty, which tracks realty stocks, went down 0.26 per cent and the benchmark BSE Sensex went up marginally at 0.84 per cent .
ICICI Prudential Life Insurance bought Rs 44.75 crore worth of shares of HDIL today. The life insurer bought 1.9 million shares of HDIL at Rs 232.66 apiece, according to data of bulk deals on stock exchanges.
The court verdict is expected to increase the demand for transferable development rights in the northern Mumbai suburbs, as developers will now buy TDRs from other developers. TDRs are generated by undertaking projects such as slum redevelopment.
TDR prices are also expected to go up as demand from developers, who had previously deferred the purchase of TDRs on the expectation that the state government's decision will be upheld, will increase. They will be forced to buy TDRs from the market, says a report by Religare Capital Markets.
While TDR prices hover around Rs 2,000 per square feet in the market, buying from the government could have been less expensive. Higher TDR prices are also expected to push home prices in Mumbai suburbs.
"Only TDR players will win and home buyers will lose from yesterday's decision. The cost of input will go up and final product is going to increase,” said Akshaya Kumar, chief executive of Park Lane Property Advisors.
