The good news that most potential homebuyers had been waiting for after the introduction of the new Development Control Regulations (DCR) won’t be coming anytime soon.
While it was expected that property prices would drop after the amendment to the DCR, city builders rule out any price cuts claiming that the new norms have reduced their construction area and also charged a premium on the incentive free space index (FSI).
“The premium has increased the project cost and now even our saleable area has been reduced,” said Sunil Mantri, chairman, real estate committee, Indian Merchants’ Chamber, adding that the high premium would in turn impact the feasibility of many projects.
Earlier, builders would merge areas such as balcony, flowerbeds, ducts, car decks, which were free of FSI, into an apartment to make it bigger. While the builder got the area free from the civic body, he would sell at market rate.
To put an end to this, in January, municipal commissioner Subodh Kumar put a cap on the incentive FSI at 35% for residential and 20% for commercial premises. However, the builder would have to pay a premium to avail this additional built up area — 60% for residential and 100% for commercial.
Paras Gundecha, president, Maharashtra Chambers of Housing Industry (MCHI), said delays in approvals were also responsible for the soaring rates. “Delays increase the project cost. I do not see any reduction in current level because of the new rules,” said Gundecha, adding that hardly any project had been passed in the past year.
Last year, realty prices had reached a record high forcing many buyers to postpone their plans. Also, the Reserve Bank of India introduced stringent conditions to avail home loans and increased their interest rates.
Supporters of the DCR claim that reduction is inevitable. “Though there may be no cuts very soon, the builders would be forced to do so eventually,” said Pankaj Kapoor, CEO, Liasas Foras, a real estate research firm.