In a move that is likely to see a rise in realty rates in the suburbs, the state government issued the final notification hiking additional development rights and premium charged with an aim to mop up more revenue for a cash-strapped exchequer.
The state’s urban development department (UDD) modified regulation 32 of the Development Control Rules (DCR) on December 4 to hike incentive (optional) Floor Space Index (FSI) for the city’s suburbs from 0.33 to 0.50. FSI is an indicator of how high a developer can build on a plot – the ratio of the total constructed area to the size of the plot.
However, this additional FSI will come at a cost, with the state hiking the premium on it to 60% of the current ready reckoner rates. It was earlier linked to the 2008 ready reckoner rate. The state hopes to mop up around Rs3,500 crore to Rs4,000 crore with the move and the premium received will be shared equally between the state government and the civic body.
Developers said the hike in premium will increase realty rates in the suburbs, as the cost of the additional FSI works out in the range of Rs4,000 to Rs12,000 per sq feet. This cost, they said, will get passed on to the buyers. With the realty market already sluggish, further increase in rates is likely to pose a challenge.
“There is absolutely no incentive. On the contrary, this will jack up project costs. We will be forced to increase the selling rates,” said Paras Gundecha, chairman and MD, Gundecha Group.
The increase in premium, developers said will also lead to increase in the cost of Transfer of Development Rights (TDR) certificate. The city suburbs have a base FSI of 1 and are allowed to use TDR of 1, which can be brought from the market. TDR is floating FSI generally generated on slum projects or when a land owner loses his plot for reservation for an amenity and can be used in the suburbs. In 2008, the state had first introduced 0.33 as incentive FSI for suburbs to reduce monopoly of the TDR lobby and help the government earn revenue from development rights. The cap of FSI, however, continues to be 2.
In March, chief minister Devendra Fadnavis had proposed to increase the FSI for suburbs and a notice was issued to hike FSI by 0.60. However, after going through suggestions and objections from the public, the FSI was hiked by 0.50. This additional FSI will not be applicable at Bandra-Kurla Complex (BKC), for slum rehabilitation schemes and in areas coming under Coastal Regulatory Zone (CRZ). The city suburbs have a base FSI of 1. However, construction projects can utilize TDR of 1, including the incentive FSI 0.50 with the cap of 2.
With inputs from Naresh Kamath