The rate for Transfer of Development Rights (TDR) has reached an all-time high of Rs 6,000 a sqft.
TDR is the development right or the built-up area granted to plot owners as compensation for surrendering their plots to the civic body for public amenities such as parks.
The sharp rise in TDR — used by developers to build taller buildings in Mumbai — means the cost of new residential or commercial properties will remain high in the coming days.
The rise, however, also resulted in a windfall for the TDR lobby, which was having to make do with a rate of Rs 4,200 a sqft just six months ago.
Builders are making a beeline to purchase TDR from private landowners ever since the state government proposed to link it to the width of the roads and also hike the rates of premium Floor Space Index (FSI).
“We have to buy TDR before the new policy comes to force because there is no way we can undertake projects with reduced FSI,” said Bhavesh Sanghrajka, chairman and managing director, Shraddha Lifescapes.
The new TDR draft policy links incentives to the width of the roads. Since a majority of the roads are narrow, the viability of more than 90% of the projects in the suburbs will be affected by reduced FSI.
Sunil Mantri, president of the National Real Estate Development Council (NAREDCO), said the hike reduces the scope of price correction. “There is no way we can reduce realty prices after buying TDR at such high costs,” said Mantri.
The price rise is also attributed to the shortage of TDR in the market.
Currently, TDR in Chembur sells at a rate of Rs 6,000 a sqft, while at Bandra it sells at Rs 5,600-Rs 5,800 a sqft. Similarly, TDR in Borivli and Kanjurmarg sells at Rs 4,600-Rs 4,800 a sqft.
TDR has played an important role in the revamp of the suburbs because builders are using it to double the existing FSI of 1 to 2. In 2011, the state government reduced the dependence of TDR by offering 0.33% FSI. This allowed builders to take 0.67% from private parties.
NAREDCO has asked the state government to reverse this formula and increase its cap to 0.67% from 0.33%. “This will boost the revenue for the state exchequer and we will get some relief from private parties,” said Mantri.