MMRDA to levy a fee on new housing projects near Metro 7

The Mumbai Metropolitan Region Development Authority (MMRDA) has proposed a transit-oriented development (TOD) charge on new residential and commercial buildings within 200 metres of the Gundavali-Dahisar East Metro 7 line. The MMRDA has yet to decide on the fee amount, but if approved, it could be replicated in other mass transit projects, potentially raising INR100bn ($1.4bn) for the MMRDA. Developers say they will not pay more money in addition to the charges they are already paying to the government.

All these years, it’s the developers who have been raking in money from their projects built around the government infrastructure. Now, in a role reversal, the state wants a piece of this profit.

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In a first, the Mumbai Metropolitan Region Development Authority (MMRDA) has sent a proposal to the urban development department suggesting that a transit-oriented development (TOD) charge be levied on all new residential and commercial buildings coming up within a 200-metre radius of the Gundavali-Dahisar East Metro 7 line. The proposal was also discussed at a recently held MMRDA meeting chaired by chief minister Eknath Shinde.

The MMRDA has yet to decide on the fee amount.

“We are exploring the concept of TOD in a big way and have taken Metro 7 as a pilot,” said S V R Srinivas, metropolitan commissioner, MMRDA.

If this proposal gets a go-ahead, it can then be replicated in other mass transit projects which could fetch ₹10,000 crore to the MMRDA, officials said.

Sources in the MMRDA said the developers market their properties by talking about their proximity to Metro lines, bridges and flyovers and earn huge profits from selling their inventories at a premium. “Now, we should be able to funnel some of the benefits back for the city’s development,” an official said.

However, developers said they will not fork out more money in addition to the charges they are already paying to the government.

“By approximation, nearly 25% to 35% of a ₹1 crore flat value goes to the government if one calculates the multiple premiums, GST, stamp duty, and other development charges. Developers have become milch cows,” a builder, who requested anonymity, said.

Rajan Bandelkar, national president, National Real Estate Development Council, an apex body of developers working under the Ministry of Housing and Urban Affairs, said, “The government had levied a 1% Metro cess in stamp duty charges which was removed later. Now for the last three to four years, a Metro cess of 2% has been charged by every corporation while giving building permissions in an area where Metro lines are operational or are proposed. The profit margin of even big-branded developers has shrunk to a single digit, and developers do not have the capacity to absorb additional charges. Ultimately, they will pass the burden on to the consumers.”

Metro 7 has been constructed on the Western Express Highway (WEH). Data released by Knight Frank India on Wednesday showed that the property registrations in western suburbs jumped from 51% in April 2022 when the phase 1 of the two Metro lines (2A and 7) began, to 58% in May 2023. Top developers such as Godrej Properties, Adani Realty, and Shapoorji Pallonji have constructed or proposed multi-storied buildings along the WEH and Metro 7.

Vivek Mohanani, MD and CEO, Ekta World, said, “The newly operational Metro lines have completely changed the dynamics of the region.”

Umesh Jandial, chief business officer, Omkar Realtors & Developers, said, “The newly launched Metro 2A and 7 have improved connectivity and enhanced ease of travel for commuters. This has resulted in an increase in demand and price appreciation for residential housing in the western suburbs, especially in the Malad-Goregaon region.”

The property rates in western suburbs where the Metro lines are already operational have seen nearly a 30% rise, while in the eastern suburbs where work for Metro line 4 (Wadala to Kasarwadavli) is at a fast pace, there is a 7% to 8% increase, Ridham Gada, partner, Prem Group, said.

“Developers will benefit more from the commercial buildings as they want to build them close to the Metro lines, while residential buildings are positioned in quieter surroundings, within a 10-minute walking distance from the stations,” he said.

The MMRDA is also hoping to raise ₹1,300 crore annually from premiums on additional floor space index on development in a specified influence area (200 metres) along mass transit corridors.