E-Paper
Reduce 36 different premiums to 6, developers’ body asks state govt
CREDAI-MCHI, a leading developers' body in Mumbai, has requested the government to reduce premiums by 50% to boost the city's real estate sector. The organization claims that the 36 different premiums developers have to pay make Mumbai's real estate the costliest in comparison to other cities, hampering its economic growth. They have proposed a low premium regime with reduced premiums, fewer charges, and a new payment scheme to attract more development and increase affordability. The organization believes that these changes will also benefit the government by generating more revenue.
Mumbai Leading developers’ body CREDAI-MCHI has requested the government to rationalise premiums by 50%. It has also stated that the 36 different premiums Mumbai Metropolitan Region (MMR) developers have to pay makes the region’s real estate the costliest, which it claims has stunted the economic growth of the metropolis in comparison with other cities like Delhi-NCR, Bengaluru and Hyderabad.
The CREDAI-MCHI, which represents 1,800 developers across MMR, has submitted a 24-page document titled Agenda 2023, presenting its findings which shows that the approval cost per sq m in Mumbai is a staggering ₹54,221 for residential development and ₹81,914 for commercial development.
The proposal was presented to State Revenue minister Radhakrishna Vikhe-Patil by a team led by CREDAI National President Boman Irani last week.
“Mumbai’s astronomical real estate approval charges and premiums are hardly conducive to talented young entrepreneurs who are high on concepts and motivation but low on capital. Today many startups, even those with their genesis in Mumbai, are forced to migrate and operate from other cities,” said Irani, who heads the Rustomjee Group
He said the prime reason behind Mumbai’s failure to attract new tech firms and the mass exodus of Fintech, IT, and service companies is the lack of availability of affordable offices or housing, shared service centres, mobility and lifestyle amenities.
The proposal presents five recommendations for a low premium regime. It demands rationalisation of all premiums by 50% including reduction in premiums for staircases, lift well, and lobbies. It wants the government to reduce the number of premiums from 36 to 6. The proposal also suggests the premium payments should be spread over the project’s cycle construction cycle without any rate of interest or penalty.
The proposal suggests a new 10:10:80 scheme with developers to pay 10% during premium approval, 10% during Commencement Certificate, and 80% during Occupation Certificate. The proposal also suggests that the government should charge an additional premium on Transfer of Development Rights (TDR) especially for redevelopment projects and should treat TDR as a premium.
The proposal pointed out that not only will a low premium regime spur an uptick in the volume of development, improve affordability of the housing market and boost redevelopment projects, but it will also increase the government revenues. It also pointed out that when the government had rationalised premiums during the post-Covid recovery phase in 2020, the 50% reduction in premiums had generate an additional revenue of ₹12,000 crore for the government.
Dhaval Ajmera, secretary of CREDAI-MCHI said by 2035, India’s GDP will exceed $10 trillion and Maharashtra will be the most significant contributor to the national GDP with a $2 trillion economy. “However, for Maharashtra to become a $2 trillion economy, Mumbai would need to triple the size of its economy, which also means competing with global cities like Singapore, Hong Kong, and Shanghai.”
