Extra FSI could lead to drop in realty rates: Experts

The amendment to the Maharashtra Regional and Town Planning Act, 1966, allowing additional floor space index of .33 in the suburbs for a premium is expected to reduce realty prices to some extent, real estate experts said.

The amendment to the Maharashtra Regional and Town Planning Act, 1966, allowing additional floor space index of .33 in the suburbs for a premium is expected to reduce realty prices to some extent, real estate experts said.

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The reason: rates of Transfer of Developmental Rights (TDR) that a builder has to purchase from private parties to increase the buildable area of his project are expected to drop.

Sukhraj Nahar, director, Nahar Group, expects the rates of apartments to come down by 5 to 10%. “If TDR rates drop, we will pass on the benefit to consumers,” Nahar said.

The government gives TDR to property owners who surrender their land for public projects such as widening of roads. In return, property owners are given proportionate area in the vicinity or northwards. The owners can use or sell these rights.

Since TDR in the market is limited, the rates are high and translate into high real estate rates.

The state wanted to amend the town planning act saying granting additional FSI would help control TDR prices.

Developers across Mumbai can get additional FSI for amenities such as staircases without reducing the size of flats.

The amendment will also enable the BMC to grant more FSI for hospitals, hotels and educational institutions.

Sunil Mantri, president, Maharashtra Chambers for Housing Industry, expects the decision to spur construction. “The financial burden on builders will ease and it will also control prices to some extent,” said Mantri.

He expects TDR rates to come down to Rs 1,750 to Rs 2,450 per square foot from the prevailing Rs 2,500 to Rs 3,500.

The state has also allowed builders to claim exemption on FSI for common areas such as elevators by paying a premium.

“The premium collected by civic bodies will be used to create infrastructure in the cities. It is charged because additional construction puts more burden on civic infrastructure,” urban development secretary TC Benjamin said.

The BMC earned at least Rs 300 from this until the high court struck the system down in August saying the

state’s town planning act, did not authorise civic bodies to charge a premium for additional FSI.