High FSI may curtail artificial realty price hike
The suburbs will see more vertical development now that the state Cabinet has amended the Maharashtra Regional Town Planning (MRTP) Act, 1966.mumbai Updated: Sep 09, 2010 02:03 IST
The suburbs will see more vertical development now that the state Cabinet has amended the Maharashtra Regional Town Planning (MRTP) Act, 1966.
The amendment allows higher base Floor Space Index (FSI) in the suburbs – from 1 to 1.33 – and this should curtail the artificial increase in real estate prices by reducing the demand for the Transferred Development Rights (TDR). The TDR is the compensation granted to owners who hand over their land for public infrastructure projects. This FSI can be utilised to the north of the original plot.
TDR certificates are sold in the market, and their prices had been spiralling upwards as developers had no choice but to buy them following the Bombay High Court stay on the sale of extra FSI.
In June, the court had stayed the state government’s 2008 decision to allow higher FSI in the suburbs, saying the MRTP Act did not have any provision that allowed the civic body to levy and collect premium in exchange for the extra 0.33 FSI.
In its Cabinet note, the urban development department pointed out that local bodies are empowered to implement development plans and land use reservations as they are responsible for creating civic amenities and upgrading infrastructure. “This requires substantial funds. The local bodies have the right to levy development charges or a premium for providing civic amenities,” the note said.
The department said the premium collected from builders for the extra FSI would be used for developing infrastructure in the city. The premium, divided equally between the state and the municipal corporation, had added Rs 1,000 crore to the state kitty.
Boman Irani, chairman and managing director, Rustomjee Group, called it the best decision taken for the betterment of the city. “The amount gathered as premium can be utilised for the overall infrastructure development and this will have a major effect on the quality of life for the citizens,” said Irani.
The state had announced the decision to hike FSI in the suburbs in the 2008 Budget and offer an additional 0.33 FSI on payment of a premium.
The maximum permissible FSI in the suburbs is 2 of which 1 is available as default and remaining 1 can be brought from private parties.
By offering 0.33 more, builders had to buy only 0.67 FSI from private parties, upsetting the cartel that deals in TDR and controls its price.
The premium to be paid for the additional FSI is 30 per cent of the ready reckoner prices and ranges from Rs 7,000 per sq ft in areas such as Manori to Rs 23,000 in Bandra.
The ordinance will be implemented with retrospective effect from April 2008, and will be in place until the state Assembly clears the amendment in its winter session.