Mumbai: Hike in FSI premium bad news for realty

The hiking of the floor space index (FSI) in suburbs and the linking of its premium to market rates, steps taken by Maharashtra government to bring down the rates of the transfer of development rights (TDR), have dampened the realty market.

The hiking of the floor space index (FSI) in suburbs and the linking of its premium to market rates, steps taken by Maharashtra government to bring down the rates of the transfer of development rights (TDR), have dampened the realty market.

Reason: the builders will now have to give Rs 3,500-Rs 9,000 for a sqft to the government, which is a huge jump from Rs 500-Rs 1,500 a sqft. In contrast, the TDR being charged by private parties is in the range of Rs 4,600-Rs 6,000 a sqft.

The TDR is an important component in the revamp in the suburbs, as builders use it to double the existing FSI of 1 to 2. In 2011, the state had reduced the dependence on TDR by offering 0.33% FSI, which allowed builders to just take 0.67% from private parties. Now, the government has increased its share to 0.60%, thus allowing builders to purchase 0.40% from private parties.

“Builders will find it cheaper to purchase TDR from private parties, instead of the government. The government is losing its revenue by such steps,” said Sunil Mantri, president, National Real Estate Development Council (NAREDCO).

So far, the state charged premium on the basis of the 2008 ready reckoner rates. It has now been revised to the 2015 rates, a hike in cost for builders.

Bhavesh Sanghrajka, chairman and managing director, Shraddha Lifescapes, said, “The TDR lobby will not reduce their prices and the main casualty will be affordable homes.”