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FSI and TDR simplified

Saturday, December 23, 2017

FSI and TDR are terms we so often hear when it comes to the real estate sector. But, how much of it do the buyers or the developers actually understand? Advocate Tanmay Ketkar explains the technical terms in common man’s language

Value of gold depends on its purity, measured in carat. Similarly, all things have separate measures to ascertain its value. In real estate,area of land and more importantly permissible FSI and TDR decides its value.

FSI and TDR are the most commonly and widely used and heard terms. All of us must have heard these terms. The term FSI is generally coupled with a number i.e. 1 FSI, 2 FSI, etc. FSI and TDR is undoubtedly the most important and sometimes deciding aspect. However public and the persons in real estate are not aware about these terms and their exact legal meaning.

What exactly is FSI?
FSI stands for Floor Space Index. In simple words, it is the area of construction permissible on particular plot of land. FSI is the proportion of construction of all floors to the total area of plot of land. Once we understand this proportion, we can understand the meaning of 1 FSI, 2 FSI etc. For example if a plot of land is admeasuring about one thousand square meters, and the permissible FSI is 1, then about one thousand square meters of construction is permissible on that plot of land. Commercially speaking FSI is the original development or construction potential of a particular plot of land.

What is TDR?
Next most important term is TDR. TDR is an abbreviation of Transferable Development Rights. TDR is also a kind of FSI. How is TDR generated? To build or expand the public utilities like ground, garden, bus stand, roads, etc. sometimes government requires private land or portion of it. In such circumstances, the government acquires the required land belonging to private party. The compensation for such acquisition is paid in terms of money or TDR. TDR is nothing but the development potential or FSI of the area of land aTDR is given in form of DRC i.e. Development Rights Certificate. TDR or DRC is negotiable and can be transferred for consideration. The owner of acquired land can either use the TDR for himself or can sell it in an open market.

TDR vs FSI
Whereas FSI is the original development potential of a land the TDR is an external development potential, that can be permitted to be used on plot of land. The town planning authority or the state government, from time to time frames or makes the rules governing the TDR and its utilisation. The urban development department of state government on 16.11.2016 issued an important notification about the TDR.

The notification clarified important aspects like the eligibility for TDR, ineligibility for TDR, permissible use of TDR etc. Accordingly the TDR will be given only for acquisition for new roads, widening of existing roads, reservation for public purpose, slum rehabilitation etc. The landlords who have already received the compensation, lands for which construction plans are already sanctioned, will not be eligible for any TDR.

The notification clarified the proportion of TDR as well, accordingly, in Mumbai cityTDR equivalent to twice the area of land acquired and in Mumbai suburbsTDR equivalent to two and half times the area of land acquired, will be permissible. If there is reservation for specific public utility purpose e.g. garden, library, hospital etc, the TDR for said land can be availed by constructing and transferring the said public utility to the government.

TDR changes
Commercially speaking, only having TDR is of no use unless and until it is utilised and actual construction is done. Generally, the permissible TDR on a piece of land is governed by the width of adjoining road to that plot of land. The new notification has made some changes in earlier norms. Now, no TDR can be utilised on plot of land having adjoining road of less than 9 meters width. If adjoining road is 9 to 12.20 meters wide, in Mumbai city 0.17 and in Mumbai suburbs 0.5 TDR is permissible. If adjoining road is 12.20 to 18.30 meters wide, in Mumbai city 0.37 and in Mumbai suburbs 0.70 TDR is permissible. If adjoining road is 18.30 to 30 meters wide, in Mumbai city 0.57 and in Mumbai suburbs 0.90 TDR is permissible. If adjoining road is wider that 90 meters, in Mumbai city 0.67 and in Mumbai suburbs 1.00, TDR is permissible.

The notification also clarifies the places where the TDR cannot be utilised. Accordingly, TDR cannot be utilised on plots of land lying, being and situated, between western railway line and Swami Vivekananda road, between western railway line and Western Express Highway, Central Railway line and Lal Bahadur Shastri Road,in Coastal Regulation Zone, and in no development zone.

From developer’s perspective to take commercial decision about a project, it is very important to ascertain the permissible construction on plot of land. Therefore, for developers it is very important to know the permissible TDR and restrictions on use of TDR. From customer’s perspective, many times personnel in developer’s office makes statements about the TDR, permissible TDR and utilisation of TDR etc, in such circumstance the consumers must be aware about the basic norms of TDR and its utilisation. This knowledge will save the consumer from being fooled by the false marketing commitments. If a consumer is going to purchase a unit that is promised to be constructed by utilising TDR, the consumer must seek all the information about the norms and proceed with the transaction, only after getting satisfying answers.

Knowledge of FSI and TDR will help developer, investor, landowners, financer in taking commercial decision. Knowledge of FSI and TDR will save customers from any scam or false promise. In nutshell everybody involved in real estate must be conversant with FSI and TDR.

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