TDR prices in the city’s suburbs have almost doubled in the past few months. Simply put it means; housing supply will drop and Real estate prices will continue to stay high. For Mumbai, the only solution is to increase the Floor Space Index (FSI) in line with other international cities like Singapore and Hong Kong. In Hong Kong the government charges a hefty premium for FSI (there is no certain limit to FSI in the city) and ploughs that money back for infrastructure development, where as in Singapore, they have an FSI of 10 all over the city. In New York, Tokyo, and Shanghai FSI limits range between 10 and 15. So should Mumbai lag behind? Mayura Shanbaug reports…
The problem of housing in a city like Mumbai manifests and presents itself in one ugly form or the other. Sometimes it reminds us in a way of the Mumbra building collapse wherein people who had fallen prey to unscrupulous builders, paid with their lives or at other times when it manifested into a problem like the Campa Cola compound building, wherein the residents continue to fight a loosing battle to save their homes of many years.
And these problems have manifested primarily due to the corruption laden system backed by irrelevant and out-dated policies that clearly need an overhaul and a permanent solution to match with the reality of Mumbai’s needs.
“The government is far away from the reality. The real estate policy regarding FSI needs to be revamped according to current reality that the government is unable to do, says” Suresh Prabhu, former union minister, who believes that the government is not finding a correct solution for the problem. “Temporary solutions won’t work in a city like Mumbai,” he says, adding “Increasing FSI as per international standards are the only solution”.
According to experts as well, the only solution in the face of so much difficulty is to increase the Floor Space Index (FSI) in line with other international cities like Singapore and Hong Kong. In Hong Kong the government charges a hefty premium for FSI (there is no certain limit to FSI in the city) and ploughs that money back for infrastructure development, where as in Singapore, they have an FSI of 10 all over the city. The FSI in Mumbai is still restricted to the standard 1.33 for the island city (MMR) and 2 (with TDR) for the suburbs, the government over the past decade has hiked it manifold for a slew of schemes including redevelopment of slums, housing authority colonies and cessed properties.
However, recently the state government in a notification allowed the cessed buildings in Mumbai constructed prior to September 1969 to either use an FSI of 3 or the FSI required for the rehabilitation of existing tenants plus 60% incentive FSI. The move is expected to benefit thousands of people living in the city’s 16,000-odd cessed buildings, most of which are in the island city.
The TDR Hiccup…
The sudden rise in the Transfer of Development Rights (TDR) rates has taken the market unawares, despite the fact that such a rise was unlikely because not much of TDR generation was taking place. Effectively, TDR prices have now doubled, and such a steep rise was not expected. The current price of TDR is now around Rs 4000 per sq. ft.
“The current TDR rate rise is the result of a slowdown of supply from such schemes, and is also linked to performance of some leading developers within the SRA projects sphere,” says Subhankar Mitra, Head, Strategic Consulting (West), Jones Lang LaSalle India.
“Another reason for a drop in supply is the fact that developers who earlier created projects purely to house project affected people (PAPs) in the Mahul Road area (south of Chembur) and generated TDR which they sold in the open market have seen prices rise sufficiently in this specific area to make a project with a sale component profitable. Hence, developers have stopped projects directed towards generation of TDR,” says Mitra.
A close reading of the TDR scheme from a regulatory perspective indicates that the supply of TDR was expected to be driven largely by slum rehabilitation schemes. Such projects have a long gestation period and their success is a function of diverse factors which do not always work cohesively. In other words, a regular flow of TDR from these projects may not be always possible.
Since the base FSI in the suburbs is only 1, it is a practice for developers to load about 60% TDR in the project in order to take the FSI about 2.0. “Thus, the increase in TDR cost increases project costs. At present, when sales are slack and the developers are finding it difficult to sustain prices, the additional costs are going to squeeze their margins even further,” explains Mitra.
“One way to check further TDR price hikes would be to place more emphasis on TDR generation through SRA schemes and other infrastructure projects. The BMC can also consider allowing more premium FSI to be used as against TDR,” he adds.
Developing New FSI Havens…
According to Anand Gupta, Honorary General Secretary, Builders Association of India (BAI), the state government can not arbitrarily increase FSI in the Island city or suburbs as it will create huge infrastructure problems in terms of road widening and water supply. The island city has a total area of just 525 square kilometer, where as the suburbs has a total area of 2500 square kilometers, thereby restricting horizontal growth resulting in land price escalation.
“What government needs to do is... design new areas in MMR region with FSI of 10. Especially the now developing land of Raigad district, which is going to be connected to the mainland by the Nava - Sheva link soon,” says Gupta. There is around 7200 square kilometers area which government can develop in pockets with FSI of 10 providing all the infrastructure facilities like wide roads , open areas, sewage disposal and water supply,” suggests Gupta. “People will have an affordable and planned city just 25 kilometers away from the main town,” he says.
What the government failed to do with Navi Mumbai -while it developed the area with the existing FSI and missed the chance to plan for the future population- government can do it at Raigad,” he adds. The move will result in fewer burdens on the main city and will get the cost of housing down making it affordable,” says Gupta. “Plus by charging premium, the government can earn essential revenue for infrastructure development,” he adds.
Clearly, a strong pitch to increase Mumbai’s permissible FSI is the need of the hour.