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Development Plan Just To Fill BMC Coffers?

Monday, March 16, 2015
By Mayura Shanbaug

The draft of the Brihanmumbai Municipal Corporation (BMC)'s plan for the development of Mumbai put forth a fortnight ago brought instant cheer to people and developers as it said the Floor Space Index (FSI) for the city and suburbs will be increased within a range of 3 and 8. Many thought that it was a God gift and would  fulfill their dream of owning homes at an affordable price. But  scrutinise it closely and you get the feeling of being duped by the so called grand vision for 20 years by the authorities, as the truth emerges that the higher FSI is just another way of filling the coffers of the BMC and benefits nobody else; neither the developers nor the common man. Experts are calling it 'self defeating, exploitative, capitalistic and anti social'

“This is certainly not a vision document,” says Vinod Sampat, Advocate and Expert on Property matters. “This plan neither benefits the common man nor the infamous builder or developer lobby. It is just a sure shot way of minting speed money by the BMC,” he says.

Sampat explains that everything in the new development plan  is chargeable, including the permissions that were there as also new permissions that would be generated by the plan. “They are going to charge premium on everything and the premium will be charged at the ready reckoner rates which is ever increasing,” he says. The “BMC will get more and more money,” he adds. Though he says that the plan would really be appreciated if the genuine difficulties faced by the people would be addressed,” Sampat added.

Pankaj Kapoor, Managing Director of Liases Foras, a real estate rating and research firm, says that having a development plan was the need of the hour for the city, as Mumbai is the worst city in the world as far as the ratio of area to built up area is concerned. “But the development plan's complexities are such that 51% of the area mentioned in the development plan is either slums or difficult to develop,” he says.

“The main problem with the city is costly land,” says Kapoor. The land cost in any project in places like Malabar hill or Worli is 60-90% of the total project cost. In places like Borivali it amounts to 50% of the cost, at the  ready reckoner rate plus now the added cost of the premium  FSI will make the entire project very costly for the developer which he will be passing on the buyer... plus sometimes it also decreases the productivity of the land,” explains Kapoor.

“By this plan the city will not be served… costly products result in very costly end products for which there will be no buyers, which in turn will give rise to an economic slowdown in the sectors,” fears Kapoor. However, he says that developers with a huge land bank will certainly benefit from the plan.

He says that the plan is self defeating ,exploitative, capitalistic and anti social. “What the BMC could have done is for the next 5-6 years incentivise construction of affordable housing and create a good amount of supply that could  take care  of the population growth for the next 20 years. Also measures like building Trans Harbour link to the main land will open doors of growth and affordability in housing,” he adds.  

With this plan we are challenged and cannot cater to affordable housing. With this plan we cannot create volumes at affordable pricing,“ says Niranjan Hiranandani, MD, Hiranandani Group. Additional FSI is nothing but the revenue earning measures by the BMC,” he says.

The resources created by the new plan like NDZ will further give rise to slums... so after 20 years we will have more slums than development,” he adds. He suggests that the authorities should keep greens like mangroves as greens and keep construction land parcels separate. The local body has already overpriced ready reckoner rates and they will keep going up plus TDR is  already at a premium, making projects unviable and making the city expensive,” he adds.  

Says Ramesh Nair, COO – Business & International Director, JLL India, “The Development Plan leaves some unanswered questions. For instance, if the assumptions made on income levels are correct, how does the DP propose to allow for housing for the majority of Mumbai’s population? Will affordable housing remain a part of the puzzle that remains outside the DP’s consideration? Also, if the population is expected to drop in wards A, B and C which have infrastructure, why does the DP not bring in levers that will incentives people to stay in these wards and make good use of existing infrastructure? How will power, water, road and drainage infrastructure for the excess housing stock be created? These are just some of the gaps in the logic where more clarity is definitely required”.

How The FSI will be calculated?
Imagine that if  area is given an FSI of 5 then..   

  • There would be a base FSI of 2.5
  • The developer can buy another 1 which will be called Premium A
  • Then the developer can buy TDR at the market rate... say that will add up another 1 to the FSI
  • If the developer wants to consume  the rest of the FSI ..Then he will have to pay further which is called Premium B.

According to Municipal Commissioner Sitaram Kunte,The ”Proposed FSI profile in DP 2034 should be seen as an outer envelope, which will not be fully consumed in the next 20 years. This will ensure that there is no scarcity of development rights that would cause distortions (in the property market).
Moreover, the new draft DP clearly mentions that FSI is not an entitlement and no concessions will be granted in setbacks for achieving the permissible FSI. Under these circumstances small plots and relatively new development will not immediately go for redevelopment. The plot size requirement to consume FSI will be much higher,” he says.  

What will happen to South Mumbai?
According to the New Proposed Plan the FSI for South Mumbai is 5. 80% of the South Mumbai consists of dilapidated buildings. In 1967, when most of the South Mumbai's Buildings were  constructed the FSI was 4* and has already been consumed by most of the buildings in the area. ADC asked Commissioner Kunte that in such a case which developer will come forward to redevelop the buildings?  He dodged the question by saying that all the explanations are given in the plan.     

The Realty Truth
The Positives

  • The new Development Plan proposes FSI to accommodate the expected increase in Mumbai's population. Both the earlier DPs failed to plan for development suitable to a growing population.
  • The new DP acknowledges realities of existing developments and densities, and proposes a geographic distribution of FSI instead of a uniform FSI across the board.
  • Transit-oriented development is encouraged by higher FSI being allowed around stations.
  • The new DP finally removes all ambiguity around calculations of what is counted in FSI; now, there is nothing that can be built and not be accounted for as free of FSI. This brings in much-needed simplicity and transparency, and reduces the scope for manipulation.
  • The new DP acknowledges that new car depots near the areas of future population growths are critical for city to remain competitive and hence proposes new car depot at Aarey Colony.

The Negatives

  • No clear time-frame for implementation has been outlined
  • For the Western Suburbs, higher FSI may be largely impractical because of the civil aviation funnel and road width requirements
  • FSIs of 6.5 and 8.4 will lead to further crowding of already traffic-congested regions such as Dadar and Andheri. 10% of built-up area in projects over plots more than 2000 square meters in area in the form of small tenements is required to be handed over to the MCGM
  • Developers are dis-incentivized from providing amenities such as swimming pools and clubhouses in their projects, as they are part of FSI to be paid for, but do not generate direct revenue

—Ramesh Nair, COO – Business & International Director, JLL India

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