Since January, when the civic body’s stringent building laws came into operation, realty speculators and investors who book flats even before the project is launched have been finding themselves in deep waters.
Developers who would take advance money at the onset promising spaces in projects to be developed in the future, can no longer land up delivering in practice.
Throughout Mumbai, most developers sell up a third of their stock at a discounted rate to investors if they pay a major chunk of the amount upfront. Mostly the deals are struck at at time when the developers don’t even have the basic construction approvals in place. At a time when building rules could be manipulated, developers would misuse and sell areas which were not part of the apartment. These areas were later illegally amalgamated into the flat to make the interiors bigger albeit illegally. Now, the new building rules have greatly upset calculations of builders who had promised larger houses to investors and are unable to deliver.
Apparently, the new rules leave very little scope for manipulation and investors have now been asking developers to return money. Reportedly, a Bandra-Khar developer has put up 14 of his projects for sale after investors have started to hound him to return their money. Till some time back, the developer was known to carry out large-scale manipulations in his projects with flagrant connivance of BMC officials. Earlier, areas like staircases, passage, lifts, ducts and AC plant rooms were not included in the building's floor space index or FSI-the ratio which determines how much can by built on a plot.
Unscrupulous builders illegally sold these areas and calculated profits based on the extra areas they could exploit. Flat owners were also encouraged to merge these areas into the flat. Under the new BMC rules, these areas are included in the FSI. The civic body has permitted builders utilise 35 per cent compensatory FSI for residential buildings (20% for commercial towers) if they pay a hefty premium to the corporation. Builders were calculating super built-up area at 100 per cent and now the overall saleable area has reduced. A developer's initial equity comes from bulk investors who book flats at a cheaper rate. This money is used by the developer to launch the project.