Anuj Puri speaks with TradeBriefs on the Mumbai Development Plan 2034
Mumbai Development Plan 2034 was approved after a long wait in mid-April. Among the major initiatives is the proposed creation of 10 lakh affordable homes on land marked as no-development zone (NDZ). Moreover, the floor space index (FSI) for commercial development has been increased to 5 while for residential development, it is now 3 in the island city. Anuj Puri, Chairman, ANAROCK Property Consultants, shares his views with Tradebriefs on DP2034.
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What are your initial thoughts on Mumbai's Development Plan (DP) for 2034?
The government is doing this to compete with other cities and to create more jobs. However, they need to be careful and put the corresponding infrastructure as well because if they are increasing the density, there has to be an investment to upgrade the city. Otherwise, we will end up with more people but there won't be those roads, etc., to cater to this increased density in population. It has happened at Lower Parel in the past and it was a nightmare, even without the occupation of the major residential blocks in the area. Today, it is worsened. So, this has happened in the past but I am hoping that this time, the money is invested back into infrastructure as well. I think this government is pragmatic, cognizant of these challenges and with the war room to push through the critical projects, the idea is to make Mumbai a world class city.
Is it going to be attractive for private land owners to come forward to give up their holdings for affordable housing?
I believe so. For example, if I own a plot, I need to give one-third for affordable housing and hand it over to the authority. For this, I will get transfer development rights (TDR). One-third needs to be kept for open spaces and basic amenities. On the remaining one-third, I am free to construct anything. However, the catch is one can't use the additional TDR on this plot. The maximum that can be used is a FSI of 1. The TDR can be used anywhere else in the city, even in the island city. As an owner, I could have done nothing with this land since this was in the NDZ. Hence, there is nothing to compare the scheme with since there was zero alternative use for this land. At least, now, there will be some benefit for me as the owner, whatever the government proposes to do with it. Additionally, I would say that in the past, we have seen that the best value people have been able to drive has been on the slum rehabilitation plots since they are within the city and were mostly close to the sea. For the government, it is good because they get one-third of each holding for constructing affordable housing which also dovetails with the national mission of affordable housing. The whole purpose of opening the NDZ was to provide land for this affordable segment. Moreover, one third has to be kept for open spaces in order to maintain the fine balance with the environment.
What about the developer's perspective?
In the island city, is it attractive for the developer to take the higher FSI, although the premium will have to be paid which is about 60% of the ready reckoner rate. In some parts, developers could make 20-40% margin and in some parts where the ready reckoner (RR) rate is lower, they may make more. Largely, RR is same as the market price but there are certain micro markets where RR is lower at about 80-85% of the market rate.
How would these lands be developed? Many owners may not have the development expertise?
Many would tie up with developers or they could give it back to the authority. There are also several ways of getting in a developer where you bring them on a development management. Godrej does this as well as Tata Housing and several others. You get them as a consultant and you pay them a fee to develop the property which is also branded by them. This is called development management (DM) and has begun to come in across various categories of development. In affordable, we haven't see this arrangement because the margins are not so huge to be able to pay the management fee. However, the way the market is consolidating today, DM is a very popular format.
How will this DP impact the Mumbai real estate market over the long-term?
This is music to the ears of the common man and because this affordable housing, unlike earlier, is not going to be be beyond the limits of the city but within city limits. Second, it will re-energise the island city on both the commercial and residential sides because commercial development was moving out to places like the Bandra Kurla Complex and beyond. You could not do any development because the FSI has been the same since 1991. Now, there will be a lot more new office space in the island city which will re-energise the entire city once again. A very major change is with respect to TDR. A provision has been made that 20% of TDR has to be purchased from slum TDR. Also, it has been permitted that TDR and FSI can be used inter-changably. Or example, let us say I have FSI of 1.33 which I am planning to scale till 3, and I find the TDR is a little costly as compared with the additional premium I need to pay the authority for the extra FSI that I need, I will take it from the authority. Technically, there are now two suppliers of FSI so the price will even out. This has been brought in to check hoarding of TDR which is a very good move.
- TradeBriefs Bureau -