Ambiguity in Pune’s affordable housing notification
Mar 20, 2014
Source : The Economic Times

 

PUNE: The rationale behind the Maharashtra government’s notification on affordable housing, is the question that everyone, within the built environment of real estate, is asking today. There is a general feeling among the developers that the Maharashtra government’s notification for the builders, developing a housing project on a 4,000 sq m (acre) plot, to reserve 20 per cent of the area for affordable housing, is not in sync with the market’s reality. The developers call it an unnecessary burden on them without any policy incentive.

Something that may lead to more negative sentiments in the market instead of addressing the issue of supply of EWS/LIC housing. They also demand clarity from this notification. The notification by the Maharashtra government says that the developers must keep 20 per cent area for affordable housing. The developer will receive 20 per cent extra floor space index (FSI) as an incentive for the 20 per cent reservation for public housing. In principle, the move is aimed at benefitting low-income groups (LIG) and economically weaker sections (EWS), who will be allotted the 323-538 sq ft tenements through a lottery by the MHADA. The scheme will create more housing stock at a time when MHADA does not have much land.

The notification says that when the developer intimates MHADA about granting of an occupation certificate (OC) by the planning or civic body to his newly built apartments, MHADA has to decide within six months, if it will purchase the 20 per cent tenements or allot them to those selected through a lottery system. In case of a plot, if MHADA declines to purchase it within six months, the developer can sell it in the open market, for which additional FSI will not be permissible. In case of tenements, the developer or the land owner has to sell plots of land to MHADA or allottees, selected by MHADA at construction rates, decided by the inspector-general of registration, Pune, under the annual statement of rates in the year of the scheme’s approval.

The developer has to first get an OC for affordable housing, only then will he get an OC for the other 80 per cent housing, which he can sell in the open market at market rates. The notification, however, leaves the developers with more questions than the government has the answers to. For instance, the clarification sought by the industry bodies questions whether the plot potential to work 20 per cent EWS/LIG tenements should be considered after deduction of 15 per cent RG (recreation ground) area required as per Reg No of 23 of DCR 1991. In the proposals for redevelopment of existing buildings, where or when the developer or society have come forward for redevelopment of the existing building with utilization of transfer of development rights (TDR) or additional floor space index, the potential of the plot which is already developed to its full potential, shall be considered after deduction of the existing built up area or otherwise.

Admitting confusion for the developers with this notification, Manju Yagnik, vice-chairperson, Nahar Group, questions that in case of proposals wherein, the developer has already proposed the tenements having a size of 50 sq mtrs in area to the tune of a minimum 20 per cent EWS/LIG, whether the provision would still be applicable over and above the already provided 20 per cent. “In case of the redevelopment on MHADA land, as per the Reg 33 (5) for the middle-income group, wherein, the tenement size up to 80 sq mtrs that is required for rehabilitation of existing tenants and the 60 per cent tenements of the MHADA layout are within EWS/LIG/MIG category, whether the said provision of 20 per cent would still be applicable,” asks Yagnik.

Hariprakash Pandey, vice-president, finance and investor relations, HDIL, agrees that there is a need for policy incentives for developers. Some points in the notification are of concern, as they could result in an increase in the construction costs for developers, as well as delay the approval process. In cases where the developer constructs and hands over LIG units to MHADA, he will be compensated as per the ready reckoner rates of Rs 1,600-1,750 per sq ft, which is lower than the actual construction cost of Rs 2,500-3,000 per sq ft, resulting in a loss for the developer.

“The occupancy certificate for the free sale portion will not be granted till the OC for the LIG unit is issued which could delay the construction of the project. Developers will now also need more time to amend the project designs as per the notification, which could further delay the projects by 4-6 months. As per the notification, MHADA has the option to buy the LIG flats within six months after the construction. Therefore, the developer has to fund the expenses from his own pocket, unlike the free-sale flats, which are built from the pre-booking amount collected at the time of booking the flats. The government should revise the notification, ensuring that MHADA buys the flats well in advance or during various stages of construction itself,” feels Pandey.

There are others who question why as per the notification, the built-up area of the EWS/LIG tenements, constructed under the said scheme, shall not be counted towards the FSI. They also question whether the area of such tenements would be accounted for the overall cap for utilization of TDR and the TDR component which needs to be reduced to that extent or whether 20 per cent EWS/LIG built up area, being free of FSI, shall be over and above the cap of 2 FSI, as stipulated in Reg No 32, table 14, amounting to an FSI of 2.2. It is also not clear whether the said notification would be applicable in the CRZ and NDZ areas.

Moreover, there is ambiguity whether the 20 per cent area to be handed over to MHADA is inclusive of the areas, which are exempted from the computation in FSI by charging a premium. Developers say they are also clueless that if it is not so, then whether the premium required to be paid for the open space deficiency will be exempted or not. In case of the composite building, wherein, 20 per cent tenements are to be handed over to MHADA and the sale area is proposed in a single building, whether the payment for all other charges should be recovered proportionately/exempted, if the MHADA’s component is more than 50 per cent and treated as a composite building.

In conclusion, Maharashtra government’s notification has created confusion among the developers and property analysts. There is a general feeling that the said notification is silent on the issues, which can arise after the grant of occupation. The policies for guidelines should be formulated for maintenance of common amenities, utilities and payment of the property tax. A section of analysts feel that only if the issues are properly addressed by the government, this notification will be a good incentive for providing adequate affodable housing to the masses. Failing this, it may lead to policy ambiguity and hence, defeat the purpose of affordable housing.

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