BMC rakes in Rs 1500 crore from premium of FSI
The BMC’s new policy was also formulated to streamline the non-transparent and highly corrupt building approvals system
Jul 09, 2013
Source : The Times of India


MUMBAI: The Brihanmumbai Municipal Corporation (BMC) has earned a major windfall, thanks to Mumbai’s builders. The BMC earned Rs 1,500 crore in little over a year by charging builders a premium for utilizing compensatory floor space index (FSI). FSI defines how much can be built on a plot.

The premium, commonly known as fungible FSI in the construction industry, has become a major money spinner for the corporation. Within a year, it has become the third highest revenue earner after octroi (Rs 7,000 crore) and property tax (Rs 3,200 crore). The civic body will utilize this amount to augment Mumbai’s infrastructure.

Amended development control rules now allow developers 35% extra area to build residential buildings and 20% additional area for commercial projects in lieu of a hefty premium to be paid to the BMCmunicipal body. These extra areas were earlier misused by many unscrupulous builders, who surreptitiously sold them to buyers as part of the apartment. In 2011, the then civic chief Subodh Kumar got on to this manipulation, framed a new policy to ensure builders pay a premium for utilizing these spaces.

Figures procured from the BMC show that builders between Bandra and Andheri (H & K wards)-this belt commands the highest residential property prices in the suburbs-collectively paid Rs 387 crore till last month. The Malad-Kandivli-Borivli zone contributed Rs 360 crore since last year. Developers in the eastern suburbs from Sion to Mulund paid a total premium of Rs 462 crore while those in the island city paid Rs 140 crore. Builders redeveloping slums paid another another Rs 149 crore.

Civic officials said the premium collection is phenomenal, but feared this may not always be the case because of the slump in the property market. “Those who paid the premium are the builders whose projects are on-going. The market is now facing a down-turn and many developers may not opt for the extra FSI immediately,” an official said.

The BMC’s new policy was also formulated to streamline the non-transparent and highly corrupt building approvals system. It curtails the municipal commissioner’s discretionary powers to grant building concessions to developers. Earlier, municipal commissioners liberally cleared projects with unusually large flower beds, voids, lily ponds and car decks. These areas are not included in the building’s FSI. These concessions allowed developers to build an additional 50% to 80% above the permitted built-up area. They would sell these free spaces to buyers at market rate and then encourage them to illegally amalgamate these areas to make the apartment bigger.

But, among the worst to be hit by the new policy were small-time builders operating in the Bandra-Khar-Juhu belt. Over the past decade. these builder had been making a huge killing by manipulating building concessions granted to them by successive municipal commissioners.

Although the building approvals system has been streamlined-a civic circular issued last year said approval should come through within 60 days-builders complain they are still being harassed by ward level civic staff. “Corruption is still prevalent. Earlier, they used to demand a fixed rate per sq ft. Now, they ask for a lump sum amount,” said a developer.

India’s richest civic body has earned a major financial windfall, thanks to Mumbai’s builders. The Brihanmumbai Municipal Corporation earned Rs 1,500 crore in little over a year by charging builders a premium for utilising compensatory floor space index (FSI). FSI defines how much can be built on a plot.

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