Premium for open space deficit hits redevelopment projects in Mumbai
Developers are unable to execute the projects because the open space deficiency premium charged by the BMC is not viable
Jun 25, 2013
Source : The Times of India


MUMBAI: Redevelopment of housing societies across the city could slow down after the civic administration recently decided to charge a 100% premium to developers who want norms for compulsory open spaces around their buildings relaxed. These concessions are generally sought in case of smaller plots where developers are hard-pressed to leave sufficient open spaces around the built-up area.

Builders accused the Brihanmumbai Municipal Corporation (BMC) of “arm-twisting” and said their projects have become “unviable”. Many developers had signed redevelopment agreements with cooperative housing societies and procured initial permissions to commence work. Now this sudden demand for an additional payment, running into a few crores for each project, has upset their calculations, they said.

A civic official said the administration had received such protest letters, from developers but is yet to decide on the issue. Other sources said builders are riled because it cuts into their profits. The BMC justified it, saying the levy will boost its revenue.

The open space premium comes at a time when the civic body raked in Rs 1,500 crore in the past year as premium from developers seeking to utilize 35% extra floor space index (FSI) for their residential projects. Known as Fungible FSI, it is already the third largest money-spinner for the civic administration after octroi and property tax. But an architect complained that the new demand for a premium on open space deficiency is turning out more expensive than what developers pay for Fungible FSI. “This is unacceptable,” said an architect with redevelopment projects in the suburbs.

Builders said the latest premium, levied on a percentage of the area’s ready reckoner rate, has forced them to rework or stall their projects. But some paid up under protest. Builder Nayan Shah said he recently paid up Rs 4 crore under protest for two of his projects in the eastern suburbs.

Property market sources said in the past few months, civic officials were issuing only oral instructions to architects to pay the full premium in exchange for the mandatory permission to commence work. But nothing is in writing. “The repercussions on the redevelopment market will be grave,” they said.

“Many projects are held up although plans are already approved. Developers are unable to execute the projects because the open space deficiency premium charged by the BMC is not viable. It has affected the overall viability of such projects,” said Manoj Daisaria, architect and past president of Practising Engineers Architects and Town Planners Association (Peata).

In a separate letter to the civic administration, Peata said, “such exorbitant demands are not affordable to developers…” The premium is levied only for housing society redevelopment projects and not on redevelopment of slums, cessed properties and Mhada colonies.

“There is no premium for open space deficiency for rehab buildings in slum projects while the sale component buildings are charged at 10%. However, there are different parameters for redevelopment of co-operative housing societies and other redevelopment in suburbs where the open space deficiency is charged at 100% including the rehab component,” said an architect, not wishing to be identified.

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