In a bid to boost Mumbai’s sluggish real estate market, the Maharashtra Government has announced a slew of measures to reduce project costs for developers, in the hopes that this cost reduction is passed on to homebuyers.
The first major move is to cut the premium on additional FSI to 40% of the Ready Reckoner Rate from the current level of 50%. FSI, or floor space index, is the ratio limiting the amount of construction on a plot of land. For example, if the FSI in an area is 3, and a developer has a plot of land spread over 5,000 square feet, the maximum saleable area of all the flats in that project is limited to 15,000 square feet. If builders want to build more than the area stipulated by the FSI limit, they need to buy additional FSI and pay a premium to the BMC, and the quantum of that premium has now been reduced.
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Similarly, premium on fungible FSI has also been cut to 35% for residential projects and 40% for commercial projects. Fungible FSI applies to additional construction like flower beds, balconies and terraces.
Another significant step is the withdrawal of development cess for redevelopment projects. As per the new Development Control Regulations or DCR, the government had proposed a cess on redeveloping slums and old buildings – this now stands removed for 2 years, which should encourage more developers to undertake these types of projects.
All of these moves have been industry demands for months now, as the Indian real estate market has been in a prolonged slump. BMC Chief Praveen Pardeshi had written to the state government only last month proposing that premiums on FSI be cut. The government’s decision to agree to this wishlist should not be seen as too surprising, but with state elections coming up in the next 2-3 months, the timing does not seem to be a coincidence.
First Published: Aug 20, 2019 3:34 PM IST
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