Mumbai property set to get big boost, premium on FSI may be dropped

The Brihanmumbai Municipal Corporation (BMC) is proposing to bring out a policy paper to re-examine the premium that it charges for the release of additional floor space index (FSI) to the realty sector. This is expected to give a much-needed push to the realty sector and help the city rake in more revenue, through more projects.

A cut in premium may lead to the launch of more realty projects which are currently stuck due to the high cost of construction in Greater Mumbai.

As per ready-reckoner (RR) rates, the premium on fungible FSI is 60 per cent, 80 per cent and 100 per cent of stamp duty for residential, industrial and commercial development, respectively. Annually, Rs 8,000 crore is collected through premium from construction projects in the city. The city’s share is Rs 5,000 crore and the balance goes to the state government.

FSI is the ratio of total built-up area to the plot size.

BMC chief Ajoy Mehta told DNA, “We need to re-examine present premium rates. What should be the right level of premiums? The funds thus mobilised will be used to finance various infrastructure projects. However, we need to have the right price level and for that we will come out with a policy paper.’’

Developing firm Supreme Universal’s managing director Sunny Bijlani told DNA, “The need of the hour is to rationalise premium charges which are currently astronomical. Today the premiums account for 35 to 40 per cent of the project cost in Mumbai and since these premiums are linked to the ready reckoner rates they keep increasing every year. ‘’

Global property consultant Knight Frank executive director Gulam Zia said, “In a downmarket situations like now, the authorities may offer some discounts on these premiums to few sectors, like affordable housing and commercial offices, so as to make the system more robust and market friendly,’’ he opined.

Builders Association of India managing committee member Anand Gupta said a re-think on premium rates can bring relief to the sector and reduce project costs. “BMC can consider providing a deferred payment facility to developers,’’ he said.

By Sanjay Jog, DNA India