Maharashtra govt may enter into JVs with pvt developers

Mumbai's skyline could wear a brand new look sooner than expected. The Maharashtra government, in a bid to speed up its urban redevelopment plan, has now proposed to enter into joint ventures with private developers. CNBC-TV18's Priyanka Ghosh traces the fine print of the joint venture that's being proposed by the Maharashtra government

The joint venture would certainly not bring any funding or capital on the table but it has a couple of incentives for the developers. The floor space index (FSI) or the developable area will move up from 2.5 to 4 - it means that on 10,000-square-feet plot, the developer can build 40,000 square feet.

Secondly, developers can also develop in a cluster. So, instead of re-developing individual buildings, they will be able to bring a whole one-acre cluster and develop it all together. More than 16,000 cessed buildings came in under the re-development scheme when the Supreme Court gave the nod last year in September, but not much has happened since then. The government, has therefore, now stepped into incentifying this space.

Re-development spaces are attracting a lot of attraction in the current market for smaller developers as the cost of acquisition is 30-50% lower than what they would need to spend to launch a new project. In the current environment, it makes a lot of economic sense for new players to enter into this market.

Amongst the larger players, Orbit Corp , DB Realty and Lok Housing are companies, which are likely to sign the JV with the Maharashtra government but importantly, the gestation period for these projects to take off is nearly five-seven years, so it won't impact pricing at the moment.

Also Read: Realty majors see relief but expect more adequate steps