Reacting to Maharashtra government's new norms to overhauled the development control regulations to redefine the floor-space-index (FSI), Pujit Aggarwal, managing director of Orbit Corporation said that despite the push in the cost, the move will help realtors to launch new projects sooner.
Bringing transparency into the realty sector, Maharashtra’s government's announced new norms amendments to the development control rules (DCR). The state government overhauled the development control regulations to redefine the floor-space-index (FSI).
Reacting to the move, Pujit Aggarwal, managing director of Orbit Corporation said that despite the push in the cost, the move will help realtors to launch new projects sooner.
"It really wouldn’t add that much pressure. On the other hand, the time period for sanctions which was about a year would reduce to three-six months. Hence, a lot of projects that were waiting in the pipeline can be launched," he explained.
Below is an edited transcript of Pujit Aggarwal's interview to CNBC-TV18. Also watch the accompanying video.
Q: What is your first reaction on the new norms of the fungible FSI and the 35% premium that you will have to pay? Overall does this push up cost for you?
A: We have been waiting for it for the last one year. A lot more projects will get announced and launched, so that is fantastic. Although it may add up to the cost a little bit the good news is that there would be a lot more transparency, the workings will be much better. So, typically what the government has announced is over and above whatever FSI was available there would be a 35% fungible FSI. You can increase your areas by 35% whether it’s in your rooms or by virtue of elevational features. For that you have to pay 60% of the ready reckoner rate as a premium to get this additional FSI. So, the government would benefit significantly whether it’s the state government or the municipality in terms of collecting revenues over here.
As far as projects are concerned and the costs are concerned, it really wouldn’t add that much pressure but to get additional FSI we were anyway paying when we were acquiring the projects in terms of these costs to our landlords or landowners. So, now it would get reduced over there and it would get added on to the taxes or the premiums that we would be paying to the BMC, hence, not a real net impact.
Q: Give us a sense of when you expect new projects to come up one? What be the impact of volumes and prices in the property market once they do start escalating?
A: Earlier, additional areas were available in a different form and the Municipal Commissioner had to use his discretionary powers. For the last one year the Municipal Commissioner said that I am not going to use my discretionary powers and I will change the law so that it could be passed at the lower level itself which is very good.
Now that this law is passed, it would amount to the plans being sanctioned at the lower level. So the time period to get your sanction which really was about a year would reduce to about three to six months depending on where the location, hence, a lot of projects which were waiting in the pipeline can be launched.
We were waiting for four or five launches within this calendar year. And hence, we will find a lot of launches across every segment, whether it is the affordable segment, the mid-segment or the high segment. You would find lot more launches over the year and this would help in easing the pressure today. There is a huge demand in real estate in Mumbai for residential segment. Of course a lot more options would be available at the buyer’s hands once these projects are launched.
Q: Would existing projects also have to be tweaked? According to the new ones because all these flower beds terraces will now have to be counted for. So, under construction projects will have to be tweaked?
A: Yes, we have not got the notification yet. It is only the Chief Minister’s press release that has given these broad guidelines. As far as these minor points regarding existing projects being convertible, we had had a word with the Chief Minister and he had said that he would consider it at the developer’s option that they could convert it into the present clause. However, the fine print is yet to be seen and we would be able to comment only after that.
Q: Have things changed at all on the demand front?
A: As far as demand is concerned the inherent demand remains but everybody is waiting for the right time to start buying it. So, basically the demand will start coming in once we start seeing the interest rates coming down, as far as home loans are concerned. No matter what whether a person buys or takes the home loan or not, but it indicates a positive sense and brings buyers back into the market. Hence, the trigger for buyers to come back in hoards would be interest rates loosening on the home loan rates.
Orbit Corp stock price
On July 25, 2014, Orbit Corporation closed at Rs 19.00, down Rs 0.95, or 4.76 percent. The 52-week high of the share was Rs 29.65 and the 52-week low was Rs 10.10.
The latest book value of the company is Rs 69.43 per share. At current value, the price-to-book value of the company was 0.27.
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