While major real estate companies are all going gung ho about affordable housing, it is the redevelopment space that is leading the recovery in the sector. Transfer of development rights (TDR) prices in Mumbai has surged in excess of 50% in the past six months. CNBC-TV18’s Priyanka Ghosh reports.

TDR is available to developers who undertake redevelopment schemes. Suburban Mumbai has a floor space index (FSI) of 1.3. If developers don’t consume the whole FSI, it can either be transferred to another plot, north or sell it to a third party.

Prices of TDRs had crashed last year from a high of Rs 4,000 a square foot to Rs 850 a square foot.

But on the recovery cycle, TDR prices are charting the sharpest growth. On an average, Mumbai TDR prices have risen by 50% in the past six months.

Sarang Wadhawan, Managing Director of HDIL, said, “We have sold approximately 1.7 million square feet of TDR at Rs 2,000 per sq ft. TDR prices have now started moving up. From what we saw at Rs 950 a square feet is now anywhere in the region of Rs 2,400-2,600 and that has contributed significantly to our revenues.

HDIL forecasts that it will sell six million square feet of TDRs by FY10. That's far higher than the total area it plans to launch for its residential projects. What’s more, it also plans to cope with the recent it department's demand of Rs 350 crore of unaccounted income, through sale of TDRs. Rs 110 crore have already been booked.

DB Realty's revenue from TDR sales fell 58% from Rs 506 crore in FY08 to Rs 212 crore.

However, the company is hopeful it will be able to sell 17.88 million square feet of TDRs from current projects. DB Realty has already completed three TDR transactions in FY10.

TDR prices have a direct correlation with prices. Within the real estate sector, it is treated as a raw material purchase and therefore TDR prices too rise when property prices surge. However, in the past six months the property prices have not shot up in the same magnitude as TDR prices. In fact, in the current market, brokerage estimates suggest that TDR prices will be sluggish as property prices too are expected to hold stable.