More FSI in Mumbai to reduce prices; need infra plan: JLL

But Sarang Wadhawan, MD of Mumbai-based realtor HDIL, termed DP 2014-2034 as “pretty confusing” – such as it does not specify how areas closer to airport or railway stations can consume the full FSI, given there are height restrictions -- and added that in any case, its implementation would be about three years away.

The positive aspect of the DP, Wadhavan said, was that it proposes to merge construction permits needed from various departments into a single authority. This should lead to fewer delays for projects.

_PAGEBREAK_ 

Below is the transcript of the interview on CNBC-TV18.

Menaka: In very simple terms this increase in FSI means exactly what if you can explain to our viewers and is it a uniform increase across the city or various different parts of the city have different increases apportioned to them in this development plan?

Limaye: Increase in FSI means allowing higher density, that means higher built-up area. More people can find houses, more space for human beings. Taller buildings given that we can\\'t create land. The other way to create land is to de-reserve a few reservations which I am not really supporting. So, it means going more and more vertical in Mumbai\\'s case which is a physically locked city.

FSI by and large is uniformly laid so far but for exceptions of say MAHADA or SRA where you have higher FSIs, but now what the new development plan speaks about is a much scientific way of FSI distribution. So, higher density along transportation corridors, higher density near the activity magnet such as railway stations, office districts etc and relatively lower density in more ecologically sensitive areas or away from the transport corridors. As a concept this is beautiful concept. Only thing is it has to be viewed along with infrastructure plans and implementation.

Menaka: Just for an illustration purpose, the current FSI is 3 or 3.3 or something like that and some of the increased FSI goes all the way up to 8? Can you give us some idea of what the new FSI looks like in the proposal?

Limaye: The base FSI for the island city is 1.33 while for suburbs it is 1 and we have certain options available such as TDR, fungible FSI etc. So, in most cases up to 3 of FSI is utilised by multiple means in the current situation across the city. However we do not have location specific differential FSI but for few notified districts such as Bandra Kurla Complex.

What the new plan says that depending on the location and depending on the density envisaged you can have variable FSI going up to 8.

Menaka: So, 8 has been apportioned to which area of the city?

Limaye: 8 will be closer to the railways stations and activity magnets and the future office or high density districts that the government plans to do. Areas such as Dadar and around, areas Lower Parel and around which are already seeing a lot of real estate development, reuse of erstwhile industrial lands getting rebuilt into office and residential blocks, the central business districts, South Mumbai and emerging or proposed business districts such as Oshiwara and Kanjur Marg, these are the areas where higher FSI is proposed.

Menaka: You sound like you are in favour of what they are proposing? You think that this will add to the stock of constructed space in the city and therefore also in some ways add to the affordable housing available in the city?

Limaye: My acceptance to this is conditional. It is a good tool to re-densify the city provided that we do proper infrastructure planning. I do not think we have focused too much on that in the new plan. So, we need to have better clarity of how we are going to deal with the infrastructure that we will need to house or to cater to the additional population we want to house or want to invite for work purpose.

Menaka: It does seem that this is sort of a development plan that recognizes the need of the hour which is to go vertical. So, why is it that many of the comments that have come in from the builders fraternity are fairly negative or pessimistic about what this development plan does?

Wadhawan: The issue here is that it is pretty confusing if you look at this new development plan. Firstly it is going to come three years forward, it is not going to be implemented immediately. There is an objection/suggestion period which is about six months and then subsequently it has to be published by the government. So, it is three years that we have.

Also at the same time this plan has its own benefits. They are looking at the approval processes becoming simpler. The other reason that the developers are negative on this plan is, currently we have a base FSI and the TDR component but we do have additions to this, we have fungible FSI, we have deficiencies which are allowed in buildings. What this plan will do is remove all of those additions.

Menaka: Isn't that great? So many builders have abused the current FSI system and then hoped that it would get regularised through a variety of processes over time. So, this is great, it takes away all those grey areas and says if you want to build these are the areas in which you can build up to lets say 8 or 6 or 5.

Wadhawan: Agreed but at the same time if you look at the larger layout it is beneficial to the larger layouts but on the smaller plots there is going to be a problem because all the smaller plots will then have to be combined together and the layout proposed to be taken for with under this new development plan.

The problem is that all the smaller layouts or even if you look at the 8 FSI which is now being talked about so much next to the railway stations, Mumbai has its own intrinsic problems like the airport where there are height restrictions in place. Will we be able to consume the 8 FSI is the first question. The second part is next to the railway lines anyways you have to leave half the building height because of the railways. So, there is no way that any of these additions can be consumed on site itself. So, it is a very confusing plan. We will have to wait and watch how it actually goes ahead.

Sonia: For HDIL per se what could the positives be because you do a lot of SRA projects and in the development plan there has been no clarity or no mention of what the FSI would be for SRA projects. Currently I think you have up to 4 FSI. Is there any clarity on how much it could benefit a company like yours that is mostly into SRA?

Wadhawan: No as of now there is no clarity as far as the SRA schemes are concerned. I think the policy is still being drafted with the development plan. The SRA policy by itself is very clear. The confusing part is, if development plan by itself restricts the FSI on a particular location and the SRA allows it then what is going to happen. So, there are few factors here which we will have to keep in mind before we start going gung-ho on the entire development plan.

Menaka: SRA just to clarify to our viewers is slum rehabilitation in that sense.You agree with what Sarang is saying that it is confusing that it sort of takes away their ability to build for instance say near an airport or near a railway stations to the allocated FSI at least under this draft proposal?

A: Only to an extent because not the entire city is laid alongside the railway tracks, not the entire city comes in the...

Menaka: [Interrupts] Yes, I know but some of the high FSI areas like you said are those activity areas near the railway station etc. Sarang says are you going to be able to use 8 in those areas?

Limaye: So, I am not really negating that possibility to certain specific land parcels but there could be exceptions but we are speaking of city as a whole. City is a living organism; we cannot really plan based on the exceptional plots, keeping in mind we have to plan holistically for the majority of the plots and Sarang is right in one sense that one thing that we have always faced with is multiplicity of agencies and rules and responsibilities. This plan also should be clear about which is the Apex authority, who overrules who and just so that confusions and multidisciplinary agencies coming into picture, there we can avoid that kind of situation.

Sonia: What this would do to prices because logically prices should come down when there is higher supply because of higher FSI but Knight Frank was telling us earlier in the day that there will be a creation of artificial disbalance in supply. So certain pockets will have higher amount of supply and that could in effect lead to prices going up in the shorter term. What is your own sense of what this would do to prices?

Wadhawan: Upon implementation of the new DP, definitely there will be an increase in prices primarily because the approval processes, the agency, the BMC by itself is now contemplating or their development plan department is contemplating that the building proposal should be merged with the development plan.

Now if that happens, it is a one stop shop where we have to go for approvals. Now that will create an artificial shortage because we will not get approvals. Now that could be a one year period where prices could increase but substantially over the next few years if we go along, prices will reduce.

Menaka: Would you agree with that? Will prices sort of increase at least in the first phase as Sarang points out. Isn't the current stock in the city is a situation of oversupply?

Limaye: No, I don’t really think that prices will increase, prices should come down, eventually the market will decide whether a price is right for a particular location or not and like in Hyderabad where we have much relaxed FSI norms, virtually there are no limits and the market has decided (interrupted)

Menaka: But that FSI is going to cost builders more as opposed to the current circuitous route of getting more FSI or using other ways of adding on FSI. So, is it going to make therefore the purchase of a one bedroom house kitchen in parts of this city more expensive?

Limaye: No I don’t really think so; the net effect is going to be beneficial for the entire city in terms of pricing and supply. There could be short term hiccups but I don’t think that they are big enough to have no solutions for that. So, the prices should come down, they should not go up.

Menaka: So, in your assessment the are only negative or missing piece in this DP is the infrastructure to support this higher FSI. More roads, more flyovers, more public transport and all of that which you are hoping will get added on to explain how we are going to service so many more people coming in. More fire departments as well.

Limaye: Yes, the agencies should be empowered enough and competent enough to tackle the issues that high rises pose. Also simply adding road coverage is not the solution, we need to strengthen the public transport system.

One point which is often over looked is whenever there is a big city; a city is always dependent on a region because for example, Mumbai’s water comes from a 100 km away. So, the more and more people we are trying to house in the city, we need to have a regional plan in place as well. City plan is not good enough in isolation. We need to understand where we are going to draw that additional water from, how we are going to provide the additional power we need to supply.

Menaka: So, all those supporting issue need to come in?

Limaye: Yes

Sonia: HDIL will not benefit in the near term because there is no clarity on SRA and how much FSI SRA will get. As far as I understand even redevelopment has been excluded from the development plan, so there is no clarity on that as well. So, what else is left. It only makes sense in effect for industrial land parcels. So, which are the companies that will actually benefit from this development plan?

Limaye: If we leave redevelopment I think we are not wholistically speaking for the city because Mumbai practically drives on redevelopment. We do not have any virgin land anymore. However if you look at the industrial plots that are still in existence it is the eastern corridor, the LBS corridor right from Kurla to Mulund we still have few industries left.

Sonia: Which are the real estate companies that could benefit?

Limaye: I would put it that way that it tries to create a fair playing ground for everybody. It gives a chance with the higher FSI to enter the real estate business because you don’t necessarily need to have land bank provided that we have clarity on the redevelopment as well. So, people who have bought industrial lands obviously they have the edge because they can start immediately. Otherwise it actually balances out. It creates more opportunity for everybody.

Menaka: Couple of things that you would wait to here on before you declare this development plan to be either a complete failure or a complete success?

Wadhwan: I think the BMC actually deciding who is going to be the final authority on the approval process I think that is the most important criteria.

Menaka: Would you suggest that people buy houses now because you think prices will go up in three years if this is implemented?

Wadhawan: I think we always suggest that people should buy.