After stifling Mumbai's Floor Space Index or FSI for long, the Maharashtra government has finally decided to mull uncapping it. however, before this comes to pass, in what could be an unpopular move, the government has more or less decided on a measure that could lead to an increase in realty prices.
The maximum city is on the cusp of mega changes as chief minister Devendra Fadnavis promises to change the face of it quite literally. As part of the development review, the Maharashta government is looking at an increase in FSI. The FSI essentially determines how tall a building can be.
Fadnavis says: "In the past, we have tried to manage urbanisation on the basis of FSI, but we could not. So that initiative has failed. So now what we have decided, we will analyse the urban challenges and while dealing with the urban challenges, we will use several instruments out of which one instrument would be FSI. And if needed, FSI can be increased."
The increase in FSI, if it happens, is unlikely to be implemented across Mumbai, and it will necessarily have to be supported by new laws on cluster development and redevelopment. According to experts, the development of infrastructure must go hand in hand with an increase in FSI. The second policy change is the government's decision to increase the price of premium FSI, or transferable development rights. Currently, the government sells premium FSI at 30 percent of the ready reckoner rates of 2008. Government sources told CNBC-TV18 that the charge is likely to rise above 50 percent, and the new price will be linked to the ready reckoner rates of 2015, which are significantly higher than those of 2008. The increase in rates is likely to be notified in the next couple of days.
Anuj Puri, chairman and head – India, Jones Lang Lasalle, says: “I think there will be one or two caveats to that. The first caveat will be that a lot of the private people have excess TDR that they control. Suddenly they are the people who are going to have a windfall gain, because they will sell it slightly below the government but a lot above what they were selling it. So there is going to be a big chunk that first the private guys are going to make and not necessarily the government is going to make it. Second is really on the real estate pricing, it will go up.”
So while the Maharashtra government's primary objective of raising the premium FSI is to fill up its coffers, the move may not have the desired effect and in fact, it may not make real estate players too happy, either unhappy.
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