Mumbai Development Plan 2034: Focus on affordable housing

Around 3,000 ha of land resources have been amassed, by clubbing land that comes under the NDZ (land earmarked for future development), recreational and tourism development area and salt pan lands. These land reserves are located at prime locations in central Mumbai, the suburbs and the island city. The DP also proposed a permissible FSI of 4.00 for affordable housing projects, aimed at bringing down the percentage of land cost per residential unit. In our opinion, the DP norms are well aligned with the central government’s norms to give a push to affordable housing supply in the land-starved city like Mumbai.

See also: Mumbai’s revised DP proposes scrapping of No Development Zones

The recent infrastructure status granted to the affordable housing sector and the Credit-Linked Subsidy Scheme (CLSS), have already prompted interest among developers towards affordable housing. Recently, the Confederation of Real Estate Developers Associations of India (CREDAI) launched 375 affordable housing projects across India, of which 40 projects including 38,687 housing units are in Mumbai. However, most of these projects are located on the outskirts of the city, due to high land cost at prime locations, which makes affordable housing financially unviable for the stakeholders.

We expect that the opening of NDZ land for affordable housing, will encourage the public-private partnership (PPP) model, between developers and the government, to build affordable houses. As most of these land parcels are in prime locations, we may see affordable housing supply within city centres in the coming years.

Despite the government’s invitation to the private sector developers in the affordable housing scheme, there has not been much participation by them, as affordable housing has not proven to be a profitable venture in Mumbai.

Proposed FSI norms unlikely to change Mumbai’s skyline

An increase in FSI to allow vertical growth, has often been proposed by development professionals, to amplify the total buildable area on a plot of land. However, the Maharashtra DP has remained restrictive on the increase in FSI. The current DP proposes small amendments in the FSI norms.

TDR allowed in the island city – While the island city (Nariman Point, Malabar Hill, Wadala, Colaba, Mahim, Sion, Mazagaon, Parel and Worli) will continue to have basic FSI of 1.33, the applicability of TDR would bring the permissible FSI to 2.00. FSI of 2.00 in the suburbs and extended suburbs – Residential and commercial developments in the suburbs and extended suburbs like Andheri, Bandra, Santacruz, Ghatkopar, Borivali, Chembur, Vikhroli and Powai, would be able to use an FSI of 2.00. FSI of up to 4 for MHADA (Maharashtra Housing and Area Development Authority) redevelopment projects – One of the major highlights of the Draft DP, is the increase in FSI up to 4.00 for MHADA redevelopment projects, as opposed to the previous FSI of up to 3.00. Also, government construction projects will receive an FSI of up to 4.00.

In countries such as Singapore, Malaysia and the United States, the FSI in central locations can go up to 25. In our opinion, the rationale behind not increasing the FSI significantly, is the lack of adequate infrastructure in Mumbai. A sudden increase in FSI, may result in more infrastructure-related problems.

Thus, we believe that the proposed FSI norms are unlikely to bring major changes in the city’s skyline.

Cooperative housing society and MHADA redevelopment projects are seeing some traction in the island city and with the state government’s nod to approve pending projects within the next two years, we expect to witness momentum in the completion of redevelopment projects.

Over 300 projects in Mumbai have been proposed for redevelopment and some of the major projects include BDD chawls, Dharavi and Bhendi Bazaar. Although several developers have made forays into redevelopment projects, these remain surrounded by skepticism, as profit margins are not very high and these projects are often riddled with public protests, lengthy approvals and delayed completions. Having said that, the proposed increase in FSI up to 4.00, may give a push to redevelopment projects in the city.

Proposed FSI norms in Mumbai Development Plan 2034 Colliers view

The Union Budget 2017-18 has also highlighted the improvement of the infrastructure sector in India. Similarly, out of the total budget of Rs 70 billion, MMRDA has allocated almost 80% of the budget to infrastructure projects in and around the Mumbai Metropolitan Region (MMR). These include metro rail and mono rail projects, the Mumbai Trans-Harbour Link (MTHL), Wadala Truck Terminal, widening of the Santacruz-Chembur Link Road (SCLR), improvement of road network outside the MMR, development of water resources at the regional level and several other projects. The completion of these projects, is likely to relieve stress on the existing infrastructure and justify any foreseeable future increase in FSI. With several infrastructure projects in the pipeline, the FSI increase is likely to be in conjunction with the infrastructure development.

The government is encouraging participation of private players in infrastructure projects through several financial models, such as PPP, Build Operate Transfer (BOT) and Value Capture Financing (VCF). Developers in cities like Pune have taken part in the development of infrastructure projects situated along their residential and commercial developments, to enable timely completion and thus, enhance the sale factor of their projects by providing improved connectivity. Developers in Mumbai should also get on board and invest in infrastructure projects that will help boost their sales in the long term.

This DP would bring much-needed clarity on the development proposals in Mumbai and lead to increased participation from private developers in affordable housing and infrastructure projects. In addition, the central government is pushing all the major cities to adopt the Transit Oriented Development (TOD) policy that will also allow an FSI of 4.00 along the metro corridor. All the states and union territories are required to adopt the TOD policy in their master plans or development plans. Hence, an additional amendment regarding the TOD policy, will be incorporated in the DP as well. This would be a big boost for the MMR and the suburbs, as metro lines have been planned across most prime locations in Mumbai.

Vertical growth and city densification along the metro corridor, may result in higher land valuations along the corridor. However, we believe that the upcoming DP-DCR norms and inclusion of the new TOD policy, should also increase the plot potential through higher FSI and address the shortage of land availability.

By: Housing.com/news