Mumbai cluster development policy: Maharashtra govt announces 50% premium waiver for 1 year

Cluster development policy is where more than one plots or buildings are taken for redevelopment together by forming a cluster.

The Maharashtra government on May 30 announced a 50 percent premium waiver payable by real estate developers for its cluster development policy in Mumbai for a period of one year, a move which is expected to aid redevelopment of old buildings in the city.

Under this, redevelopment of old and dilapidated buildings in the city of Mumbai will get boost, Maharashtra Chief Minister Eknath Shinde told reporters during the announcement after the state cabinet meeting.

Shinde said, "In Mumbai, for cluster development we have decided to give a push. This will ensure redevelopment of hundreds of old and dilapidated buildings that are stuck. For this, we have decided to give 50 percent waiver in premium for redevelopment of such buildings, and lakhs of citizens will get benefit due to this."

Speaking to reporters after the cabinet meeting, Deputy Chief Minister and Housing Minister Devendra Fadnavis said, "We have introduced this one- year-long scheme to push cluster redevelopment in the city, and this is also one way of generating stock of more affordable housing in the city. For now, we have not kept the scheme for unlimited time, and it will be valid for only those proposals that come in the period of one year."

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What is cluster development?

Cluster development policy is where more than one plots or buildings are taken for redevelopment together by forming a cluster. Under this, the state government provides various exemptions including additional floor space index (FSI) to developers, considering it takes care of the old buildings in the city of Mumbai. One such exemption now will be 50 percent premium waiver. In Mumbai, there are close to 300 extremely dangerous buildings and the figure of dilapidated buildings run in thousands.

What is a premium?

Premium refers to multiple charges levied by the authority with respect to approvals for initiating, progressing, and completing the area or additional area in a project. These include the fungible premium, premium paid for FSI (floor space index), open space deficiency premium, premium paid for more ground covered for construction, lobbies, lift wells, staircase premium, etc.

In Mumbai, there are more than 20 types of premiums that a developer ends up paying to the authorities, and around 20 to 30 percent of the project cost is towards these premiums, said a developer who did not wish to be named.

The Maharashtra government had in January 2021, announced a waiver of 50 percent towards various premiums for all types of projects. However, this would mean that it will be applicable for developers who were willing to pay the balance 50 percent premiums upfront.

Meanwhile, reacting on the same, a Mumbai-based developer said, "We had demanded that the state government should bring down premiums by 50 percent across all type of real estate projects. However, over here only cluster development projects are being considered. This will ensure that only the big 25 to 30 real estate developers in the city will benefit out of this. There is nothing for small developers or mid sized developers in this scheme."