Real estate developers in Mumbai have sought relaxation in premiums, or charges, payable to authorities for the construction of buildings in more than 100 delayed real estate projects, citing that they had already paid the premiums at 50 percent concessional rate in 2021.
The Confederation of Real Estate Developers' Associations of India (CREDAI)-Maharashtra Chamber of Housing Industry (MCHI), the apex body of developers in Mumbai, has submitted a representation to the Mumbai civic body, Brihanmumbai Municipal Corporation (BMC) for re-issuing lapsed Intimation of Development (IOD) certificates to the developers of such projects.
These IODs were issued during a premium waiver of 50 percent announced by the Maharashtra government in 2021 due to the Covid-19 pandemic.
However, after paying upfront 50 percent premiums in 2021, more than 100 developers could not start work in a one-year period due to which their IODs lapsed, and now they are not getting further approvals including the commencement certificate (CC).
This is because the BMC now wants these developers to pay the balance 50 percent premium applicable as on the current rate. This demand is contested by real estate developers, who call it unfair.
In its letter to the civic body, the CREDAI-MCHI has said it is necessary to re-issue IOD approvals where all the premiums are already paid upfront for fungible floor space index (FSI), staircase, lift passage premium, open space deficiency, etc.
"The demand for payment of balance 50 percent as per current rates in such cases by zonal offices is incorrect as it defeats the purpose of the scheme as the said premium is paid. As payment is done by a purchaser and the commodity is purchased at the prevailing rate by full compensation, it should be treated as purchased. We request to revalidate such IODs for one more year as it will help revive the real estate sector," said the CREDAI-MCHI letter.
Also read: Maharashtra cabinet clears proposal to cut govt levies on real estate by 50% until Dec 31, 2021
100-plus projects not able to revive
"We, as the chamber of real estate developers, have submitted a representation to the BMC, and the BMC, in return, has written to the state government for its nod on re-issuing the IODs. We are thankful to the BMC for taking up the issue considering it will be unfair to ask for a balance of 50 percent from developers who upfront paid 50 percent in 2021. Owing to this, 100-plus projects are not able to revive," Keval Valambhia, Chief Operating Officer of CREDAI-MCHI, told Moneycontrol.
According to developers, these projects got delayed and could not be constructed owing to reasons including non-compliance of conditions laid down by the BMC and non-cooperation by homeowners in the case of redevelopment of old buildings.
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.
What was the waiver?
The Maharashtra government had announced a waiver of 50 percent towards various premiums in 2021. However, this scheme was applicable for developers who were willing to pay the balance 50 percent premiums upfront.
Owing to this waiver, BMC was able to collect more than Rs 14,000 crore premiums in one year period of 2021-22 which is more than double of Rs 3,000 to Rs 5,000 crore being collected by it in a good year.
What is the BMC now doing?
The BMC after receiving representations from developers and other various stakeholders has written to the Maharashtra government's urban development department for its approval on continuing the 50 percent premium waiver for developers seeking re-issuance of IODs issued during 2021.
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