Mumbai, like other principal metros like Delhi, Noida, Gurugram, Chennai, and Bengaluru has been seeing a consistent slowdown in construction activity. Post the passage of the RERA Act, there has been a tightening of regulations. In addition, the government charges on realty projects have been quite high and that had been pushing up real estate prices in Mumbai, which was already quite high. The latest measures announced by the Maharashtra Chief Minister, Devendra Fadvanis, are intended to give a boost to the realty sector in Maharashtra in general and Mumbai in particular.
The CM announced modifications pertain to significant cuts in premium that the builders have to pay to avail the additional floor space index (FSI). The FSI represents the ratio of the buildable area to the size of the plot where the building is located. Here are some of the highlights of what the CM has announced. Last year, the state government had introduced an additional cess over and above the premium on FSI that builders had to pay. That additional cess now stands scrapped and that will reduce the cost for builders.
The premium on all urban development projects on the FSI has been reduced from 50% to 40%. Additionally, the premiums payable for compensatory fungible FSI has also been lowered from 40% to 35%.
For fast tracking the redevelopment of MHADA owned colonies, the government has recommended a 50% reduction on all such premiums for lower-income groups and a 25% reduction for middle-income groups.
These concessions will be only valid for a period of 2 years post which they will be reviewed. But this surely provides a boost for builders to pass on the lower cost to buyers and get more customer traction. In the final analysis, this will also require buy-in from customers at a time when the consumer confidence is relatively low. That will be a major hitch.