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Honey, they just shrunk our home

As the tourist season sets in, inquiries from expats and NRIs, who want to buy an apartment in the city, are also pouring in. While the real estate market is expected to do some brisk trade during the season, with the proposed amendment on free Floor Space Index (FSI), buyers too might be at the receiving end as developers plan to downsize their projects as well as increase the price of flats

It is the peak season for the tourism industry in India. With a huge number of tourists and NRIs coming to India between November and January, the real estate sector will too witness brisk trade. Many of them also prefer to buy apartments in the city during their stay. "Infact, queries have already started pouring in from NRIs and tourists who usually buy flats during this season," said Sunil Mantri, Chairman, Sunil Mantri Group. But the reality of a dream home in a city like Mumbai continues to elude many and this year buying a flat in Mumbai might get all the more difficult. The proposed amendment to the Development Control Rules (DCR), 1991 by the Municipal Commissioner, announced in the month of July, has invited the ire of the builders and the developers in Mumbai. This means your dream home, might get costlier. The Commissioner had suggested a 100 per cent premium on free Floor Space Index (FSI) that the corporation grants to builders for balcony, flowerbeds and other such spatial amenities.



This, say real estate experts, will lead to a substantial increase in real estate prices in Mumbai as well as result in smaller homes. Said Advocate Vinod Sampat, president, Cooperative Societies Welfare Association, "Prices might increase, but I am in favour of this amendment. Why should the builders get these amenities free of charge? They should be made to pay for these amenities, which until now they were getting free of cost."

Affordable
But Niranjan Hiranandani, well-known real estate developer however believes that such an amendment will affect the affordable housing sector. "It will add to the bill of customers who seek low cost housing," said Hiranandani. Sampat, on the other hand, believes that this amendment will not affect middle-class families as, "they are anyway moving out of Mumbai because most of them cannot afford a house in the city due to escalating real estate prices."

Mantri refutes this claim, "I feel middle class families will be deprived of many benefits wherein the developer was getting extra area in addition to the prevailing rules / regulation of FSI and was trying to share, say the terrace area, available for the project.  The developer would not mind selling these to the consumer at 1/3 or 1/2 cost.  Now the common man and the middle class will be either deprived of the facilities or will be charged more."

Prices
Many believe that any premium that the builders or the developers pay will eventually go out of the consumer's pocket. This many say, will also hamper upcoming projects in the city.  Said Mihir Dhruva, Chairman and Managing Director (CMD) of Habitat Group, "The government has taken steps to control the misuse of the DCR by developers. As far as middle-class families are concerned, one must know that developers are not making 1BHK flats between Churchgate and Borivali. But between VT and Mulund there is a demand for them. So this amendment can affect those areas." He added, "the cost of flats has gone up because of the demand and supply gap. Even the meaning of affordable sector has changed. The government authorities want to make Mumbai a world-class city, but they have forgotten that world class cities have no limit on FSI. This measure will definitely not help to bring down the prices in the real estate sector." Others believe that a 100 per cent premium, is bound to affect redevelopment schemes. "Builders until now are benefiting only on 50 per cent of tenant area, and if full premium is payable on 25 per cent area, which includes flower bed, balcony, etcetera, then two things will happen. The extra price will be eventually passed on to the sale component. Secondly, there will be some cost cutting in amenities, but there will be definitely a price burden," said Daxesh Kadakia, Managing Director (MD), Deekay Realtors. Highlighting the current real-estate scenario of Mumbai, Kadakia added, "The real-estate sector is in a state of dilemma now. During the three months between November and January, we get queries especially from outsiders, inquiring about real estate prices in the city. If the amendment comes into practice then, real estate price will automatically increase. But there is a catch here. If there are no buyers, the prices will again come down," added Kadakia.

Planning
Developers claim that, they now have to start planning their project differently wherein the common areas are also going to be charged to the prospective purchaser and size of home is going to become smaller. "The developer probably has to differentiate luxurious project and the standard project and areas will be provided accordingly. In fact, the entire staircase, passage areas, lift areas, in any project will also be shrunk.  The passages of new buildings are going to be smaller and there will be smaller common areas.  Balcony areas, terraces will not remain the same since they form part of the calculation of areas, which is going to be restricted to 25 percent.  This is going to shrink all the homes.  I believe, probably the concept of providing huge area and huge open spaces, is going to vanish and you will see typical compact houses which are going to come in the near future," said Mantri. Until now, most builders were charging buyers for these free
amenities.

Freebies
According to media reports, the civic body has come down strongly on builders and developers by stating that builders have no right to raise real estate prices. In spite of getting free amenities from the corporation, all this while, they have been selling flowerbeds and balconies to buyers at a price. While proposing modifications in the DCR, BMC Commissioner Subodh Kumar had mentioned, "We found that most of the space for balconies, flowerbeds and such was taken inside the home and converted into livable area, thus flouting the norms. The buyer already has been paying the builder for it in spite of the builder getting it for free. There has been a misuse of the free FSI. Now the buyer and builder can sell the flowerbed, balcony and other amenities and pay us the premium for the FSI."

But, many property experts have a different take on the regulation suggested by the corporation. Said Dr Sanjay Chaturvedi, real estate expert and executive editor at Accomodation Times, "If one goes by the old DCR, then builders are not supposed to charge for these amenities from customers. So far, builders and developers have violated the rules and the corporation by suggesting 100 per cent premium on free FSI is in a way supporting this act of wrongdoing. Hence, through this amendment, the builders can now legally demand money from customers on facilities, which were supposed to be free. Instead, the corporation should form a strict monitoring body to ensure that customers are not charged on such amenities."

Monitor
Customers too believe that a monitoring body should be in place, which can address such concerns. Suman Chandra, who bought a flat for Rs 30 lakh in Dombivili a week ago, had been looking for an apartment for the last three years. "I was looking for a place closer to Andheri (E), where I currently stay. But I couldn't afford one. Hence, I had to settle with a 1BHK in Domibivili," said Chandra, who works for a private company.
Chandra was aware of the fact that balcony, flowerbeds and other such spatial amenities are given free of cost to the builders. "I know that I was charged for all these amenities, but I agreed to pay for it. As customers, what other option do we have?" asked Chandra.

A word of caution from Sampat who says, "The practical implementation of the regulation will be a challenge. If profit margins of builders and developers suffer after this amendment comes into force, then the developer lobby will try to eradicate the amendment. The corporation should not succumb to such pressures then."
The bigger question is to what extent will these measures help to solve the city's real-estate problems? "Escalating prices of flats can be attributed to the paucity of land in Mumbai. Until this problem is addressed, these sort of measures may not be of much help. More land needs to be reclaimed from the sea, in order to solve the city's real estate problem," said Sampat.

25%
Increase Cost
If this amendment comes into force, there will be 25% increase in real estate prices

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