Imagine having to pay around Rs 35 lakh for a flat, the likes of which cost over a crore now. Sounds too good to be true? The president of Confederation of Real Estate Developers Association of India (CREDAI) claims that if in Mumbai a developer is allowed a floor space index (FSI) of 13 — instead of the current 1.3 — property prices will come down dramatically. FSI is the buildable area on a plot of land.
Lalit Kumar Jain, president of CREDAI, met the heads of top national banks recently regarding the lack of funding in real estate. MiD DAY had reported on September 9 (‘Cheaper homes coming your way’) that as the sluggish economy has dried up loans that builders used to take from private lenders, home prices will inevitably come down in the near future. After the meeting, when asked whether Reserve Bank of India reducing Cash Reserve Ratio by 25 basis points would help in fiscal consolidation, Jain said, “This is not enough. There are two options to contain inflation: Either cut monetary supply or increase availability of products. The second alternative is the right one since it will generate employment and contribute to the growth of GDP.”
When asked whether realty rates would come down, Jain was prompt in replying that if FSI is increased to 13 then builders will sell flats that are currently worth Rs 20,000 per square foot at Rs 7,000 per square foot. “We have arrived at this figure after meticulous calculations. In other nations, FSI ranges from 15 to 45. This means a developer can build up to 15-45 times the total land area available,” said Jain.
Sunil Mantri, senior member of CREDAI and former president of MCHI, said, “Currently, FSI is 1.3. If we get an FSI of 13, it will mean we will construct more and our expenses will be reduced to 1/10th of what they are today. This will of course mean more supply and prices will definitely come down. Currently, FSI is low and stocks are insufficient compared to demand.”
To improve sales, builders urged bankers to reduce housing loan interest to about 7 per cent from the existing 10 per cent or more. They also demanded that banks fund up to 90 per cent of the total cost of a flat.
Castles in the air?
“It’s pretty difficult for any builder to get such vast FSI. The infrastructure situation has to be kept in mind. When we talk about international cities, the infrastructure there is good. Our city already has so much of traffic jams, water and drainage problems. Builders demanding such high FSI should come up with a feasibility report based on ground realities first,” said advocate Vinod Sampat, a housing expert.
Meanwhile, builders claim that such a move will not burden the infrastructure. Lalit Kumar Jain said, “Because of unavailability of homes in Mumbai, people are moving towards the suburbs and extended suburbs. Just one-third of what you are spending on creating new infrastructure in those remote areas can improve the existing infrastructure.”