Maharashtra: Recent regulatory developments and their impact

In order make the real estate sector more organised and bring-in the much needed transparency, several new policies and regulations saw the light of the day in Maharashtra. In this article, CommonFloor has analysed the top six regulations along with their impact on the realty sector.

20% LIG housing reservation

The dream of affordable housing will soon turn into reality in Maharashtra. With the vision to create slum-free state, the Maharashtra Government issued a notification for reserving 20 per cent of the area in every project for affordable housing.

In January 2012, the draft for Inclusive Housing Policy was released by the government, which made it compulsory for the developers to reserve 20 per cent of the area if a project is built over or above 2,000 sq. m. However, the final policy increased the project area to 4,000 sq. m. As of now, the modification is only applicable to cities with population over 10 lakh.

So, how will low income groups (LIG) and economically weaker sections (EWS) benefit? Well, they will be allotted residential units sized in the range of 300-500 sq. ft. This will be done through a lottery system by MHADA. For promoting affordable housing, developers will get an additional 20 per cent Floor Space Index (FSI) as an additional incentive.

However, every coin has two sides. As per the notification, if MHADA fails to purchase the affordable units within six months, the builder can sell them in open market. In an unorganised sector like real estate, there are very high chances of corruption in this clause. Developers along with officials of MHADA might intentionally delay the purchase of the flats, so that the former gets to sell the project at the market rate. This could also mean that an apartment of 300 sq. ft., for instance, in Bandra East will cost around Rs 24,500 per sq. ft.

Further, several developers are of the opinion that in a city like Mumbai, plots sized 1 acre are rarely available. Thus, there are chances that the policy might hardly be utilised for the city that desperately needs affordable housing.

Hiked reckoner rates

In January 2014, when Mumbai was already struggling with low sales volume and piling inventory, the state government hiked the reckoner rates.

First let’s understand what reckoner rates are. As per the definition, RR is an annual statement of property rates on the basis of which the market values of apartments for stamp duty and registration are calculated.

Thus, hiked reckoner rates means increased stamp duty, which in turn will increase the construction cost. And most likely, the developers will pass on this increased cost to the end-users.

There are total 737 zones in Greater Mumbai. As per the new regulations, in 711 zones the rates have been increased in the range of 10-20 per cent, and in the remaining 25 zones, the increase is over 20 per cent. Thus, the increased RR rates range between 10-40 per cent.

Compulsory Open Spaces

After the recent case by Municipal Corporation of Greater Mumbai (MCGM) versus Kohinoor CTNL Infrastructure Company Pvt Ltd, where the latter’s request of relaxation in open space was rejected, the Supreme Court has issued a notification for compulsory open space.

As per the Development Control Regulation (DCR) 23, open space of up to 15 per cent for plot sized 1,500-2,500 sq. m. and 20 per cent for plot sized 2,500-10,000 sq. m. is mandatory. And for plot sized above 10,000 sq. m., 25 per cent open space is mandatory.

Further, in plots sized 600 sq. m, 6m passage is also compulsory. It goes for the redevelopment projects as well. Also, the open space cannot be replicated on podium, which has been the common practice until now.

Though this move has been welcomed by buyers, developers are not very happy. This can have a negative impact on the realty market as developers will need to rework building designs, which is a tedious task especially for redevelopment projects.

SEAC circular for environmental clearance

The Government of Maharashtra’s Environment Department recently issued a circular which made the approvals by local planning authority for projects sized 20,000 sq. m. and above mandatory. As per the latest circular, only the project that are approved by the local authority will be eligible to approach the State Level Expert Appraisal Committees (SEACs) to obtain environmental clearances.

This move has been criticised by both developers as well as end-users. Getting environment clearance is already a tedious task, and now with mandatory approval from the local planning authority, it will only delay the project completion. This in turn will just increase the project cost.

Cluster redevelopment scheme for suburbs

After the collapse of Mumbra Building in April 2013 (illegal building in Thane), which took 78 lives, the decision was rolled out to replicate Mumbai’s cluster development model in the suburbs and Thane region.

As per the new cluster development policy, building that are older than 30 years and are legal can opt for this policy. Buildings that are less than 30-years old but are in a vulnerable condition will also come under the purview of this policy. Further, in South Mumbai where the minimum area required to develop is just 4,000 sq. m. as per the policy, it has been increased to 10,000 sq. m. for the suburbs. This move will promote redevelopment and encourage housing societies.

Further, developers will get an additional FSI of 4. The policy is good in intent as it will also ensure sound infrastructure development such as wider roads (10m), proper water and drainage facilities. Also, from 100 per cent, the owner’s consent has been reduced to 70 per cent. In the case of 70 per cent consent, government will acquire the land at the cost of the developer.

However, there is negative aspect to this policy. It puts a lot of responsibility on the land owners who usually do not live in the old, dilapidated buildings.

Extension of cut-off date for regularisation of slums

Maharashtra cabinet has also increased the cut-off date for regularisation of slums in Mumbai city and suburbs. As per the new ruling, the slums that have sprouted between the years 1995 to 2000 will also come under the purview of this move. This is expected to benefit about 15 lakh slum dwellers.