Real estate developers buy TDR at throwaway price
Since sellers don’t perceive a market for TDR Real estate,developers are able to buy TDRs at throwaway sums. Developers buy certificates issued in B or C zones (the secondary and peripheral parts of the city), and utilize them in projects in the centre of the city (part of the A zone) where land valuations are steep. This allows them to go beyond the floor space stipulated for the area.
TDR Bangalore is a tradeable certificate issued by BBMP Bangalore to landowners in lieu of area surrendered by them for developing public amenities. It entitles the landowner to build a certain amount of floor space and this right is enshrined in a certificate (development right certificate) issued to the landowner. This certificate can be utilized by the holder or he can sell it. And the floor space can be created in any of the three zones (A, B & C) as defined by the Bangalore Development Authority (BDA)’s zoning regulations. Since sellers don’t perceive a market for these certificates, developers are able to buy TDRs at throwaway sums.
The TDR market has suddenly picked up pace. TDR Bangalore is a tradeable certificate issued by BBMP Bangalore to landowners in lieu of area surrendered by them for developing public amenities. For every 100 sqm (1,000 sqft) of area surrendered, the landowner is entitled to DRC worth 150 sqm (1,500 sqft). The ratio is 1:1.5 The DRC is valid for a period of 5 years. The same may be revalidated for five more years subject to payment of revalidation fees.
Suppose a developer buys a 1,000-sqft TDR from C-zone. That will cost him about Rs 5 lakh, given that C-zone TDRs are available for Rs 300-500 per sqft. As per BDA’s utilization guidelines, a developer using a C-zone TDR in an A-zone property can only deploy half of the floor space that he has bought. So the developer in this instance can use 500 sqft. Given that a sqft in the city centre costs around Rs 17,000, the developer can sell his 500 sqft for Rs 85 lakh. That’s a huge benefit, even after accounting for the developer’s construction cost. B-zone TDRs at Rs 1,000-2,000 per sqft also provide big benefits.
Many real estate brokers have emerged as TDR aggregators, who then sell the certificates to developers. There are over 60 TDR brokers in Bangalore. TDR brokers charge 2 per cent from landowners and 1 per cent from developers/buyers as brokerage fee. In most cases, broker’s commission varies from Rs 5-15 pr sqft.
“We have bought 5-6 lakh sqft of TDR that we plan to load on to our upcoming projects,” said Irfan Razack, CMD of Prestige Estates & Projects. The company is deploying TDRs in three commercial properties measuring over 1 lakh sqft that is expected to come up on Bellary Road, Palace Road and Marigowda Road.
Century Real Estate is buying 2.5 lakh sqft of TDR that will be deployed in the Four Seasons hotel project in Hebbal and a commercial project on Bellary Road. Sobha Developers holds 1 lakh sqft of TDR.
“The TDR market has suddenly picked up pace. Developers are able to see the benefits of using TDRs,” said B M Poonacha, head of land and special projects at real estate brokerage L J Hooker.
Courtesy: Times of India