Mumbai Property :New FSI rule yields 938cr for BMC

Mumbai: The city’s builders have enriched the Brihanmumbai Municipal Corporation (BMC) by nearly Rs 1,000 crore within a few months. Between April and December 2012, India’s richest civic body raked in Rs 938 crore as premium from developers seeking to utilize 35% extra floor space index (FSI) for their residential projects. The huge collection comes at a time when the property market is virtually stagnant.

The new policy formulated by the previous municipal commissioner, Subodh Kumar, and approved by the state government a year ago has finally reaped a huge dividend for the BMC. “We expect this amount to touch Rs 1,500 crore by the end of the financial year in March,” civic chief Sitaram Kunte told TOI.

The money accrued from builders will be ploughed back to augment Mumbai’s civic infrastructure—roads, sewage and water supply. The premium for what is termed as “fungible FSI” in the construction industry is all set to become the third largest money-spinner for the civic administration.

“After octroi and property tax, the premium on fungible FSI will be our major source of income this year,” said Kunte. The BMC hopes to collect Rs 7,000 crore as octroi and Rs 3,300 crore as property tax by the end of this financial year.

The first builder in Mumbai to pay the premium was Nayan Shah of Mayfair Housing. The Runwal Group is believed to have paid one of the highest premiums of around Rs 70 crore for its housing project in Mulund.

Kumar formulated the new policy to streamline the non-transparent and highly corrupt building approvals system. It curtails the municipal commissioner’s discretionary powers to grant building concessions to developers. Earlier, municipal commissioners liberally cleared projects with unusually large flower beds, voids, lily ponds and car decks. These areas are not included in the building’s FSI. These concessions allowed developers to build an additional 50% to 80% above the permitted built-up area.

The developer would sell these free spaces to buyers at market rate and then encourage them to illegally amalgamate these areas to make the apartment bigger.

Most building files will now be approved at the civic executive engineer’s level. Only in rare cases will they be put up before the commissioner.

THE MONEY-SPINNER

Between April and December 2012, the BMC raked in `938 crore as premium from developers seeking to utilize 35% extra floor space index (FSI) for their residential projects

The biggest chunk of premium has come from builders in the western suburbs between Bandra and Dahisar. As much as 522 crore or more than half the total collection in the past nine months came from this region alone

Developers in the eastern suburbs between Ghatkopar and Mulund paid about 333 crore during this period

The island city, where property prices are the highest in some enclaves, contributed 83 crore to the civic kitty

The maximum monthly collection ( 348 crore) was made in last December In all, 715 applications were made by builders to avail of fungible FSI in this period
Source : TOI

Mumbai lags in new hsg units on the block

Mumbai: The financial capital logged the third highest number of new housing units last year.

According to the latest audit of new housing units in the market, global property consultant Cushman and Wakefield states that Mumbai recorded a 72% rise in 2012 over the previous year.

Residential market across major cities in India witnessed a drop in total number of units launched by approximately 16% over the previous year, the report found. Approximately 1.62 lakh new units of residential properties were launched in eight major cities last year.

Of the total number of units launched, majority units were launched in the mid–range segment comprising approximately 83% of total launches.

With nearly 54,500 new units, the national capital region (NCR) constituted a majority (34%) of the total number of new units launched. Pune came in second with approximately 24,000 new tenements, followed by Mumbai (22,500 new units) and Chennai. Bangalore recorded a drop of 50% in the number of new launches over previous year.

According to Sanjay Dutt, executive managing director (south Asia), the increase in new homes is mainly attributed to clarity on Development Control Rules (DCR) that had held up new projects from taking off. “The new project launches were mainly concentrated in the suburban locations like Borivli, Kandivli, Thane and Mulund,” Dutt said.

“Out of the total units launched, 64% catered to mid-end segment. Juhu, Khar and Andheri witnessed new launches in the high-end segment,” he added. The mid-range segment saw a record 1,35,700 units being launched. Of the total mid-range housing units launched, the NCR saw a total of over 50,000 units mostly concentrated in Gurgaon and Noida. High–end and luxury segments saw a 24% and 23 % decline over the last year. Mumbai witnessed the highest number of luxury units offered (approximately 1,200 units) followed by Bangalore and Pune in 2012.

Source:TOI

Mumbai Builders to take AAI to court over runway

The Airport Authority of India’s (AAI) decision to allow the use of the secondary runway atJuhu airportwill affect about 153 projects that have received no-objection certificates (NOCs) since 2011, in the prime Juhu-Vile Parle realty belt. Property prices in the belt are roughly Rs30,000 a sq ft.

While construction has started on many projects,AAI will review, modify and cancel their NOCs depending on whether the buildings lie in the runway’s flight path. Developers will have to accordingly restrict the building’s height to up to seven floors, rather than the earlier up to 14 floors. A four-star hotel at Juhu Tara Road near Juhu beach and big redevelopment schemes like the proposed Khira Nagar housing society near the Milan subway may get affected.

AAI’s decision will affect projects from the Juhu airport to Western Express Highway in Vile Parle (E), Juhu beach on the west, the JVPD Scheme in the north and Milan subway in the south, and builders are contemplating legal intervention.

According to civil aviation norms, the height of a building near an airport should be 4% of its distance from the edge of the nearest runway. No buildings are allowed within 300 metres of a runway. By this calculation, if a building is a km from a runway, it can be roughly 30 metres tall, or up to seven floors. The relaxation in 2011 enabled them to increase the building height to 57 metres, or up to 14 floors.

“AAI should have thought about this before issuing NOCs. We are finding it difficult to operate when rules are changed abruptly and that too with retrospective effect,’’ said Vijay Thakkar, chairman of Dev Land Housing (DLH), whose recently launched DLH Square, a high-end residential building on 9th Gulmohar Cross road in JVPD Scheme will be affected by the AAI order.

Another developer, whose five residential projects are affected by AAI’s decision, said the authority was being ridiculous. “Considering the city’s development plan is known, AAI should have known that buildings would come up. They should have stipulated the buildings’ height. We would have drawn up our designs accordingly,’’ the developer said. He added, “Many projects are under construction,while few are completed. Will AAI revoke these NOCs? We will challenge the decision in court.’’

BUILDING HEIGHT REVIEW 2011 DECISIONS

A report was submitted by J M S Negi, exexecutive director, air traffic movement (ATM), on secondary runway at Juhu airport in March 2011

The report, accepted by Airports Authority of India (AAI), said that runway (16-34) was redundant for Juhu airport and a hindrance to flight operations at the main airport

Negi’s report said clearances could be giving to buildings seeking greater height around runway

Following the report, AAI decided to disallow operations on runway and convert it into a taxiway

The plan faced opposition from agencies operating at airport and pilots, who felt Juhu airport would be rendered non-operational if runway is closed

Opposing parties wrote to AAI stating earlier studies which made it clear that main runway at Juhu will have to be closed for operations whenever main airport uses secondary runway, as the two had converging paths. In such a situation, operations can continue at Juhu only if secondary runway at heliport is operational and well-maintained

IMPACT ON PROJECTS

No-objection certificates have been issued to 153 projects since 2011

All the projects are in prime Juhu-Vile Parle realty belt, where property prices are over Rs30,000 a sq ft

While construction has started on many projects, AAI will review, modify and cancel NOCs depending on whether buildings lie on runway’s flight path

Developers will have to restrict building height to up to seven floors, rather than up to the earlier 14 floors

A four-star hotel at Juhu Tara Road near Juhu beach, a high-end residential building DLH Square, and big redevelopment schemes like proposed Khira Nagar housing society near Milan subway may get affected

NEW DECISIONS

AAI will maintain secondary runway, it was decided at a meeting on Wednesday between AAI chairman, helicopter pilots and agencies operating from Juhu

AAI said it will review height sanctions given to buildings around Juhu since 2011

SECONDARY RUNWAY & FLIGHT PATH

Runway 16-34 is 722 metres long and 20 metres broad. The 16 end of the runway is close to Santa Cruz bus depot

Source : TOI

Projects near Juhu airport may get hit

In a development that could greatly effect real estate projects near the Juhu airport, the Airport Authority of India (AAI) has hinted that it will not be shutting down the airport’s secondary runway. The authorities also assured that the No Objection Certificates (NOC) that had been issued to nearly 120 projects in the recent past, many of which are high rise buildings, will be reviewed.

The development comes after continuous allegations of some elements in AAI making efforts to close the secondary runway, reportedly to favour builders and developers.

Sources keeping tabs on developments at the airport said that a meeting was held at Rajiv Gandhi Bhavan in Delhi, AAI’s corporate office, on Wednesday. It was called after the government-run Oil and Natural Gas Corporation (ONGC), which runs its offshore operation from Bombay High using Juhu airport as its helibase, pulled all possible strings to stop the secondary runway from being shut.

ONGC is the biggest operator from the airport and closure of the secondary runway would adversely affect its operations, government sources said, adding that the meeting was attended by AAI chairman VP Agarawal and Air Navigation Services member V Somasundaram, along with officials from ONGC, including its chief managing director Sudhir Vasudeva and few private operators.

“A presentation was made to the AAI officials, who later agreed with our point of contention, declaring that the secondary runway would not be shut,” said a source.

Another source confirmed that NOCs given to projects around the airport would be reviewed to ensure that they do not come in the way of flights landing or taking off.
shahakar.abidi@dnaindia.net

Realtors take new industrial policy with a pinch of salt

The state’s new industrial policy, which has thrown in a huge supply of land in the market, is making realtors jittery. They fear that land prices will drop and, could even throw them out of business.
For you, as a buyer, it means houses will be available at cheap rates.

The industrial policy announced last week has opened up 35,000 acres of land worth Rs3.08 lakh crore in various cities. The land, earlier meant for special economic zones, will now be used for housing and commercial projects. Most of it is near cities like Navi Mumbai, Pune, Nashik and Nagpur.

The country’s biggest body of developers, Credai-MCHI, has opposed the states industrial policy. President of Credai, Lalit Kumar Jain, said that instead of allowing agriculture land to be converted into non-agricultural, the government should give higher floor space index in the city to construct more houses.

Floor space index refers to the ratio of constructed carpet area as against the size of a plot. An index of 2 on a plot of 100sq mt means one can construct 200sq mt.

“Floor space index below 5 is disastrous. A low index will only destroy the city’s greenery,” said Jain. “Only a few influential corporate groups will reap benefits of this policy.”

In Navi Mumbai, Mukesh Ambani and his aide, Anand Jain, own over 3,500 acres meant for special economic zones. A realty expert said that if they throw in 3,500 acres to construct houses at low rates, it will cause tremors in the market. “Also in Pune where Bharat Forge owns 11,500 acres…” said the expert.

Navi Mumbai resident, advocate Mahendra Sandhansiv, welcomed the new policy. “Presently, the property market is beyond the common man’s reach. And groups of small developers jack up rates without justification,” said Sandhansiv.
An office bearer of the Nationalist Congress Party, which has criticised the policy, said that the government should give 15% of developed land to farmers whose land was acquired for economic zones.
sudhir_s@dnaindia.net

Why black money is making real estate a Ponzi scheme

The trend of rising property prices due to the circulation of black money is dangerous. The fact that every transactor from a crook to a salaried professional is being sucked into dealing with black money makes real estate even more dangerous. The only way this trend can be stopped is by the income tax authorities cracking down on black money in real estate.

Now the million dollar question is “Is there political will in allowing the IT department to crack down on real estate?” If the answer is no then everyone should listen to “Hotel California” by the Eagles before entering the real estate market.

The tax authorities will do well to scrutinise every real estate transaction taking place in the country. It is high time that the plug is pulled on the Ponzi scheme that is real estate in India.

The real estate Ponzi scheme is sucking in even normal working class professionals who otherwise in their lives would not have any contact with black money. The real estate Ponzi scheme is one primary reason why real estate prices are going up while rental yields are going down .

Real estate is the talk of the town and anyone and everyone in any place in India talks about rising real estate prices. However buying or selling real estate is a nightmare for everyone, especially salary earners.

The reason that real estate transactions are a nightmare for everyone is the cash component involved in the transactions. Obviously the first part of the nightmare starts with the dealing with the brokers, agents, builders and every other peripheral person involved in the transaction. One conversation with the real estate dealers is enough to put one off buying or selling property in India.

The trend in every part of the country is part of the real estate transaction takes place in cash. Hence a salaried professional wanting to buy a property has to cough up cash and that would mean several hundred trips to ATMs. The same applies to a person selling property, as the buyer who is invariably one who has sold a property and has got cash from sales wants to reinvest the cash.

The Indian government, to its credit, has made it more and more difficult to launder cash and that is forcing any transactor in real estate to deal more and more in real estate as there is no place to invest the black money that is prevalent in real estate dealings.

The black money floating in the real estate market is being circulated within the market and has no outlet. This black money is forcing property prices higher as one sale transaction results in demand for real estate as black money has to be deployed somewhere. This circulation of black money in a single market is driving prices higher and higher. However, at the same time, genuine demand for rentals, especially in commercial real estate, is low and that is driving down rental yields. In short the real estate market in India is flying high not on the back of demand and supply but on the back of black money having no other place to go.

The question is where will this all end? An investor wanting to book profits in real estate ends up with taking cash payment. The investor cannot exit the real estate market as he is holdings wads of cash that cannot be deployed elsewhere. Unlike markets such as equities, bonds and commodities where exit is easy and one can wait to enter, the real estate market has no exit. As the song Hotel California goes “ We are just prisoners here of our own device”. Once one enters the property market one can never leave it even if he or she wants to.

News Published Under:   Real Estate India

Realty rates in Navi Mumbai may see a dip

Allowing the corporate groups to use 40% of their total land for construction of houses and commercial shops will plummet the soaring property prices in the metropolitan region, particularly Navi Mumbai.

Under the new industrial policy, houses and shops can be built on about 35,000 acres of land acquired under Special Economic Zone (SEZ) since 2005.Industialist Mukesh Ambani and his close aide Anand Jain, own over 7,500 acres in the state and over 3,500 acres at Ulwe and Dronagiri in Navi Mumbai.

Pankaj Kapoor, managing director of Liases Foras, a real estate research firm, said today’s property rates are highly speculative and overrated in the city, particularly in Navi Mumbai. “I am sure after opening a huge chunk of the land for housing would ease the soaring property prices. But it will not happen in the near future,” he said.

Kapoor said that when the suburbs were extended in Mumbai and in New Delhi too Noida extended to occupy more area, people had hoped the property rates would go down. “But it has not happened. Nevertheless, Ambani and other corporate groups will exploit the new government policy for their own benefit rather than look at the common man’s welfare,” he added.

Ambani SEZ is near the proposed Navi Mumbai international airport site and Mumbai Transfer Harbour Link. “Ambani has already planned to develop the integrated township with malls, educational institutes in its acquired land under SEZ in Navi Mumbai. So, this is a strategic location for development,” said sources, requesting anonymity.

Real estate expert Atul Nemade said the land cost is a crucial factor to determine the project’s and flat’s cost. “Ambani and other corporate honchos acquired the land at a cheap rate from locals. And, the government has waived off several taxes and agriculture to non-agriculture conversion fee.”

Nemade said that at least 20% correction will happen in Navi Mumbai property market.
“Unlike other developers who buy the land in an open market and construct costly houses, the end product will be cheap,” he added.

Manohar Shroff, Maharashtra Chamber Housing Industry, Navi Mumbai, said the new industrial policy would not impact property rates. “Big corporate houses have got the holding capacity. So, why they will sell their product in cheap? They have not acquired land for charity. They will release the supply as per the demand in the market and make profit,” he said.

Agency: DNA

Log on to Check a Realty Project’s Status Before Booking

The government plans to fast-track approvals for real estate projects and put up all approval status online in a move that will help consumers check if a project is approved before booking a house.
A committee on streamlining approval procedures for real estate projects, headed by former Competition Commission of India chairman Dhanendra Kumar, will submit its report to the ministry of housing and urban poverty alleviation this week and it will form the basis of a policy guideline that all states will need to follow, a senior government official said.

“These guidelines would be one of the conditions for states to access central government funding from the housing ministry,” the person said on condition of anonymity.

The committee is likely to suggest bringing all state and central government clearances on two separate electronic platforms so that builders can get faster clearances without having to go to multiple authorities for individual approvals.

Uploading approval status on the internet will be a great relief to home buyers who till now have had to go by the developer’s word on all approvals.

Faster approvals will also help builders bring down home prices significantly because approval delays, which sometimes run into years, result in costs escalating by up to 40%. “Home prices can become cheaper by up to 40% if approvals come faster,” Lalit Kumar Jain, the national president of the Confederation of Real Estate Developers’ Associations of India and the managing director of Pune-based developer Kumar Urban Development, said.

Developers say large housing projects in the metros involve getting more than 50 approvals from various authorities in the central, state governments and local authorities including the environment ministry, National Monuments Authority, aviation ministry and several departments such as forest, water, pollution, fire, revenue and town planning.

A housing project with 100-150 apartments in Mumbai could take up to three-and-a-half years for getting all clearances, Jain said. The situation in Bengaluru, Chennai and Gurgaon is a trifle better, with time taken for approvals ranging from two to three years. In this period, most developers who have brought fresh land for the project end up paying interest, he added.

Many builders also allege that they have to pay bribes to officials in various government departments to get approvals, which cost time and money. This additional expense and interest costs are added on to the cost of homes that the eventual buyer pays when the project is launched.

The government official said the committee is expected to recommend that states create a compendium of all regulatory requirements for real estate projects, study them and delete those that seem unnecessary. This could mean the total number of authorities involved in the process could come down significantly, automatically reducing the time taken to start a housing project.

State Government scraps prime mill land ‘largesse’ to builder

Mumbai: The state government has cancelled an abnormally high floor space index (FSI) of 7.6 sanctioned by former chief minister Ashok Chavan for a hotel project on the defunct Hindoostan Mills property at Prabhadevi. The government’s decision is a major setback for the developer, Hubtown (formerly known as Ackruti), which purchased this six-acre land jointly with construction giant DLF
for Rs 350 crore in 2007. It had planned to build a 60-storey hotel.

Chief minister Prithviraj Chavan is believed to have overturned his predecessor’s controversial decision last month. “He was livid when told that the National Textiles Corporation (NTC) had valued its own Indu Mills property at a phenomenal Rs 6,000 crore based on the largesse given to Hindoostan Mills,’’ said sources.

The state government was at that time negotiating with NTC to take over the 13.5-acre Indu Mills for an Ambedkar memorial. “The CM was intrigued at the reckless valuation done by NTC. There was no way the state government could pay such a large amount to NTC. It was then that the urban development department decided to revoke the high FSI sanctioned by Ashok Chavan,’’ said a senior bureaucrat.

The developer is now left with a much-reduced FSI of 1.33, which will allow only 3.5 lakh sq ft of permissible built-up area compared to the 15 lakh sq ft it had envisaged earlier. FSI defines how much can be built on a plot. For instance, a 7.6 FSI would allow a developer to build 7,600 sq m on a 1,000 sq m plot. Other builders too sought higher FSI
Mumbai: Hubtown MD Vimal Shah was unavailable for comment, but sources said the developer will now set up a residential building on the Hindoostan Mill land. However, the plot falls under the coastal regulation zone 1 and is reserved only for industrial purposes.

Last year, TOI had reported that NRI tycoon C Sivasankaran had sold his 50% stake in Hindoostan Mills for almost Rs 450 crore. Hubtown and financial investor Red Fort Capital, who had the remaining stake, purchased Sivasankaran’s share. Sivasankaran had picked up DLF’s 50% stake in the property for Rs 310 crore in 2009.

Government sources said another reason why the Hindoostan Mills FSI had to be rejected was because other developers demanded similar concessions. “The owner of SoBo Central mall at Tardeo wanted more FSI to build a hotel, citing the Hindoostan Mills case,’’ said officials.

Officials said that some developers cunningly procured high FSI for hotels permitted under the 1967 development control rules (DCR), but simultaneously demanded building concessions allowed under the 1991 rules. Real estate sources said several developers procured much higher FSI under the garb of building a hotel and then slyly convert it into a “service apartment facility’’. “They then surreptitiously sell these apartments on long lease,’’ they said.

Meanwhile, the controversy over grant of hotel FSI has also stalled the redevelopment of the erstwhile Sea Rock Hotel at Bandra Bandstand. Last year, the 5.5 FSI project did not receive environmental clearance or approval under the Coastal Regulation Zone (CRZ) notification. The Maharashtra Coastal Zone Management Authority (MCZMA) raised queries about the project and refused to endorse it. The BMC too did not grant the project a commencement certificate. The Bombay high court too is hearing a PIL against the grant of such a high FSI to this project.

 The Sea Rock project was earlier sanctioned an FSI of 2.5. However, in 2009, the then chief minister Ashok Chavan permitted additional FSI of 3.

THE PLOT In mid-2007, the Hindoostan Spinning and Weaving Mills (above), located near Siddhivinayak temple at Prabhadevi, was sold by its owner, the Thackerseys, for Rs 350 crore to Ackruti Nirman (now renamed Hubtown) and DLF. In 2009, NRI entrepreneur Sivasankaran picked up DLF’s 50% stake in the property for Rs 310 crore. Last year, he sold his stake for Rs 450 crore to Hubtown and financial investor Red Fort Capital

Source:TOI

Bhendi Bazar awaits last green nod

Mumbai: The city’s largest project of cluster redevelopment of old and dilapidated buildings in south Mumbai is only one step from receiving the final environmental clearance before work can start on it.

Last week, the Bohra community’s Rs 1,500-crore redevelopment project, spread over 14 acres in Bhendi Bazar, was granted green clearance by the State Environment Appraisal Committee-2 (SEAC-2); the panel has been set up to specifically scrutinize and clear proposals for work in the Mumbai Metropolitan Region. Now, the project, which is being executed by the Saifee Burhani Upliftment Trust (SBUT), will approach the State Environment Impact Assessment Authority for the final green nod.

After the final environmental clearance was received, constructions would start in April, SBUT secretary Sheikh Abdeali Bhanpurawala, .

A brainchild of Syedna Mohammed Burhanuddin, spiritual leader of the one million-strong Dawoodi Bohra community, the project embodies the redevelopment of old and rundown houses in Bhendi Bazar, which stretches from the JJ flyover junction at Byculla to Minara Masjid on the south. Around 80% members of the Bohra community lives and works out of this area. The work comprises nine clusters, with buildings ranging from 15 to 62 floors. Four existing mosques will be retained. Of the 252 Mhada buildings, 152 have been scrutinized and certified by the authority. Sources at the trust said around 800 tenants had already been shifted to transit camps in Mazgaon and Sewri.

While granting the nod, the SEAC-2 directed the trust to draw up a traffic management plan as large number of trucks will ply the area for three years during the constructions; the trust has also been told to set up foot overbridges at important junctions and to use only treated waste water for the work. The project proponent has been asked by the SEAC-2 to ensure that all mitigation measures are implemented in “letter and spirit”.