With little
available land for ready development, the Maharashtra Housing & Area
Development Authority (Mhada) is scouting for partnerships with private
developers. Mhada has invited expression of interest (EoI) from realtors, if
they would be interested in sharing their land for development of houses for
economically weaker sections (EWS) and the lower income group (LIG).
According to
MHADA, the government agency has only 25 acres readily available for
development. Other land parcels are either encroached or the government of the
government has not completed the transfer procedure. The dearth is forcing it
to look at the public-private partnership (PPP) model.
Builders who
would join the state development authority will be rewarded in two ways. They
will get money for construction and would also be able to develop more houses
on the land parcel. This is possible since Mhada gets a floor space index (FSI,
the ratio of permissible build-up area to the size of the land lot) of 2.5.
Private developers, on the other hand, are allowed an FSI of only 1 (with some
exceptions, in parts of Mumbai). They need to buy transfer of development
rights (TDR), if they want to develop more than the permissible limit. A
developer generates a TDR by giving his land for public use such as widening of
a road or slum rehabilitation. He may sell such rights in the market to another
developer. Even after using TDR, developers may only construct up to an FSI of
only 2 in Mumbai.
Mhada’s
model will work like this. Assume a developer has a 10,000 sq mt (or 2.47
acres) plot. Legally, he may build only up to 10,000 sq mt of living space. If
Mhada comes into the picture, he gets to develop housing space of 25,000 sq mt.
Of this, Mhada will take between 6,250 sq mt and 10,000 sq mt, depending on the
scheme. The realtor will get the rest. Mhada will also pay the developer the
cost of construction. In this case, the builder gets 5,000-8,750 sq mt extra.
Mhada is also looking at making use of the subsidy the government provides if
40 per cent of the project is used for housing EWS and LIG. The subsidy is
between Rs 60,000 and Rs 1 lakh for each flat so built, depending on the house
size.
Developers are
worried that the rates at which Mhada will sell the flat can impact prices of
their flats. The prices can dampen around 10-15 per cent. But the extra FSI
should compensate it,” said one of the leading property developers.
But he also
cautioned that this project can be affected if builders are allowed extra FSI.
The earlier, Vilasrao Deshmukh government had raised FSI in the city’s suburbs
to 1.33 from 1. Before it could be implemented a public interest suit was filed
against this. If the court rules in favour of the government, builders will get
FSI up to 2.66 in the suburbs if they would use TDR.
Mohan
Deshmukh, president of the Maharashtra Chambers of Housing Industry (MCHI), a
builders’ association, feels this partnership is only feasible if the land is
outside Mumbai city’s municipal limits. Within the city limits, developers can
make more money if they construct and sell the house on their own, he said.
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