fsi

Mumbai In a major relief for builders, the state government will come out with an ordinance next week, empowering the BMC to grant a builder 33% extra floor space index (FSI) in the suburbs, and exempting a building’s lift and staircase areas from FSI, in exchange for a premium. Developers will be charged a premium based on a percentage of the ready reckoner rate.The government claims this money will be utilized to augment the city’s infrastructure.The ordinance will nullify a Bombay high court order last June, which said that the BMC had no authority under law to charge a premium from builders asking for such concessions. Mantralaya sources said the government would now amend the Mumbai Regional Town Planning Act (MRTP) and issue the ordinance to give it sufficient legal teeth. “The ordinance will be issued next week,’’ an official from the state urban development department told TOI.Ever since the court order, it is learnt that around 600 building files submitted to the municipal commissioner for clearance have been stuck. “The court quashed the BMC rule that made it mandatory for builders to pay a premium if they sought exemption from FSI for common areas in a building, like lifts and staircases. As a result, the civic chief has not cleared a single proposal since he is no longer empowered to collect this premium,’’ said an official. The BMC was earning roughly Rs 200 crore a year by charging this premium. Expect further dip in TDR rates State govt increased base FSI in suburbs from 1 to 1.33 in 2008, levying a premium for utilizing the addl 0.33 FSI. This adversely affected TDR market.A petition filed in the Bombay high court challenged the govt’s decision. It said a construction boom would severely burden civic infrastructure The HC ruled in June that the BMC was not authorized to charge such a premium. After the order, the BMC stopped clearing new building proposals. Govt will now amend MRTP act to nullify HC ruling, empowering BMC to give builders 33% extra FSI in suburbs and exempt lift and staircase areas from FSI, in return for a premium. Developers say TDR prices will fall even further ‘BMC is not authorized to levy premium’. In March 2008, the Maharashtra government increased the base FSI in the suburbs from 1 to 1.33 and levied a premium based on the ready reckoner rate for land to any developer who wants to utilize the additional 0.33 FSI. However, the maximum cap of FSI 2 for projects in the suburbs still remained. Under the Development Control Regulations, certain areas are exempted while calculating FSI, including staircases and lifts. However, the BMC did not have the legal authority to levy a fee for allowing builders to avail of these concessions. When the government itself offered extra 33% FSI to builders, the Transfer of Development Rights (TDR) market was badly affected and there were few takers for it. Subsequently, some public-spirited citizens filed a petition in the Bombay high court, challenging the government’s decision to grant this extra FSI. The petitioners contended that this would lead to a construction boom and put a crushing burden on the civic infrastructure. In June, the court held that the government was not empowered under the existing rules to levy a premium in exchange for higher FSI. “Several hundred construction projects have stalled after this order because builders felt their projects would not be financially viable if they started including staircases and lifts in the FSI,’’ said a real estate industry insider. If the staircase and lift areas are exempted from FSI, the builder has more leeway to expand the actual livable area (apartments) in the building. However, this move hurt the TDR lobby, which is supported by some powerful ruling party politicians. TDR, or transfer of development rights, is generated when the owner/developer surrenders his land to the government and agrees to rehouse slum dwellers or project-affected persons free of cost. In turn, he is issued a TDR certificate that gives him additional construction rights in the suburbs, but only to the north of the plot he has surrendered. Virtually all construction activity in the suburbs is today carried out with the aid of TDR. Now, with the government amending the MRTP Act and issuing an ordinance, builders told TOI that TDR prices, which have already dropped from Rs 3,000 a sq to to Rs 2,400 a sq ft, will fall further. Dependence on TDR will go down TDR Policy The TDR policy was launched in 1991. Owners whose plots were reserved for playgrounds, markets and gardens in the island city or meant for road widening could surrender their land to the BMC and get an equivalent space in the suburbs Additional FSI by buying TDR Currently, a developer setting up a building in the suburbs can use 1 FSI and load another FSI of 1 by buying TDR from the market. FSI refers to the buildable area of a plot. An FSI of 1 means that the area of construction should be equal to the area of the plot. Eg, a plot of 10,000 sq ft can only have a built-up area of only 10,000 sq ft. The FSI for the suburbs was 1, but the state increased it to 1.33 in 2008. This means that a plot of 10,000 sq ft can now have a built-up area of 13,300 sq ft—a 33% increase. With the new BMC ordinance coming in, builders’ dependence on TDR (in some parts of the suburbs) will reduce by 33%, and the state will be able to generate revenue by charging this levy and using it to augment infrastructure. Source:http://content.magicbricks.com/state-to-overrule-hc-on-extra-fsi?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+india-real-estate+%28Magicbricks+Property+Pulse%29 Filed under: Legal questions Tagged: FSI