Fiasco over Development Plan puts realty projects on standstill

The real estate sector in Mumbai, already reeling under falling sales and an inevitable cash crunch, has come to a complete naught following the fiasco over Mumbai's draft development plan (DP) for 2034. Scores of project developers, especially those who are involved in redevelopment projects, are stuck after the draft DP made drastic changes in their land use as well as floor-space-index (FSI) rules, while financiers are holding back their funds as uncertainty prevails.

For Amit Kulkarni, the changes in land use have come as a rude shock. The director of Mumbai-based Varasiddhi Infrastructure, which was all set to roll out a humongous redevelopment project in Chembur's Camp area, is now staring at uncertainty after the new draft DP converted an internal access road of 7m to a public road of 12.3 m, despite the fact that there are no land-locked areas without connectivity around the redevelopment project.

"We had received the corporation's approval for the redevelopment plan almost a year back, in July 2014. Ours is a 3.8-acre, 10 buildings project, involving 316 flats and 8 shops. The recreation ground had to be relocated, and we got the property registered. We were just about to receive the intimation of disapproval (IOD, which means an approval of civil plans), which is the final stage before the take-off," Kulkarni told dna.

Kulkarni as well as the society residents have now filed over 100 individual complaints. They are awaiting the reversal in the land use changes. Kulkarni's experience is not an isolated one.

Krishna Developers, another city-based realtor, has run into problems after a part of its 3-acre Marol property turned green zone. "Land use for several ongoing projects in city has now changed to green zones or heritage zones. In some cases, the developers had already signed land deals," said a foreign banker, who finances property developers across the country.

He said almost every mid-sized realty company is at the receiving end of the DP confusion. "The abrupt changes and the subsequent suspension of the draft DP have only helped existing big players, whose projects are either completed or nearing completion."

Apart from the changes in land use, the new draft DP has also brought in drastic changes in the FSI rules. FSI is the ratio of the permissible built-up area to the plot area. Though the FSI has been increased to 3.5 from the earlier 2.7, developers still prefer the earlier system since the way index is counted has undergone changes under new rules making the property expensive.

"Earlier, the allowed FSI used to be 2.7, which included lift area and passages, staircases. Now it has been increased to 3.5, but barring parking area, everything else including society office, gymnasium and electrical meter room, is counted in," said one developer.

In some places like Dadar and Andheri, the government is providing up to 8 FSI under Transit Oriented Development (TOD), but with riders. Areas that are closer to transit modes such as railway stations and metro stations have got FSI of over 5, while other areas closer to commercial business districts got the highest FSI of 6.5-8.

"Unfortunately, the new rules make the cost of purchase exorbitantly high. Our financiers are jittery about the new rules," said a leading developer.

All new projects, including that of Varasiddhi, will need to wait for the new draft DP to be in place before moving ahead. "The state government has ordered a revised draft within the next four months. But we are forced to wait because as per the rule, the stringent of the two – the earlier DP and the new draft DP, will prevail for all projects," says Kulkarni.

Niranjan Hiranandani, a real estate tycoon who co-founded Hiranandani Group, however, told dna that it is time for the new government to move on and create a grand master plan for Mumbai for next 20 years. "Forget the mistakes in draft DP. The new chief minister and new commissioner should work towards a master plan and create a global city that rivals the likes of Hong Kong, Singapore and Dubai," said Hiranandani.