Cluster development policy is here, finally

Friday, 24 January 2014 - 9:29am IST | Place: Mumbai | Agency: DNA
Rise in RR, rollback of construction rates will make many projects unviable, say builders.

The state government has modified its cluster development policy by making it development friendly. But the significant rise in ready reckoner (RR) rate and recent rollback in construction rate will adversely affect the development calculations in a big way, say developers.

RR rate is the government rate for residential and commercial properties. The state revises the RR rate every year. For instance, for the incentive FSI against rehabilitation for an area of 2-4 hectares in Parel-Sewri, a developer has to give 65% share to Mhada this year against 60% area last year. Besides, in return developer will get 35% incentive share against 40% last year.

“One hand, the area to be handed over to Mhada has increased by 24% and. And, other hand, the developer incentive area has reduced by 10%. We are losing at both side. It will make the project unfeasible,” said prominent developer from South Mumbai.

He said, along with the RR rate, the construction rate should also have been kept same. “The state should not have roll backed the construction rate. It clearly shows there is co-ordination between two state departments –revenue and urban development department. To get more revenue, the state revenue department increased RR rate and construction rate in spite of slow property market,” he said.

When pressure mounted on state government to roll-back the RR rate and construction rate, then the revenue department only brought the construction rate to 2013 level. On the contrary, the construction rate has gone up drastically in past few years The input cost of construction that includes cement, steel, brick, sand and labour has gone up drastically. So the state government does not seem to have take into consideration the ground reality.

“This partial revision has disturbed the development calculation. Now, cluster development projects, which were development-friendly due the modified policy, will suddenly become unviable. It will stop the city’s development once again. Developers will not opt for the cluster development,” said another developer.

“I have pointed out the major loopholes and subsequently, even submitted suggestions to the state government. I hope the government will take cognisance of them by rescinding the RR rate as well. Otherwise, such good modification in cluster policy will remain on paper only,” he added.

The new rule
Under the new cluster development policy, the minimum area required to develop in south Mumbai is 4,000 sqm, while it is 10,000 sqm in the suburbs. It says the access development road should be at least 10 metres wide. Only cessed and buildings that are older than 30 years will be allowed for cluster development. In rehabilitation, the minimum carpet area is 300 sq ft. In case of new apartments with sizes exceeding 1,000 sq ft, the tenant or old flat owner will need to pay for the additional space as per the construction rate. Developers will be granted an FSI of 4 under the new policy. Builders will be required to create a corpus for maintenance of the new buildings.

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