Home buyers need to worry on TDR present shortage

Will Home price Increase on TDR issues?
                        Or It’s a concern for TOP Project  Developers in Mumbai- Pune

               Government stepped in to  TDR policy and launched in 1991 to decongest cities. Plot owners who spare marked spaces like playgrounds, etc., or whose land was needed for road-widening, could surrender it and get an equal amount of space in the suburbs. In the suburbs, (transfer of development right ) TDR is generated when the developers/owners surrenders his land to the government and agrees to re-house 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. For instance, if a slum is redeveloped in a non-prime area, the builder can utilize TDR in an upmarket area. According to industry sources, developers have reaped a bounty ever since the concept of slum TDR was introduced by the state government in 1997. They have gone on a construction spree, especially in the congested areas.

         

              Through the constant up and downs the real estate in Maharashtra in now facing another obstruction  through TDR,  since the last few years. However, the segment received a major jolt due to the recent spike in transfer of development right (TDR), a move which have been received by the sub-urban developers with great caution and even disappointment.  Hear what MR. Ram Raheja, director and head-design architecture says,  on this “TDR is an important component for builders redeveloping suburban properties because it doubles the built-up area over and above the usual floor space index (FSI) permitted on the Plot. Builders wanting to buy it from the market are now finding it increasingly unaffordable”.

         Last few years, the price base of TDR was in the range of Rs 2,250-2,500 per sq ft but suddenly, it jumped to Rs 4,000 per sq ft. According to experts, there was effectively an increase every month. Look at the experts view on this Shubhankar Mitra, head-strategic consulting (west), Jones Lang LaSalle India, informs, “The sudden rise in the TDR price from Rs 2,000 to Rs 4,000 per sq ft has caught the market unawares, despite the fact that a rise was likely, as not much TDR generation mostly comes via slum redevelopment or road widening projects. Effectively, TDR prices have now doubled; such a steep rise was not expected.”

          For all good TDR policy was launched in 1991 to decongest cities. Owners having plots were used for spaces like playgrounds, government projects welfare for the public etc, whose land was needed for road-widening, could surrender it and get an equal amount of space in the suburbs. In the suburbs, TDR is generated when the developers/owners surrenders his land to the government and agrees to re-house 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. For instance, if a slum is redeveloped in a non-prime area, the builder can utilize TDR in an up market area. According to industry sources, developers have reaped a bounty ever since the concept of slum TDR was introduced by the state government in 1997. They have gone on a construction spree, especially in the congested areas.

         Executive director, Ravi Ahuja, Cushman & Wakefield India, concurs that “An increase in prices of TDR will have a negative impact on developers as it will reduce profit margins in projects. Hence, these increases would be passed on the buyers, putting additional pressure on them and creating a negative impact on demand.”

         The transparency in the process of acquisition can help in price and quality control. However, Ahuja is quick to point out, “TDR is traded in the open market and prices are arrived upon based on supply-demand dynamics. It would be very difficult to control prices in the open market.”

          Experts caution that if some measures are not taken immediately, a further hike is going to affect the market negatively. “The substantial price hike will result in a slowdown in trading of TDRs for some time as the current residential markets are subdued in many pockets in Maharashtra and developers are faced with liquidity issues. Hence, developers looking at launching new projects would be slow in acquiring TDRs at the new prices as they would have to be sure that the project costs and unit prices can absorb the increased costs,” concludes Ahuja.

              Un less the government find new developing pockets and start spending on it the TRD availability shrinks in the market and the existing holders demand steep price hike. From now may  be discounted property rates may vanish.

There the option may be only to stick with the allowed FSIs area wise.