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.
