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TDR POLICY NEEDS TO BE REFORMED

The most sought after reformation in the present rules pertaining to the loading of TDR in redevelopment of properties in suburban Mumbai is an ultimate desire of the Developers. TDR is an important component for Developers redeveloping properties in suburban Mumbai because it doubles the built-up area over and above the usual Floor Space Index (FSI) permitted on the plot. But the Developers wanting to buy it from the market are now finding it increasingly unaffordable. FSI refers to the buildable area on a plot of land.

An FSI of 1 means the area of construction should be equal to the area of the plot. For example, a plot of 20,000 sq. ft. can only have a built-up area of 20,000 sq. ft and no more. FSI for Mumbai Suburbs is 1, but another 1 FSI can be loaded by buying TDR i.e. 33% of the plot area from BMC at concessional rate and the balance of 67% from the open market.

To further loosen the grip of private dealers/suppliers of TDR, it is recommended that the Government should increase the BMC limit of buying the TDR from 33% to 67%. The BMC's TDR rate which is fixed on the Ready Reckoner Rate of the target area which is currently available for between Rs. 1,500/- to Rs. 2,500/- a sq. ft and it is nearly 80% to over 100% cheaper than the market rate at which the Developers are buying the remaining TDR of 67% which is likely to touch Rs. 5,000/- in near future.

Let us first understand the concept of Transfer of Development Rights (TDR). Transfer of Development Rights i.e. TDR means making available/generating certain amount of additional built up area in lieu of the area relinquished or surrendered by the owner of the land so that he can use extra built up area either himself or transfer it for an agreed sum of money to another person in need of the extra built up area to be constructed for example in redevelopment projects to prompt the Developer’s saleable area.

Similarly, the TDR is also generated when land reserved for the public use like playground etc. is acquired by the BMC. Instead of paying cash compensation to the land owner, the BMC issues a TDR certificate which mentions the Floor Space Index (FSI) potential of the land acquired. This certificate is transferable and can be sold in the open market by the land owner.

The present rule is that the TDR should be utilised to the north direction of the property against which it was issued. The TDR concept since its inception was exclusively applicable only to the suburbs of Mumbai. Even TDR generated in the city could be used only in the suburbs. As a result, citizens were deprived of civic amenities due to lack of availability of reserved plots as the present TDR policy created imbalanced development in the suburbs.

As a result of this restriction over the past few years, thousands of square metres of TDR generated in downmarket areas have been used in posh localities in the western suburbs. This has resulted in heavy redevelopment activity in the western suburbs bringing in its trail a series of problems like traffic congestion, increase in level of pollution etc.

With a view to rectifying this imbalance and need of the hour, it is most recommended to reform the present TDR policy to rationalise the use of land. Removal of ban on use of TDR in the Island City and change in DC Rules has to be seriously considered by the Government. The revised TDR policy would help transform Mumbai into a better global centre.

It is significant to note that the ban on the use of TDR in the Island City was imposed because of the fear that excessive use of TDR in the Island City might result in high density of population and leave excessive load on the existing civic infrastructure of south and central Mumbai.

It is recommended that against the unit of 1.0 of plot potential, atleast 1.3 times the TDR should be awarded to the owners of reserved plots so as to make it an attractive return and hand over reserved plots to the BMC voluntarily. Once the TDR policy is revised, the large quantum of reserved plots shall be unlocked in the city. These plots can be used for various civic amenities such as gardens and play grounds. Owners will be able to get higher value for their plots against the sale of TDR since the compensation will be based on the actual market value.

In its existing policy until now, TDR could be utilized for redeveloping a plot situated to the north of the property from where it is generated. The Urban Development (UD) Department has now planned to remove this provision. Instead, it has put forth a plan to allow loading of TDR anywhere in the suburbs. Moreover, to ensure that Developers do not make unreasonable gains, it has planned for indexing of the TDR.

Under the new policy, the Ready Reckoner Rates areas where the TDR is generated and loaded will be taken into consideration. For example, if a TDR is generated from plots situated in rich areas like Bandra (West) of Suburb where the prevailing market rate is very high per sq. meters and assuming that this TDR is planned to be utilized on a plot meant for redevelopment in Malad (West) where the market rate is lower per sq. meters, the TDR so generated from the Bandra (West) will be twofold. Similarly, if the same TDR was generated from the plot in Malad (West) and was to be utilized on a plot meant for redevelopment in Bandra (West), the TDR will be halved.   

Under the present policy, the TDR value remains unchanged in such cases. It is also not possible to use the TDR generated in Malad (West) on a plot in Bandra (West), as Bandra (West) is situated southwards. The proposal also involves indexing the TDR generated from heritage sites. This is based on recommendations made by MHCC (Mumbai Heritage Conservation Committee) for extending the incentives to private owners in order to conserve heritage structures. The proposal awaits approval of the Government and it is expected to get an approval soon.

The another proposal is worth considering that in case of large-sized reserved plot of 2000 sq. meters and above, 50% area of the plot should be handed over to the BMC by the Owner/Developer of the plot free of cost and on remaining 50% the Owner/Developer should be allowed to develop it. He should be permitted to utilise the full potential of the plot. On the BMC acquired plot, the owner should get TDR. If the size of the plot is less than 2000 sq. meters, then 60% plot can be retained by the owner and 40% should be hand over to BMC at free of cost.

The DC Rules should be adequately amended to bring uniformity in the use of FSI. The nonsensical and irrational use of FSI has created the haphazard development in Mumbai city. For non-cessed building redevelopment, the FSI is restricted up to 1.33 only whereas the use of FSI is to the extent of 3.00 for redevelopment of cessed buildings. Besides, under DC Rule 33(9) which deals with cluster redevelopment, the Developer can avail of an FSI of only 4.00. In fact, the cluster redevelopment under DC Rule 33(9) should be more attractive in comparison with the DC Rule 33(7) for the redevelopment of cessed buildings.

The Developers are distressed due to sudden leap in TDR Rates from Rs 2,500/, a sq. ft to over Rs 4,000/- in the past two months. This has jeopardised all the proposed redevelopment projects in the suburbs. The unparalleled augment in price of TDR is believed to be attributed to few players of the realty industry who control around Rs 2,000 Crores business a yearly only in TDR deals, has forced many Developers to renegotiate the terms of redevelopment deals with housing societies or put them on the grasp.

Industry sources says that total TDR stock currently available is barely 10 lakhs sq. ft against the annual demand of about 70 lakhs sq. ft. Most of the stock is held by few Developers ruling the redevelopment market. These affluent Developers are some of the biggest slum Redevelopers in the city who generate TDR by building tenements for slum dwellers or project-affected persons free of cost. As compensation, they receive additional construction rights in the form of TDR. They can either use this TDR themselves to build anywhere north of the slum plot or sell it to another Developer at a cost.

It is feared that the rate of TDR may jump to Rs 5,000 a sq. ft in the next couple of month as no TDR is being generated from slum projects. Since the last three months, every week has seen an acknowledged increase in TDR prices. This has made redevelopment of housing societies unaffordable. If the TDR rates continue to shoot up and if the Government fails to intervene, many redevelopment projects will come to a grinding halt leaving the housing societies in dry and the prices of saleable areas shall be skyrocketing.

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