Shiv Sena-BJP ruled Municipal Corporation of Greater Mumbai (MCGM) last week came out with a revised draft development plan which recommended hike in the floor space index (FSI) from the present 1.33 to 2 and in some cases even up to 5. Experts see that recommendation if implemented might lead to a softening of prices for an unaffordable market like Mumbai by creation of more housing.
“The move comes comes at a time when the residential segment’s sales velocity is already tepid owing to affordability issues. Thus, it is likely to result in softening of prices in select markets within the city. However, it is pertinent to take into account the existing high levels of unsold inventory in the city which may deter developers from utilising the extra FSI immediately. Thus, the proposal to increase the FSI may have a limited upside for the market in the short to medium term given the mounting inventory and the recent revision in ready reckoner rates, ” Shveta Jain, managing director, residential services, Cushman & Wakefield said.
Ramesh Nair, COO – business & international Director, JLL India said believes that the move will bring in more housing stocks in the market. “Higher FSI in the revised development plan (DP) will imply more development, including more houses which hopefully should positively impact the goal of housing for all in Mumbai,” he said.
He further added proposing development on no developent zone (NDZ) lands and that are outside Coastal Regulation Zone(CRZ) limits with a necessary requirement of developing affordable housing and handing over to the government may also be a step in the direction of reducing the shortage of such housing in Mumbai.
MCGM also proposed a higher FSI of 4 for affordable housing and township projects. According to Jain, “the prpoposed FSI hike is expected to result in creation of more housing stock by developers through efficient utilisation of scare land in the city.”
There are some realty experts who see the move as developer centric and feel that it may lead to haphazard development within the city. Narasimha Jayakumar, chief business officer, 99acres, said “Although the new FSI rules masquerade as a benefit for consumers in terms of higher availability of affordable housing options, the move seems to be developer-centric. This might lead to haphazard development within the city, which is already struggling on account of high population density. ”
Mumbai housing prices are already higher and unafforable for a huge segment. A recent data released from Knight Frank for eight major cities — Mumbai, Delhi-NCR, Bengaluru, Pune, Chennai, Hyderabad, Kolkata and Ahmedabad — shows that all the eight cities have seen the average residential price going up by 3 to 15 per cent between 2013 and 2015. While average prices in Bengaluru went up 15 per cent from Rs 4,158 per sq ft (psf) in 2013 to Rs 4,780 psf in 2015, average prices in Mumbai rose by 12.8 per cent in the same period from Rs 7,085 psf to Rs 7,994 psf. While the Delhi NCR market witnessed a price increase of 7.4 per cent, Kolkata and Chennai remained the most stable as prices went up by 3.1 per cent and 5.6 per cent, respectively.