1. Mumbai real estate: Upcoming Development Plan 2034 to augment growth

Mumbai real estate: Upcoming Development Plan 2034 to augment growth

The latest version is a redrawn plan after the critical citizen feedback received on the earlier draft plan last year.

By: | Published: August 27, 2016 4:04 PM
Real estate discount offers, homebuyers need to exercise caution Though in conservative measure, and treading cautiously after the criticism of the last version, the plan has laid out several measures to increase the development potential of Mumbai.

The latest version is a redrawn plan after the critical citizen feedback received on the earlier draft plan last year. Though in conservative measure, and treading cautiously after the criticism of the last version, the plan has laid out several measures to increase the development potential of Mumbai.

The Revised Draft Development Plan 2034 for Mumbai is a redrawn plan after critical citizen feedback on the earlier draft plan was received last year. While complaints about last year’s plan regarding the high FSI, few open spaces and factual land use errors become contentious issues in the earlier version and have been dealt with in the latest version, the biggest casualty has been the quintessential transit-oriented development (TOD) scheme, considering the interdependence between the city and the larger metropolitan region.
Mumbai, the country’s financial capital and its most populous city, is not geographically spread out like Delhi or Bengaluru. Accordingly, the draft development plan has tried to make use of the available avenues for the future growth of the city. Although in conservative measure and treading cautiously after the criticism of the last version, the plan has laid out several measures to increase the development potential of the city.

One way is by granting floor space index (FSI) on the gross developable plot area and not the net developable plot area. This leads to additional development potential. The plan has also proposed to increase Mumbai’s FSI from 1.33 to 2. While the FSI in the island city has been increased from 1.33 to 2, it remains the same in the suburbs. However, in our opinion, the increased FSI will not have a major impact on the real estate of the island city. We anticipate that almost 80% of the development will take place at a much higher FSI (up to 4) under schemes such as cluster redevelopment, cessed building redevelopment and slum rehabilitation, which implies that only one-fifth of the new projects are likely to undergo development with the enhanced FSI. Housing societies that are more than 30 years old and plan to undergo redevelopment will be able to avail of the increased FSI.

Another factor that has been implemented is the use of No Development Zone (NDZ) land for development. To this end, there are specific policies for developing NDZs such as eco-sensitive areas, water bodies, encroached land, forest land and private land. As per the current plan, the total area under NDZs is approximately 13,000 hectares. The NDZs are further divided into NDZs and natural areas. No development will be allowed in natural areas. Of the total land classified as NDZs, i.e. approximately 13,000 hectares, a little over 10,000 hectares are natural areas and the rest, NDZs (approximately 3,300 hectares). However, most of the land under NDZs has been encroached upon. So, even if landowners pledge their land for development, there is the distinct possibility that the share of land that they can develop may fall under the category of land that has already been encroached upon. This will not give landowners any incentive to pledge their land for development under this scheme. Offering assistance in reclaiming the land that has been encroached upon will increase the landowners’ confidence. Hence, the NDZ development policy will aid the new development to a limited extent.

Another measure to increase the city’s development potential has emerged on the commercial space front. An FSI of 5 has been proposed for the proposed Central Business Districts (CBD) areas, such as Govandi, Mankhurd, Mulund, Nahur and Dahisar. Up to 30% of this FSI can be used for residential development. These designated pockets in the city identified as CBD areas would benefit from this enhanced CBD development potential. The move has been aimed at utilising the land available at the octroi nakas. Exploitation of these land parcels, considered to be at strategic locations within the city, would augment the supply of office and retail property.
In another policy item, an additional FSI, based on the area of the plot, will be allowed for the development of plots for commercial purposes. Any plot in commercial, residential or industrial zones, measuring more than 3,000 sq m, can utilise the FSI of 5 if it is developed independently for commercial purposes, excluding shopping.

IT/ITeS sector has been the biggest consumer of office space in the country. As a result, IT/ITeS development projects will have an FSI of 5, wherein IT/ITeS and IT-supported financial services can use 80% of the FSI, with the remaining 20% to be used for commercial services. The incremental FSI can be bought at a premium, which is at 25% of the ready reckoner (RR) rate in the case of IT/ITeS, and 40% and 100% of the RR rate in the case of IT-supported financial services and commercial services, respectively.  sThe differential premiums have been drawn in a bid to encourage development in the IT/ITeS sector, where other cities,uch as Bengaluru and NCR, are taking the lead. Thus, this move will augment the supply of affordable office space within the Mumbai city limits.

The Author is Vice President – Research, Knight Frank India

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