New TDR: good for traffic, not so good for property developers

New TDR: lower FSI may lower developer’s profit too !!


The city’s civic body effectively changed the Transfer of Development Rights (TDR) by getting clearance last week from chief minister Devendra Fadnavis on a new policy. According to the new TDR, builders and developers will have less floor space index (FSI) compared to what was previously allowed. Henceforth, the width of the road on which a plot stands would determine the FSI permissible. To illustrate: a 5000sq.mts. plot situated along a road of 9.15mts width in a Mumbai suburb, is currently allowed ‘FSI of 2’ (i.e. the builder/developer can construct a total built-up area of 10,000sq.mts. on the plot). New TDR rules would change that to 7,500sq.mts (FSI of 1.5). Likewise, the FSI for projects on roads 13.4m wide has been slashed from 2 to 1.75, which will directly reduce the total built-up area of such projects.

Developers are understandably concerned as it will affect their projects, especially redevelopment projects in Mumbai suburbs. A general estimate suggests there are over 500 buildings being considered for redevelopment. At least 4 out of 10 of Mumbai’s road are no wider than 13.4mts wide, some as narrow as 9.15mts wide. And 6 out of 10 redevelopment projects are on such narrow roads, especially in suburban areas like Khar, Santacruz and Bandra. “A significant number of these projects will be affected; many may simply become unviable” a reputed builder said.

A BMC official explained that the new policy would help to control the rampant construction of tall buildings that are built without a thought for the impact or cost to an already overburdened civic infrastructure. 

“But the new TDR also aims for balance” the official pointed out. “By the same criterion, redevelopment projects on wide roads will get additional FSI”, he said. E.g. projects on roads wider than 30mts will get FSI of 2.5 compared to the earlier FSI permit of 2. Areas that come under this category of wide roads include SV Road, JVLR, SCLR, LBS Marg and E. Moses Road.

The new rules may not go unopposed as TDR is a key factor in any builder’s business. A builder/developer/owner hopes to get the maximum TDR while surrendering their land to the government. As per TDR terms, they have to provide free-of-cost re-housing to slum-dwellers/persons affected by such projects. Upon surrendering the land, the builder/developer receives a TDR certificate that entitles him to additional construction rights for projects in the suburbs (specified as “to the north of surrendered plot”). When constructed, such projects yield built-up space of which 60% has to be given to existing occupants. It is the remaining 40% which is the source of profit for the builder-developer, as he can sell it at market rate. However, with the new change in TDR rules, this profitable portion will now be reduced by 25 to 30%, making a huge dent in their profits. In some cases it may even be less than the invested capital comprising total cost of construction plus buying TDR from the market.

The real estate sector has yet to voice its reaction to the TDR rules. Meanwhile, Maharashtra govt. is looking to make TDR applicable anywhere in the suburbs. Currently, it specifies construction rights as “to the north of the plot”. A premium has been suggested, which if paid, will make the TDR applicable anywhere in the suburb. A TDR notification may be announced in the week ahead asking the industry for its feedback on the new rules.