The real estate sector plays an important role in the growth of every state. However, the scenario in the country’s business capital of Mumbai has not been very encouraging. The percentage of housing stock in the city has declined in the last one year. With the approval system caught in a limbo, projects have not taken off as planned, causing severe delays and supply crunch, also putting pressure on prices. Developers feel over-regulation has slowed momentum in the industry.
Boman Irani, CMD, Rustomjee points out, “Four years ago, the Mumbai Metropolitan Region topped the housing supply index but today the region’s housing stock has dropped by one-third. NCR has moved ahead in the number of newly created homes (sq. ft.) in the last year standing at 22.7 million, followed by 14.8 million in Bangalore, 10.4 million in Pune and only 7.2 million in Mumbai and MMR.”
Talking about the importance of affordable housing, Vyomesh Shah, MD, Hubtown Ltd. shares, “Mumbai is a mega-metro with a huge population of over 20 million. In the absence of any mass low rental housing stock and demand far exceeding supply, the city is witnessing creation of more and more slums and other illegal structures. Government must swiftly act to create affordable housing and provide relief to the city and its people.”
Healthy economic conditions and easing of credit policies are important factors to help generate affordable housing in a metro such as Mumbai. High cost of land is also a factor that goes against the concept of affordable housing in Mumbai. Paras Gundecha, Chairman, Gundecha Builders and President, MCHI-CREDAI says, “Developers in Mumbai pay an exorbitant cost to procure land, making it inevitable for them to pass on these costs to consumers. The Government has to play a vital role in bringing down these costs. The government can also provide more FSI to builders in order to facilitate development of affordable housing projects. Furthermore, private and government flats of 269 square feet can be built as per the demand from consumers.”
Getting the necessary clearances in time has been cited as the key bottleneck. There is a backlog of almost 500 files waiting to get the environmental clearance. Mayur Shah, MD, Marathon Group and VP, MCHI-CREDAI says, “For clearances, one has to deal with multiple agencies, both in central and state government as well as the local municipal bodies that cause severe delays in the project execution. Almost 18-24 months are lost simply in securing the requisite permissions, which increases the project cost by 40%. Especially getting the environment clearance is a big hurdle; the committee has not been able to clear more than 65 proposals in the last one year so the backlog is huge. After buying land, the interest cost paid by the developer is 15-20% so land holding becomes a major cost.”
Speedy approvals are critical if we want to generate affordable housing in the city, believes Dharmesh Jain, CMD, Nirmal Lifestyle. He says, “The process that used to take only 30 days before has now run into 500 days. The demand for affordable housing is huge but we are not able to create enough supply in time. Only volumes will rationalise the prices.”
Mayur Shah adds, “Though the input cost is not under our control, the price escalation due to delays can be at least avoided. Infusing more supply in the market will ease pressure on prices and change the equation.”
Developers also shared that other states have moved far ahead when it comes to speedy approvals, especially in places like Gujarat and Bangalore, where getting approvals takes a maximum of just 60 days.
Giving high priority to affordable housing, Chief Minister Prithviraj Chavan recently met the city’s top developers at a meet organised by MCHICREDAI. The developers put forth a detailed presentation talking on several industry issues, also deliberating on the formation of a special committee for real estate. The meeting, which took place on May Day, saw the CM in full attendance with his various secretaries, which is a positive sign. The CM has assured the developers that solutions would be found in a time- bound manner.
Bandish Ajmera, Director, Ajmera Realty and Infra India Ltd. says, “The CM personally discussed the issues raised with senior bureaucrats from various government verticals to ensure that the whole
process is on fast track. MCHI has requested formation of a special committee which will deal with the day-to-day issues and maintain a follow-up with the government on the issues.”
Divulging the developer wish-list presented to the CM, Vyomesh Shah says, “The government has promised us action on a war-footing basis. However, creation of adequate supply of new homes is a key challenge. We have asked the government to reduce total approval time to a maximum of 60 days. Mumbai also has a huge scarcity of land, which can be tackled by increase in FSI. But the immediate requirement is to reduce approval time, which will kickstart the process of creating
more homes and bringing prices down. The government also needs to redefine the term affordable housing for metros and accordingly redesign the incentives on it.”
Increasing FSI was deliberated strongly at the meeting, which, according to developers, will prove crucial in creating affordable housing stock. Deepak Goradia, MD, Dosti Group explains, “The price relating to land cost in a city like Mumbai is very high. As far as the cost of construction component is concerned, the price will increase. If the Government does not increase the FSI then it will be very difficult to become more rational to make the housing affordable.”
Speedy approvals remained the critical concern. Gundecha says, “In the current scenario, a developer has to run from pillar to post to gain all the necessary approvals from the government. We have advocated the concept of “single window clearance” as this would cut down on the time taken to grant approvals to developers, thereby reducing the cost of the projects. If the government grants all the necessary approvals within 90 days, approximately 20% interest would come down on projects. Naturally, flats would be affordable then.”
Mumbai has changed since the 1960s; it has expanded and needs a fresh approach. We need a long-term sustainable policy. The CM has decided to look individually into problems of different municipal corporations. These are important components of the MMR and the CM has decided to take time out to meet respective municipal chiefs and look into micro issues. We do not expect overnight miracles but are happy that the gaovernment is sensitised to problems of the sector and is willing to help. This is the first step in the right direction.”
Source : TOI