Property in Mumbai Close To Infrastructure Projects May Come With A High Price Tag

For those who thought of saving some commuting time by buying a home close to an infrastructure project in Mumbai, there is a likelihood that they would have to shell out more. This is because MMRDA has proposed a development fee of 10% on the ready-reckoner rates for property close to various infrastructure projects in the city. If passed, the cost of residential spaces in these areas is likely to shoot up.
Speaking about the proposed move, Ashwini Bhide, Jt. Metropolitan Commissioner, MMRDA, says, “MMRDA is not a local body. It does not levy any taxes. We have no source of income besides the rented property. We have decided on this move so that we have a continuous source of income. Besides, wherever a new infrastructure project comes up, the residential property price also goes up. Infrastructure projects add value to any residential project. The concept of development fee is same; only the methodology has changed.”
Good infrastructure is treated as a boon for any city but increase of taxes for providing it becomes a burden for end users. Though improved infrastructure is an urgent necessity in Mumbai, the proposed increase in ready-reckoner rates around the metro and mono rail may act as a dampener to the real estate market which is reeling under the burden of high interest rate, inflation and a slower economic growth, say experts.
Says Manoj John, Vice-President, Corporate Planning and Strategy, RNA Corp, “That all developers would charge higher rates from customers for properties near infrastructure projects is an assumption and cannot form the basis to charge development premium.”
In India, believe developers, the additional development fee is not justified. Says Vishal Jumani, Director, Supreme Universal, “In the West it is a standard practice to levy an additional development fee on the properties being impacted by any infrastructure projects. However, the decision of whether development should happen or not lies with people residing there. Also, if any infrastructure project gets a goahead, then the project is executed in a time-bound manner which results in manifold benefits for the owners in terms of better accessibility, enhanced land values, among others.”
He adds, “In India, the length of time taken to execute the projects practically suppresses the land value of the property for a long period of time. This causes a major loss in the area (by say, loss of rentals in a residential complex) which often becomes inaccessible during construction of the infrastructure project.”
Similarly, Diipesh Bhagtani, Executive Director, Jaycee Homes, says, “MMRDA must consider acquiring extra space for commercial auction instead of charging a development fee.”
A few developers also believe that if development premium is introduced, then certainly all properties should be sold at higher rates irrespective of any convenience benefit. Says John, “Infrastructure projects benefit a broad cross-section of populace who are not always residents and tenants of real estate properties in the vicinity. So these developments would be subsidising the project cost incurred to benefit others.”
According to Ashok Kumar, Principal and MD, Cresa Partners, globally and even locally it has been witnessed that property rates in close vicinity of road or rail network especially among the low and mid-segment market have jumped positively as it creates job opportunity and reduces travelling time. “However, this may not always seem true especially among the top end market as this segment of people consider privacy and quiet location with less vibration, noise and pollution,” he says.
Agrees Subhankar Mitra, Head – Strategic Consulting (West), Jones Lang LaSalle India, “Since there is no discreet and non-invasive manner in which such projects can be raised, there are high levels of noise and air pollution, as well.”
Considering the densely populated cities and increased urbanisation, infrastructure is critical for improved future growth, but the government must find a balance to offer the best infrastructure with value affordable packaging for the common man too.


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