Mhada revises Mumbai redevelopment policy

The Maharashtra Housing and Area Development Authority (Mhada) provides affordable and sustainable housing units to people of the state. This is done by way of a transparent lottery system hosted by the various Mhada Boards present across the state.

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Each year, before the onset of the monsoons, the Mhada comes up with a list of dangerous buildings. Residents of these cess and dilapidated buildings are given notices to evacuate the property and move as tenants in other projects. Housing societies or developers are called to redevelop these buildings but see faded responses because of projects being financially unviable. The Mhada has now revised its 2007 redevelopment policy, making MHADA’s redevelopment projects more lucrative. Redevelopment is demolition of an existing building and constructing a new one on its place. Read to know more in this guide.

What is redevelopment?

Redevelopment is demolition of an existing building and constructing a new one on its place. While the original residents of the property will get bigger houses — for example, a person with a 2 BHK may get a 3 or 3.5 BHK, the developer who is constructing will get a set number of apartments that he can sell in the open market. A third beneficiary to this arrangement is the state government which earns revenue by selling additional FSI to the developer/ housing society.

Revisions made to Mhada redevelopment policy 2007

Redevelopment of housing societies under Mhada is governed under Regulation 33(5) of the Development Control and Promotion Regulations (DCPR) 2034. In these projects, developers or housing societies, whoever take up redevelopment have to pay a premium on the additional built-up area that is available once the existing built-up area is reduced from the total available built-up area.

Premium charges revised

Revisions have been made regarding premium charges for commercial floor space in projects carried out under Regulation 33(5) of the Development Control and Promotion Regulations (DCPR) 2034. Previously, developers had to pay 1.5 times the residential rate for commercial space. Developers believed this made the project financially unviable. Media reports mention that the premium was between 60% and 140% of the residential rate and this resulted in inflated property costs. Since money had to also be paid at the onset, the redevelopment project would get delayed. With the revision in the Mhada redevelopment policy, now, the premium for allotting built-up area for commercial spaces will be calculated on the basis of land rates, market values and intended usage.

Premium allowed to be paid in 4 installments

Under the revised policy, in sync with the BMC’s policy for payment of charges and premiums for building permissions, the Mhada has granted housing societies and developers to pay the premium for the additional built-up area in a phased manner. Payments can be made in four equal installments with interest, thus ensuring that the financial burden on stakeholders is reduced and projects delayed previously due to financial constraints can be executed seamlessly.

Premium allowed to be paid in 5 installments for plots less than 4,000 sqm

Under the revised policy, for all plots which are less than 4,000 sqm, payment of charges and premiums for building permissions can be done by housing societies and developers in five installments with interest. While the first instalment is 10% of the total premium amount and has to be paid within one month of getting the letter of intent, the other four installments of 22.5% + interest has to be paid at the end of 12, 24, 36 and 48 months.

What are the different premiums that a developer has to pay for while redeveloping a project?

There are over 20 premiums that developers have to pay in a project and these form around 30% of the project cost in some cases. The premiums include things like fungible premiums, FSI premiums, lobby premiums, lift premiums, staircase premiums etc.

Mhada redevelopment policy: Other amendments made in the past

More space granted

In 2022, Mhada relaxed some rules. The state granted 5% amenity space above 20,000 sqm area, three carpet area index (FSI) for MHADA redevelopment instead of 2.5 and up to five FSI for commercial business district expansion. The relevant changes were made to Section 37 (2) of the Unified DPCR, to effectuate the new norms.

No need for permissions

According to the GR passed on September 15, 2022, there is no need to get any prior permission from the Maharashtra state government for redevelopment. This holds true for construction of buildings destroyed by fire, buildings that have been legally demolished and those part of cluster development.

Housing.com POV

Land saturation is a reality that Mumbai is dealing with today, and redevelopment is predominantly the way forward for residential development in the city. MHADA cess buildings are located in prime areas of the city, and redevelopment was stalled due to stringent regulations. These revisions to the MHADA Redevelopment Policy are steps in the right direction. Also, with only 51% consent now required to undertake redevelopment work (as opposed to the earlier 70%), the process is expected to be faster. This will give the city modern, spacious projects and better infrastructure, while solving housing concerns of many of Mumbai’s citizens.

Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com

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