Mumbai’s new TDR policy: Lower congestion, but costlier homes?

The Maharashtra government has announced a new TDR policy that is linked to the width of the road adjacent to the plot. We examine its impact on the housing stock and congestion in the city

Mumbai has a new Transfer of Development Rights (TDR) policy that is linked to the width of the road beside the project’s site. As per the new policy, projects on roads that are less than nine metres, will be granted no TDR benefit, while projects on roads over 30 metres wide, will get FSI of 2.5.


New TDR policy: How it affects Mumbai’s real estate market

The modified policy allows buying/selling of TDR across the city. Earlier, the TDR could only be sold to developments north of where it was originally generated. It will also allow developers to load additional FSI to developments, in areas where the demand is high. Furthermore, a developer can generate cash flows, by transferring the development rights to a potentially larger market.

“As it will take time for additional TDR to be generated from this policy, it may lead to a short-term increase in the prices of TDR that is already available for purchase,” points out Nishant Agarwal, MD, Avighna India.

The purpose of TDR, is to provide a certain amount of additional built-up area, in return for the area surrendered by the land owner. Developers, hence, are disappointed with the lack of additional construction benefits, for projects located near roads with a width of less than nine metres. This new policy will only benefit big developers, who are building projects along wider roads, they opine.

See also: The FSI premium that is hurting Mumbai’s property market

“In Mumbai, most of the plots are on smaller roads. However, these plot owners will not be able to utilise TDR. This will adversely impact the housing stock and projects will become costlier,” says Kaizad Hateria,​ brand custodian and chief customer delight officer​, Rustomjee.


Will the TDR policy ease traffic congestion?

The new policy seeks to redistribute the load, based on the carrying capacity of the roads.

“The policy will also help to increase the width of existing roads in congested areas, as people will now willingly offer their land for road widening, to get the additional FSI that is linked to the road’s width. This will ease traffic woes in the most congested areas,” says Jayant Gehi, AVP-business development, Supreme Universal.


TDR policy’s impact on redevelopment

Under the new policy, the permissible TDR has been reduced, on internal roads that are less than 18 metres wide. Hence, redevelopment projects that are not on the main road, are likely to suffer. The current market scenario, coupled with the upcoming implementation of the Real Estate Regulatory Act (RERA) and the revision in the TDR policy, may cause a short-term dip in property prices. This could make several redevelopment projects less attractive, ultimately resulting in a slowdown in the pace of redevelopment.

“Redevelopment projects are crucial for the city. The government should not allow them to become unattractive, especially, since they are extremely challenging and time consuming,” maintains Agarwal.

Hateria adds that the new policy, could also lead to disputes in housing societies that have already signed redevelopment agreements with developers.


TDR revision to be beneficial in the long run

“Higher TDR prices, due to indexation and demand and higher approval cost of TDR, shall increase property prices, which are already high due to various government premiums. This will be a double whammy, post demonetisation,” feels Rajesh Patel, director – business development, Kanakia Spaces.

Given the current state of the economy, liquidity crunch and high ready reckoner rates, it will take time for the impact of this policy revision to be felt. Any initiative that creates more transparency, flexibility and accountability, will be in the long term interest of the realty sector.


How the TDR revision affects home buyers

  • It will reduce congestion on smaller roads that are less than nine metres wide, due to lesser FSI, thereby, improving the density distribution in the city.
  • Higher premiums and indexation of TDR, will lead to higher costs, thereby, pushing property prices upwards.
  • Supply will increase in the island city on wider roads, which will lead to higher TDR costs and increase in prices.


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