Wednesday, January 16, 2008

Record Slum TDR Rate in Mumbai

Another record was created in the city's real estate industry on Wednesday when slum TDR or transfer of development rights belonging to the Maharashtra housing and area development authority (Mhada) fetched an all-time high price of Rs 3,275 a sq ft. This is the first time that the rate of slum TDR has gone up so high, ever since it was introduced by the state government a decade ago.

In Mumbai's construction industry, slum TDR certificates are the equivalent of the stocks of blue-chip companies. They are generated when the developerowner surrenders his land to the government or agrees to rehouse slumdwellers or project-affected persons free of cost. In turn, he is issued a TDR certificate that gives him additional construction rights in the suburbs, but only to the north of the plot he has surrendered.

The latest stock of slum TDR came from a state government company, Shivshahi Purnavasan Prakalp Ltd (SPPL), which has been entrusted with the task of constructing low-cost houses to rehouse projectaffected persons.

Recently, Mhada had invited bids for about 8,000 sq m of slum TDR which was generated by a SPPL project in Turbhe near Mankhurd. When bids were opened on Wednesday, Swastik Realty quoted Rs 3,275 a sq ft for about 2,000 sq m of slum TDR. The remaining stock was purchased by Mantri Realty at Rs 3,250 a sq ft and another investment company, which paid Rs 3,204 a sq ft. It fetched Mhada Rs 28 crore.

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What makes this stock of slum TDR lucrative is its use in prime areas like Bandra (west). This is because Mankhurd, where the slum TDR has been generated, falls south of Bandra on the map.

Mhada sources told TOI that till a few days ago, the price of slum TDR was around Rs 2,800 a sq ft. Wednesday's record price is an indication about the demand for slum TDR. But such high rates is bad news for flat purchasers as it has a direct impact on the final price of an apartment. Residential property prices are already at a record high, and only a certain high income class of citizens can actual afford to buy a home in Mumbai today.

Builders have reaped a bounty ever since the concept of slum TDR was introduced by the state government a decade ago. They have gone on a construction spree, especially in the congested western suburbs between Bandra and Andheri. Activists have criticised this policy on the grounds that it puts a further load on the already stretched infrastructure in the suburbs. Critics call it transfer of disaster rights.

Virtually all construction activity in the suburbs is today carried out with the aid of slum TDR, which the builder can load on his project as additional floor space index (FSI) to construct additional floors. For instance, if the FSI in the suburbs is restricted to 1, the developer can load a maximum of FSI 1 on his project by buying slum TDR from the market.