Wednesday, February 27, 2008

FSI increase on cards in Mumbai

As per the latest news articles it looks like the state government will be increasing FSI uniformly to 2 across the board. As per current rules, Mumbai city has an FSI of 1.33 and suburbs 1. SRA schemes have an FSI of 2.25 and Dharavi redevelopment 4. Most high rises are built in the suburbs using the TDR (transfer of development rights) certificates. The price quoted for them thru legal channels is 4500 per sq/ft. If one has to factor in the cash component, the price would shoot up to 7k-8k. With FSI being normalized at 2, it is possible to construct twice as much on the same land as before. Prices can drop here if this is implemented.

I found this excellent document on FSI by Alain Bertaud. He makes no bones of the fact that the BMC uses the TDR certificates in a monopolist manner thereby corrupting the system to a level where mumbai citizens have to live on 2.9 meters of land. Its an eyeopening document and it worth a second read. Quoting from the document.

Which factors are responsible for this situation? What is so exceptional about Mumbai?
The very low consumption of floor space coupled with very high real estate prices would suggest that a number of supply bottlenecks might be responsible. By comparing Mumbai to other metropolis in Asia it appears that indeed 4 factors are exceptional and contribute to the very low supply of floor space:

1. An exceptional topography that reduces the amount of developable land
2. A draconian and ill-conceived land use policy restricting the area of floor space which can be built on the little land available;
3. Muddled property rights preventing households and firms to freely trade land and floor space as a commodity;
4. A failure to develop major primary infrastructure networks, which prevents the city to overcome its topographical constraint. In turn, the weakness of the infrastructure network is used to justify the restrictive land use policy

To give an order of magnitude to these figures consider the following: Shanghai in 1984, recovering from more than 10 years of Cultural Revolution, had a floor area per person of 3.65 m2. Shanghai’ Municipality, at the time, considered that rapidly increasing floor consumption was to be the city’s first priority. In 2003, the average floor space consumption in Shanghai was 13.1 m2/person. This was achieved in part by drastically increasing the FSI to allowredevelopment of obsolete buildings with relocation largely in situ.

http://alain-bertaud.com/AB_Files/AB_Mumbai_FSI_conundrum.pdf

Another article on Time discusses Dharavi.

http://www.time.com/time/business/article/0,8599,1711330-2,00.html

1 comment:

Shailesh said...

Excellant article. I actually read that few months ago, but not sure why I did not post it. Anyway, the BMC, Politicians and Builders are primary culprit as they are the ones who restrict supply and then complain. Also recently I read in News that State Govt was fighting in Supreme Court for allowing doubling of FSI.