The revision of Mumbai’s development plan (DP) has put the commercial capital’s real estate market in disarray, affecting almost all deals involving land parcels, society redevelopments and even slum rehabilitation.
Both developers and project proponents, or landlords, are deferring decisions or are even avoiding initiation of talks as it’s difficult to conclude a deal in the absence of a proper pricing process and clear development potential.
“If the government is keen on making housing affordable for people, it should try to improve the housing supply. However, it is doing exactly the opposite by not clearing the uncertainty around the development plan and approvals,” said Ramesh Nair, COO ” Business & International Director, JLL India.
The Development Plan 2034 was first announced in February only to be withdrawn in April. The civic body was then asked to revise it in the next four months beginning April, and the same was then expected to be put up for citizens’ suggestion/objection and all of this process will take more than a year against the earlier estimate of 6-8 months.
“The endless delay in drawing up the new rectified DCR has rendered the real estate atmosphere in Mumbai static. Ambiguity in the sector prevails and developers are unable to gauge the feasibility of projects,” said Zaheer Memon, partner at Zara Habitats LLP. “Due to the uncertainty, several ongoing and future deals have been put on hold by developers. Moreover, tenants housed in older, dilapidated buildings are directly facing the brunt, as they too are unaware of the additional carpet area they are rightfully entitled to, making their suffering seem unending with stagnation in terms of negotiations for redevelopment of their buildings.”
Zara itself had initiated talks for two redevelopment projects in Mumbai until the Development Plan 2034 was announced, but has kept the negotiations on hold due to lack of clarity on development potential, and therefore, tenant benefits.
Deals are not being initiated or are being held back as valuations of these depend on the possible development that will be governed by the proposed regulations. According to directions from the state government, the civic body will be using the stringent of the two development plans ” existing one and the proposed DP 2034 ” for approving any projects in the city.
“We can bear the market risk but not regulatory risk like this. There is no clarity on FSI potential and most importantly, cost implications. How can one conclude any deal?” asked Sunny Bijlani, director of Supreme Universal. “Even though a review of development plan 2034 is being undertaken, given the large number of errors, stringent of two is being applied, particularly for plots with reservations. This effectively means the new DP is in force. Apart from this, delaying the process indefinitely is what’s hurting almost all of us, including homebuyers,” Bijlani said. Interestingly, the government itself has acknowledged that there are errors in the proposed DP 2034 with regard to wrong reservations applied to certain zones and plots, and has therefore, asked the civic body to revise it.