The new launches have drastically slowed down in Mumbai due to confusion with Development Plan.
A perception has gained ground that the less launches are due to slow sales, liquidity crunch of the developers and other market realities. Though these reasons cannot be ruled out behind some setbacks, the Mumbai real estate has been in a wait & watch mode for quite some time for another significant reason – confusion with the new DP (Development Plan).
It has, as a matter of fact, affected the new launches in the city more than any other factor. The developers do not wish to launch a project now and within a few months find themselves in a position where they have to rush to the Brihanmumbai Municipal Corporation (BMC) for further changes.
The BMC is expected to release its revised Development Plan by February 2016. Last year, the draft DP led to confusion in the market where both the developers as well as the citizens pointed out glaring errors, leading to the removal of then Municipal Commissioner. There were about 8500 suggestions and objections to the draft DP. The developers also maintain that this led to the delay in many new launches.
Dhaval Ajmera, Director, Ajmera Realty & Infra points out that the confusion that has happened with the proposed DP is the primary reason for the slowing down of the new launches in the past one year in Mumbai. The DP is now being rectified, as there have been confusions, wrong reservations that have been filed. Probably certain places that were early declared as residential area are now been under another reservation where the developer cannot launch the project as it is wrongly demarcated. Hence, until the reservation is cleared, launches have had to take a backseat.
“There are instances where property declared as a completely residential zone is now partly claimed under the reservations. Hence, if the developer has planned a project in a certain area, it is affected due to the partial reservations impacting the launch of the complete project to go on a hold. This definitely affects the developer majorly keeping in mind that the finances are stuck. Keeping in mind the confusion in the draft development plan, it is taking long to solve and we hope to get it resolved probably by May this year,” says Ajmera.
Parth Mehta, Managing Director, Paradigm Realty maintains that where land has been already acquired or development rights has been already obtained there the developers are left with no choice but to go ahead with prevailing DCR (Development Control Regulations) and commence their construction but provisions for extra FSI can always be kept in planning provisions.
“Where developers who are looking at potential new acquisition currently there is a wait and watch scenario with reference to permissible FSI and new approval policy. Where developer has received complete approval and where construction activity is visible at the site there indeed sales are still happening, may not be at a very high velocity but apartments in projects by credible developers with a delivery track record are selling backed by complete approvals in place, home loans facility tie up with banks and subvention schemes offered by banks and institutions,” says Mehta.
Vipul Shah, Managing Director, Parinee Group, on the contrary, believes that the developers are going ahead with their existing developments plan as the new DP has taken a lot of time. However, because of the delay there is a lot of confusion in the industry. This should have been avoided. So the sooner the new DP is released, it would bring clarity to benefit both the real estate industry and the consumer.
“The old DP and the expected new DP has taken a long time and still not sure, which in turn has created a huge confusion in the Industry resulting in imbalance of the realty eco system. Initially the sales were a bit slow but buyers are waiting to buy the right project as we have seen in case of few new launches proving the market is looking up,” says Shah.
The developers demand that the new DP will indeed have to be released keeping in mind no area specific FSI imbalance. There will have to be a balanced distribution of FSI to ensure optimum supply of new inventory in locations, whereby there will not be very highly skewed pricing imbalance.
This also raises a fundamental question as to what extent slow sales have affected the new launches and to what extent the DP confusion has been the catalyst. Most of the analysts tracking Mumbai property market agree that the liquidity crunch, uncertain job scenario, lack of visible parameters for business growth have kept people on wait & watch mode.
As far as homebuyers are concerned, there is a general belief that the confusion has also affected the home buying decision of prospective buyers as many of them are so well informed that they anticipate significant price correction once new DP is implemented.
Developers nevertheless maintain that the price correction has already been factored in today’s prices backed by eased out payment plans . Hence, prices going below this points will not be a viable proposition for the developers considering high input cost. But the new launches have been definitely affected as the developers are in dilemma whether to wait for new DP or go ahead with current DCR. The developers hence demand that the new DP should be in sync with the government’s loud claims of facilitating ‘ease of doing business’.
