A bidding war has taken place for the rights to redevelop property in Mumbai's upmarket Bandra area, throwing up some surprising results. The highest bidder provided all apartment owners an additional area of 116%, while the lowest bidder offered all existing unit owners an additional area of 37% in the renovated complex.
Developers are bidding under two different schemes, one of which is the Development Control Regulation 33(11) of the Slum Rehabilitation Authority (SRA) scheme. This plan enables the builder to erect more space than they could under a typical plan while paying the government substantially less money. In exchange, the developer must provide the government with a set number of free residences known as Permanent Transit Camps, or PTCs.
This scheme seems like a win-win plan in theory, but there are challenges. Excessive FSI can lead to irrational thinking, slow sales, slower project execution, and price pressure. Due to the proximity of an airport, many prestigious locations in Mumbai have a height restriction, which forces developers to build below the permitted height and causes delay and expense overruns.
Free homes or PTCs must be delivered to the SRA in accordance with regulations. The vast majority of developers won't build these PTCs due to the lack of land for this building and the attendant difficulties. Developers will be forced to rely on a third party and pay for these PTCs. The building for sale stalls if the supply of PTCs does too.
Many developers are starting this plan without offering the PTCs much protection. Societies who are implementing this plan must strike a balance between their avarice and due diligence. Apartment purchases at the beginning of these developments should be cautiously made by homeowners.
However, the era of mischievous SRA developers is over, according to Jitubhai Patel of Aakar Architects. The market has stabilised in the last decade, and with it comes greater transparency and accountability.
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