Increase Of TDR Catches Mumbai Real Estate Off-Guard..

 by Mr. Subhankar Mitra, Jones Lang LaSalle India

The sudden rise in the TDR price has taken the market unawares, despite the fact that such a rise was likely because not much of TDR generation was taking place.

Effectively, TDR prices have now doubled, and such a steep rise was not expected. The current price of TDR is now around Rs. 4,000 per square feet.

A close reading of the TDR scheme from a regulatory perspective indicates that the supply of TDR was expected to be driven largely by slum rehabilitation schemes.

 

Mr. Subhankar Mitra,
Jones Lang LaSalle India

Such projects have a long gestation period &  their success is a function of diverse factors - factors which do not always work cohesively. In other words, a regular flow of TDR from these projects may not be always possible.

The current TDR rate rise is the result of a slowdown of supply from such schemes, and is also linked to performance of some of the leading developers within the SRA projects sphere.

Another reason for a drop in supply is the fact that developers who earlier created projects purely to house PAPs in the Mahul Road area (south of Chembur) and generated TDR which they sold in the open market have seen sale prices rise sufficiently in this specific area to make a project with a sale component profitable.

Hence, developers / promoters have stopped projects directed towards generation of TDR.

Since the base FSI (Floor Space Index) in the suburbs is only 1, it is a practice for developers / promoter to load nearly 60 % TDR in the project in order to take the FSI nearly 2. Thus, the increase in TDR cost will increase project costs.

At present, when sales are slack and the developers are finding it difficult to sustain prices, the additional cost are going to squeeze their margins even further.

One way to check further TDR price hikes would be to place more emphasis on TDR generation through SRA schemes and other infrastructure projects. The BMC can also consider allowing more premium FSI to be used as against TDR.

About the author..

Mr. Subhankar Mitra is Head  (Strategic Consulting (West)) at Jones Lang LaSalle India

For Media Contact..

Mr. Arun Chitnis

Head – Corporate Communications & Media Relations

Jones Lang LaSalle India

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