BMC set to release revised DP by February 2016

16 Feb 2016

The new launches have drastically slowed down in Mumbai. 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, Mumbai's real estate market has been on a 'wait and watch' mode for quite some time for another significant reason ­ confusion with the new DP (Development Plan).

It has, as a matter of fact, impacted 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 wherein they would 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 the then municipal commissioner. There were about 8,500 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 last 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 earlier declared as residential areas are now 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 a 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 gets affected due to the partial reservations, thus impacting the launch of the complete project. This definitely affects the developer majorly, as 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 have been already obtained, there the developers are left with no choice but to go ahead with the prevailing DCR (Development Control Regulations) and commence their construction process but provisions for extra FSI can always be kept in planning provisions. "For developers who are looking at a potential, new acquisition currently, there is a 'wait and watch' scenario with reference to permissible FSI and new approval policies. And wherein the developer has received the 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 financial institutions," says Mehta.

Vipul Shah, managing director, Parinee Group, on the contrary, believes that the developers are going ahead with their existing development plans 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 there still exists a lot of ambiguity, which in turn, has created a huge confusion in the industry resulting in the 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 the case of a 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 imbalances. There will have to be a balanced distribution of FSI to ensure an optimum supply of new inventory in locations.

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's property market agree that the liquidity crunch, an uncertain job scenario, a lack of visible parameters for business growth have kept people on a wait and watch mode.

As far as home buyers 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 a significant price correction once the 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 point will not be a viable proposition for the developers considering the high input cost but the new launches have been definitely impacted as the developers are in a dilemma whether to wait for the new DP or go ahead with the 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.