But Affordable Housing Still A Pipe Dream
Builders are now virtually bankrolling the Brihanmumbai Municipal Corporation (BMC), the country's richest civic administration. In the past three years, the construction industry paid a jaw-dropping Rs 12,200 crore plus in various premium charges and taxes to the municipal corporation.
Today , money collected from builders is the second largest revenue source for the corporation after octroi, (tax on goods entering Mumbai), which fetches over Rs 7,000 crore a year.
Despite this huge revenue inflow, the contradictions are glaring. Housing in Mumbai has become unaffordable for most people--the average apartment cost is around two crore rupees even as almost half its population lives in slums. Global property consultant Knight Frank estimates that Mumbai's property market size last year was roughly Rs 51,000 crore, with 32.2 million sq ft area developed in the entire year.
In 2014, around 30% of the BMC's Rs 17,500 crore revenue income came from building projects. Compare this with more than a decade ago when this income was a meagre 7% (Rs 233 crore), while octroi collection was Rs 2,025 crore (58%) followed by property tax of Rs 669 crore (19%). The municipal cash registers started jingling from 2012 on wards and civic officials credit one man for it--then municipal commissioner Subodh Kumar--who, during his 15-month tenure, pushed through new building rules.
The amended development control rules introduced in January 2012 stipulated that builders pay a hefty premium (60% of the locality's ready reckoner rate) if they chose to build 35% extra space in their buildings. Earlier, this extra space was liberally allowed by successive civic chiefs free of cost. Builders who benefited from this free largesse used to sell these areas to flat purchasers at mar ket rate. Kumar put an end to this and levied a huge price for these extra spaces.
Municipal commissioner Ajoy Mehta was a joint commissioner in the BMC way back in 1998. “At that time, octroi, property tax and market fees were the main earners for the corporation. Development charges then were a mere processing fee levied on builders,'' he said.
But critics complain that the high premiums charged by the BMC today have perverted Mumbai's real estate market. “Developers are funding the BMC to create high-end, luxury buildings when the demand is more for affordable housing, which is non-exist ent,'' said industry experts.
“As much as 33% of a building cost goes in taxes This is one major reason why affordable housing is not hap pening,'' said developer Ni ranjan Hiranandani. “The ready reckoner rate shoots up every year, there is complete chaos in the building approv als system and corruption hasn't reduced. How do build ers drop prices when the in dustry is burdened with so many taxes and high premi ums? The government has squeezed this industry .'' But Subodh Kumar, the former civic chief, debunked the claim that high premiums make housing unaffordable “One needs to find out the ex act burden these taxes have on developers,'' he said.
Gulam Zia, executive di rector at Knight Frank India, said the previous change in development control rules brought about a sea change in FSI calculations and minimized discretionary approvals. “This led to a much higher collection of premium for every square feet of allotted area and induced greater transparency in the system,'' he said, adding, “The challenge now for the BMC is to ensure that the amount collected under these heads are actually channelized in city improvement in a time-bound manner.“
Mehta said the Rs 12,000 crore collected from builders has been put in a separate fund and will be used exclusively to augment the city's infrastructure projects like the 35-km coastal road and GoregaonMulund Link Road.
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