Premium floor space index (FSI), when introduced by the Chennai Metropolitan Development Authority (CMDA) three years ago, was seen as a tool that could encourage vertical growth of the city. FSI is the ratio of land area to the built-up space.
Over these years, it has proved its potential to be a money spinner for the builder community and the regulatory agency aswell. While builders have cashed in on the steep hike in market prices, the CMDA has generated additional revenue of 520 crore through collection of premium charges for the additional FSI sanctioned.
Starting with a meagre 6 crore collection in 2009-10, the revenue from premium FSI charges shot up to 160 crore the following year and scaled further up to 300 crore last financial year. In the first two months of the current year, the CMDA has earned 50 crore through allocation of premium FSI.
The euphoria over premium FSI seems to have paused for now owing to the recent exponential hike, on April 1, in the guideline values. As the premium charges for the additional FSI is calculated based on the guideline values, it does not make economic sense to avail premium FSI when the guideline values are higher than the market value, said Prakash Challa, former vice-president of the Confederation of Real Estate Developers’ Association of India. The situation in the outskirts of the city, where guideline values have gone up by even 10 times, the situation is still worse.
But, the first two months of the current year have yielded good revenue for the CMDA through sale of premium FSI because “most of those cases had got sanctions last financial year. Hence, they have paid the premium chargeson the basis of earlier guideline values” said an official. A sizeable segment of people, who apply for premium FSI are those constructing buildings for self use, noted Challa.They would continue to avail the facility, he felt.
Going by the rate of growth in residential prices in thecity in the last five years, the lull may be short-lived. The residential price index of the National Housing Bank shows that apartment prices have shot up by three times in the central business districts of thecity since2007. Even the backwater regions of the city command an apartment price of 7,000 to 8,000 per sq ft now.
Meantime, the Directorate of Town and Country Planning, the regulatory agency for the rest of the state, is on the verge of introducing premium FSI in its limits. “It has become a necessity with the introduction of the development control rules for the DTCP last year,” said an official.
Source: The Times of India, Chennai