Chennai realty sees short-term lul in premium FSI allocation

Chennai

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

Increase in FSI expected to boost affordable housing

Chennai

With soaring land prices, owning an apartment continues to be an elusive dream for most aspiring home buyers. The State Government’s move to provide additional FSI (Floor Space Index) to projects catering to the LIG (lower Income Group) and MIG (Middle Income Group) segments, is expected to ease the pressure.

As per the State Budget announced last month, developers can now construct more built-up area without incurring any additional costs, for LIG and MIG housing.

Developers in the city welcome this move, unanimously. Devesh Bhuva of Prince Foundations says, “This is a great initiative and we are certain that it will boost the affordable housing market. This is definitely a step in the right direction. However, there is no clarity, as of now, about revised guidelines or implementation.” The current FSI for multi-storeyed buildings is 2.5 and for ground floor plus three floors is 1.5. The new guidelines have not been announced.

There is a sense of cautious optimism among developers. While they believe that the move to increase FSI can only be good news for the real estate sector, questions about implementation, clarity on new guidelines and rules, remain unanswered. Suresh Jain, MD, Vijayshanthi Builders, says, “This move will make a lot of sense for projects in the outskirts, where the land price component is not as high as it is in the city. The only way to ensure that the benefit of this initiative reaches everyone, is to keep a check on pricing.Land price accounts for close to 75% of the cost of an apartment within the city and as long as this trend continues, affordable housing will remain a dream.”

According to the provisions under CMDA’s Second Master Plan, projects spread across 2.5 acres or more must reserve 10% of their area for construction of 45 sq m units (or less) for EWS (Economically Weaker Sections). Only one bedroom apartments can be constructed in that space. But Suresh feels that the size of these dwelling units needs to be increased from 450 sq ft to about 700 sq ft. “The move will not make much sense otherwise,” he adds, “How can a family live in a 450 sq ft one BHK apartment? And how will an increase in FSI benefit home buyers, if land prices, construction and labour costs continue to skyrocket? That’s why the Government needs to keep a tab on land pricing. That will make all the difference.”

Apart from pricing, another important point that developers raise is that of infrastructure and connectivity. S Ramakrishnan, CEO, Marg ProperTies, says, “Affordable housing is still in its nascent stages. While this move is definitely going to help, especially for investments made in the suburbs and outskirts, the need of the hour is support infrastructure and connectivity. People can only afford to buy apartments in the outskirts, but what’s the point in investing in these projects if no steps are taken to build adequate social infrastructure and spruce up public transport? Growth corridors such as OMR, GST and ECR hold a lot of promise and they need to be further connected through a grid development. This, along with additional FSI, will promote long-term sustainable development.”

It may be premature to debate the impact of the move to provide additional FSI, as clear guidelines and policies are yet to be framed. However, developers believe that the real benefit of the move can be reaped only if larger issues like pricing, infrastructure and connectivity are addressed.

Source: Times Property, The Times of India, Chennai

Higher FSI For LIG And MIG apartments in Tamil Nadu

Chennai

To insulate the poor and the middle-class from rocketing property prices, the state government has announced additional floor space index (FSI) for housing projects catering to the low income (LIG) and middle income groups (MIG). FSI is the ratio of land area to the built-up area.

The government will not levy any premium FSI charges while sanctioning additional FSI for LIG and MIG projects. In effect, the builder — the Tamil Nadu Housing Board or private developers — will be able to construct more built-up area without incurring additional cost on land. It would reduce the cost of such apartments, finance minister O Panneerselvam reasoned out in the budget. The FSI for multi-storeyed buildings is 2.5 while that for a ground floor plus three floors is 1.5. The new FSI guidelines are yet to be announced.

The minister announced a slew of interest waivers on housing loans disbursed by cooperative housing societies. Interest waiver for LIG units is increased from 50% to 75%, for MIG from 25% to 50% and for HIG from 10% to 25%. Also, penal interest has been waived completely. While the government will contribute Rs 390 crore towards interest waiver, the cooperatives will forgo Rs 545 crore penal interest. The interest waiver scheme, to be in force till September 30, is expected to help societies mobilize Rs 665 crore over dues.

The budget dealt a heavy blow to the construction industry, which includes the housing sector, by slapping a 50% increase in infrastructure and amenities charges, commonly known as impact fee, levied on all new buildings constructed in the state. As of now, a multi-storeyed residential building in any part of the state is charged an impact fee of Rs 25 per sq ft.

For multi-storeyed commercial, IT, industrial or institutional buildings, the impact fee is Rs 50 per sq ft in Chennai and Chengelpet regions. In Coimbatore and Tirupur, it is Rs 37.5 per sq ft and in other regions it is Rs 25 per sq ft. A 50% hike in impact fee will translate into an increase of Rs 12,500 to Rs 25,000 for a 1,000 sq ft building depending on the category it belongs to.

“The builder community welcomes the increase in FSI for LIG and MIG housing. It will bring in more housing stock at affordable rates. Tamil Nadu faces a shortage of three million housing units. The government could have avoided increasing the infrastructure and amenities charges. It will lead to increase in prices of apartments,” T Chitty Babu, Confederation of Real Estate Developers’ Association of India, secretary said.

Source: The Times of India, Chennai