Maharashtra govt mulling to increase compensation rate for builders

The issue has escalated in recent years because MHADA has filed criminal cases against 29 developers for not transferring surplus area to the government. Representation pic

The state housing department is mulling on revising the rate at which the Maharashtra Area and Housing Development Authority (MHADA) compensates developers for its share of the constructed surplus area that redevelopment projects in the city make available. The Confederation of Real Estate Developers' Associations of India and Maharashtra Chamber of Housing Industry (Credai-MCHI) has taken up the issue with Chief Minister Devendra Fadnavis, following an increased tussle between the developers and MHADA. The CM has asked the housing secretary to find an amicable solution to the grievance. Housing secretary Sanjay Kumar confirmed that his department was working on the request.

The developers say the existing rate of R2,529.54 per sqm (R235 per sq ft) that was approved in 1991, is abysmally low. Seeking upward revision of the rate, they say the current ready reckoner rate for construction is R28,500 per sqm fixed by the government, which itself is 10 times the 27-year-old MHADA rate. The developers say that the abysmally low rates result in huge and unfair losses to them.

Developers booked
The issue has escalated in recent years because MHADA has filed criminal cases against 29 developers for not transferring surplus area to the government. Four other developers have been issued notices. Social activist Kamalakar Shenoy has filed a Public Interest Litigation, accusing MHADA of not taking possession of 2.70 lakh sqm constructed area, which he valued at R14,000 cr.

According to MHADA's submission in the Bombay High Court, it had been able to recover 13,126 sq mts of constructed area from 50 cessed buildings. But so far, MHADA has received 31,326 sqm from 153 projects and made R38 crore through premium charged. According to MHADA, it should get 90,258 sqm from the ongoing 150 projects and another 46,481 sqm from 106 proposed projects. A probing police agency, the Economic Offences Wing (EOW), has told the court that from the 457 approved projects, the state authority was expected to get 1,98,646 sqm of constructed area.

City may get 6-10k flats
The constructed area that is unoccupied after accommodating the old tenants (for free) of cessed buildings is treated as surplus area. Of the surplus, 60% goes to the housing board (MHADA), for which the developers are paid construction cost which is termed much less. The developer is allowed to sell 40% of the surplus in the open market to make the project commercially viable.

Redevelopment projects are given more FSI (upto 3) so that all components are built. Generally, the government offers flats in such redeveloped properties to project affected people. A developer said the association members would happily hand over surplus constructed area if the prevailing rate of compensation was increased in accordance with the market. He said if the issue is resolved, the city may get 6,000 to 10,000 affordable flats (of 300-350 sq ft) from the projects that are completed, being built, and those proposed.

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