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Economy Oct 21, 2011

What increased FSI means for suburban Mumbai

By Firstbiz Staff

Maharashtra Chief Minister Prithviraj Chavan on Thursday cleared the long-pending demand from builders to increase the floor space index (FSI) in suburban Mumbai from 1 to 1.33. The move has big implications for a city cramped for space and struggling to match urban infrastructure with the needs of a burgeoning population.

The FSI was actually raised for Eastern and Western suburbs in 2008, but a PIL filed in 2010 had stalled its implementation. The Bombay High Courthad told the state that the FSI hike was not maintainable since it was not in agreement with Maharashtra Regional Town Planning Act (MRTP) Act. The government amended the Act during the winter session of the legislature last year.

Reuters

What is FSI?

The World Development Report 2009 definesFSI as "the ratio of the total floor space in a building to the area of the plot on which it is built.'' For example, if a building covers half of a plot that is 1,000 square meters in size and it has 10 floors, the FSI would be five.

The implications of the move:

• The Hindustan Times reports that the decision will "trigger aredevelopment boom in the Eastern and Westernsuburbs." Builders will shift focus to the suburbs where they can create more stock of housing.

• More stock of housing without a substantial increase in construction cost would drive down rents and property values. But in Mumbai, where rents are high because of supply bottlenecks, that is yet to be seen.

• Levy for additional FSI means increased revenue for the state exchequer to the tune on Rs50 crore annually.

DNA reports that increasedFSI will badly affect the transfer of development rights (TDR) cartel because there will now beless dependence on TDR. A few players, reports the paper, have80% available TDR, which costs more than Rs1,000 crore as per the market rate. It quotesParas Gundecha, president of the MaharashtraChamber of Housing Industry (MCHI):

"It will have a hugepositive impact on the real estate sector. Now,all TDR syndicate will be broken down and itsmarket will automatically crash. They have toslash the rates by at least 0.33%. Developers willprefer to buy the additional FSI as per the readyreckoner rate from the government rather thanpay exorbitant prices to TDR holders."

• Increased FSI, contrary to the experience of other global cities, in Mumbai also means increased population density which in the face of unchanging infrastructure leads to lesser amenities - water, sanitation, express transportation, schools, hospitals and open space - per person. This has huge bearing on quality of life.

A case for higher FSI:

A World Bank report informsthat in theMumbai of the 60s and 70s, city planners decided to cap itspopulation at seven million, and regulation andinfrastructure policies were designedaccordingly. In 1964, FSI was introduced and set at 4.5. While FSI is progressively relaxed in most global cities over time, in Mumbai the experience has been the reverse. FSI was reduced to1.33 in 1991.

In a 2004 study, The perfect storm: the four factors restricting the construction of new floor space in Mumbai, urbanistAlain Bertaud writes Mumbai is a contradiction in that being the country's most prosperous, the city has one of the lowest FSI and floor space per person in the world. Generally low FSI is found in cities facing economic troubles.

He further says that theway to increase floor space area per person is either to increase FSI or relocate people out of municipal limits, which is not feasible. Yet FSI in the City has been kept at a "draconian" low."The choice therefore is not whether the FSI should be brought in line with other large cities of theworld, but how much and where should the FSI be increased and what other measures should betaken to support this increase. "

He further writes of fixed FSI:

"Mumbai's fixed FSI has created the conditions of a zero sum game when it comes to floorspace. Poor households have to face a constant reduction of their consumption of floor space,because they cannot compete with the increased consumption of more affluent households. Thepoor are therefore progressively pushed out of formal housing into slums or into what is calledsidewalk dwellings. The only possible addition to the total floor space of Mumbai is thereforethrough densifications of slum and the creation of new sidewalk dwellings."

by Firstbiz Staff

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