By Dr. Mohit Ramsinghani
Redevelopment is gaining traction as a major strategy for real estate developers, especially in crowded cities like Mumbai. Here’s why:
Limited Land Availability: With sprawling urban areas, there’s just not a lot of vacant land left for new construction. Redevelopment offers a way to utilize existing plots and create more living space.
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Aging Infrastructure: Many older buildings lack modern amenities and may have structural concerns. Redevelopment allows for the creation of updated living spaces that meet current standards.
Win-Win Scenario: Redevelopment projects can benefit all parties involved. Residents get upgraded apartments, developers get to build and sell new units, and the government earns revenue through the increased Floor Space Index (FSI).
New Approaches to Redevelopment:
Cluster Redevelopment: This involves redeveloping multiple neighboring societies together, allowing for larger projects with better infrastructure.
Public-Private Partnerships: Collaboration between developers and the government can streamline approvals and make redevelopment more efficient.
Focus on Sustainability: Redevelopment projects can incorporate green building practices to create eco-friendly spaces.
Challenges Still Exist:
Resident Approval: Getting a majority of residents on board for redevelopment projects can be a hurdle.
Complex Approval Processes: Navigating building permits and regulations can be time-consuming and challenging.
The Maharashtra government offers a few benefits to developers undertaking redevelopment projects, especially for older buildings:
Reduced Premiums for Land Conversion: The government recently reduced premiums for converting leasehold land to freehold land from 15% to 10%. For self-redevelopment projects on government-owned leased land, the premium is down to just 5%. This can significantly reduce the overall project cost for developers.
Increased Floor Space Index (FSI): The new redevelopment rules allow for an increased FSI of up to 5. This means developers can construct more floors and potentially gain more profit by selling additional housing units.
Cluster Redevelopment Incentives: There’s a 50% concession in FSI premium for cluster redevelopment schemes. This encourages larger-scale projects that can improve surrounding infrastructure along with the redevelopment itself.
Transferable Development Rights (TDRs): Developers can utilize TDRs to construct more on their projects by purchasing development rights from designated areas with limitations on building heights. This allows for increased building density without sacrificing green spaces in the city.
It’s important to note that the Maharashtra government is also promoting self-redevelopment projects where housing societies manage the redevelopment process themselves. This can be beneficial for residents who gain more control over the project but eliminates some of the advantages developers bring, such as financing and expertise.
Overall, redevelopment is a growing trend in real estate that offers benefits for developers, residents, and cities alike. As the process becomes more streamlined and incorporates innovative approaches, we can expect to see even more redevelopment projects in the future.
-The author is Chief Business and Strategy Officer – Suraj Estate Developers. Views expressed are personal.