BMC to hold talks with MCHI on reducing premiums on permits
In a bid to address the prolonged slowdown in real estate sector, the Brihanmumbai Municipal Corporation (BMC) is planning to hold a series of discussions with the Maharashtra Chamber of Housing Industry (MCHI) over the next few weeks.
The meetings will focus on ways to reduce the financial burden developers face in obtaining building permissions.
The MCHI is in the process of drafting a proposal, which will represent the concerns of builders hoping to widen profit margins by reversing expensive premiums they pay to various departments within the BMC and the state government.
Representatives of prominent construction firms rued that a builder ends up paying around 50 per cent of the project cost in premiums, for innumerable permissions from multiple civic departments and, in some cases, the Ministry of Environment and Forests.
Dharmesh Jain, president of CREDAI-MCHI, pointed out that the delay in acquiring permissions from various departments of the government also leads to a rise in taxes a builder pays, as the sum piles up every year. “In the last five years, the amount paid has shot up by Rs 300-400 crore, which is why the real estate business has come down. We are in the process of coming up with certain suggestions to reduce the amount, which can also benefit the consumer,” he said.
Jain added that among other solutions, he will also propose a centralised window to pay all premiums, which can then be sent to the departments concerned. “In the list of permissions, those which need to be acquired from the environment ministry tend to take the longest time — between six-eight months. Since construction is not a polluting activity, the real estate sector can be granted certain exemptions,” he said.
Other builders, including Dhaval Ajmera, director of Ajmera Realty, said the government should take certain steps to ensure that the land cost does not rise steeply every year. “The interest cost of the project goes up since the permissions take long to come and as a result, in the past couple of years, builders are only able to make a profit of 10-15 per cent. It is necessary to bring down the cost of premiums to boost investment in the market, especially since the government has been advocating affordable housing,” he said. He added that until six years ago, builders would make a profit of around 30-40 per cent. Apart from the delay in acquiring permissions, builders also want to review the annual hike in the Ready Reckoner rates. Ajmera said land cost has gone up by around 30 per cent over the last few years, for “no visible reason”. “While the rise in the residential sale factor is valid since it depends on the quality of amenities and infrastructure, a builder provides to the consumer. There is no basis for the increase in the land cost since nothing is changing about the land. We should collectively push for the land rates to be cut down,” he said.
He added, “The BMC charges high premiums for staircase even though it is essential for every building. If certain premiums, such as this one, can be omitted, the overall cost would come down and, in the process, the charges will drop for the consumer as well.” Officials of the building proposal department also pointed out that though the charges are at par with the norms, the amount is a significant portion of the project cost and it needs to be reduced to provide a boost to the struggling real estate sector.
Municipal Commissioner Ajoy Mehta, meanwhile, said, “There is a need to rationalise taxes the builders have to pay and the mechanism has to ensure that everyone benefits, including the consumer. This can serve as an impetus for the developers in order to give a boost to the real estate sector. We will set up a meeting with MCHI to discuss their suggestions, which they can present in the form of a proposal.”