Does Mumbai Need A Uniform Floor Area Ratio?

As a mental experiment, imagine a situation where the government hands out restaurant licences uniformly, ignoring market demand. In such a case, the government in Delhi, for example, would hand out the same number of restaurant licences for Connaught Place, the central business district (CBD), and Dallupura, a peripheral area in the national capital. Now, what is likely to happen? There is a huge demand for restaurants in Connaught Place, where retail space is the most expensive in Delhi, unlike Dallupura. While on the one hand restaurants in Connaught Place will become unbearably crowded and highly expensive, Dallupura will not benefit much with so many restaurants because there is not much demand anyway.

The same principles applies to the government allowing the same floor area ratio (FAR) throughout India's financial capital, Mumbai. For beginners, Floor Area Ratio (FAR) is the ratio of the floor area in a building to the area of the plot on which it stands. For example, if a 2,000 square foot (sq ft) building stands on a 1,000 sq ft plot, the floor area ratio is 2. If a 3,000 sq ft building stands on a 1,000 sq ft plot, the floor area is 3, and so on.

The Brihan mumbai Municipal Corporation wants a uniform base floor area ratio of 2 throughout Mumbai. This means that throughout Mumbai, on a 1,000 sq ft plot, the maximum permissible floor area developers will be allowed to construct will be 2,000 sq ft. Currently, the base FAR in Island City is 1.33, and in suburbs, it is 1.

This may seem like a huge improvement, because now, instead of a 1,330 sq ft building, developers can build a 2,000 sq ft building in the city. However, most buildings in Mumbai are much bigger than that. So, landlords will not benefit much from this. Large tracts of centrally located land in Mumbai are idle, often in the hands of government agencies. So, if FAR is raised, this land could be utilised to build taller buildings. Besides, increasing the FAR in the suburbs from 1 to 2 will double the height of the buildings. This will raise the available floor space in Mumbai as a whole, where space is the most scarce in the world. This is not all. Now, transfer of development rights may be used only in the north of the plot where it is generated. This means that if developers want to transfer their right to build in one part of Mumbai to any other part in the city, they will be allowed to do so.

Despite the fact that these are improvements over the current policy, this will not solve the problems in Mumbai. Why?

No major city in the world has a near-uniform FAR. In New York, for example, the highest permissible FAR is 15, and the lowest is 0.5. This means the ratio of the highest FAR to the lowest is 30. Urban local authorities of major cities allow such a huge variance in FAR based on the fact that there is a great demand for space in central areas of New York, but not so much in suburbs. So, more economic activity is concentrated in central areas of New York, making the city far more productive, and wages much higher. This should be true in Mumbai, too, which contributes much to India's economy.

Land in central areas of New York and Mumbai is very expensive. Real estate developers cannot profitably develop properties with a low FSI of 1.33 or even 2 in such areas. That is why FAR is 15 in New York's CBD, 25 in Singapore's CBD and 12 in Hong Kong's CBD. Real estate developers may make greater profits when the FAR is raised in central areas, but this will also make real estate less expensive. Higher profits of real estate developers do not come at the expense of buyers. This is nearly a “free lunch”, when a government allows taller buildings.

In Mumbai, the highest ratio in residential FAR is 2 in the Bandra-Kurla Complex and 0.5 in the suburb of Gorai. This is a ratio of 4, which is too low. When the ratio is low, the FAR is not lower in parts of the city where the distance from the centre is greater. So, the built-up area of Mumbai will be spread on a very large area. When the built-up area is spread over a large area, more people will travel in overcrowded trains, and the roads will become more congested. This is because the distance between houses, offices and markets are greater when buildings are uniformly low-rise. Otherwise, much of the activity would have been concentrated in the centre.

Mumbai's population has risen much since 1940s. But this would not have led to crowding inside trains and congestion inside houses and office spaces, if there was a huge variance in FAR levels.

The FAR should be high, even to make redevelopment of slums possible. For example, the Dharavi Redevelopment Plan envisions a FAR of 4 in Dharavi. This is because authorities recognise that they will not be able to redevelop the slum, providing reasonably good flats for residents with a low FAR. Dharavi is closer to the Bandra-Kurla Complex, but it is not prime property yet because of weak property rights. World Bank researchers have long been pointing out that Mumbai is perhaps the only city where a high FAR is allowed near a slum, but not in the CBD.

If the FAR is differentiated according to the demand for floor space, there are many potential benefits.

1. Rents will fall.
2. The cost of housing will fall.
3. Productivity will rise, especially in and around the CBD.
4. Real estate developers will be able to profitably redevelop centrally located property.
5. Trips will become shorter.
6. The environment will become less polluted.
7. More people will be able to easily access Metro stations and other transit nodes.