This Is Why Redeveloping Leased Properties In Mumbai Should Be Made Easier

In Mumbai, the Brihanmumbai Municipal Corporation (BMC) has leased out 4,179 plots to private entities for residential, commercial, industrial and various other uses, with the lease period ranging from 10 to 999 years. Redeveloping such properties is very difficult because renewing the lease periodically is a time-consuming process. To renew the lease, private entities that hold the property have to obtain approvals from various government agencies. This has been a major constraint imposed on the redevelopment of real estate in Mumbai. Recently, the BMC had asked 234 government organisations and corporations to renew their lease.

Now, the BMC has decided to make redeveloping leased property in Mumbai easier. The BMC wants to make the process very simple, and ensure that the approvals for redevelopment are given in a short period of time. Once the norms are simplified, amalgamating plots leased by the Municipal Corporation of Greater Mumbai (MCGM), and obtaining an “No-Objection Certificate” for redeveloping leased property in Mumbai would become easier. The BMC will invite suggestions from residents of Mumbai, on this matter.

Why does this matter?

• According to the proposal, the application to be submitted for redevelopment of plots should be one page instead of two pages. For amalgamating leased plots, approval would be given in 34 days. For redeveloping leased property, a “No-Objection Certificate” would be given in 25 days. This would simplify the procedure, making redevelopment much easier.

•  Even though the lease period of many such plots have expired, the ownership of such assets are mired in litigation. The rents which corporations and other entities pay for leased property are extremely low, when compared to market rates. This has also led to litigation, and the utilisation of such plots is grossly inefficient.

• Recently, the BMC demanded that the payment of transfer premium should be at the rate of 10 per cent of the ready reckoner rate to grant permission for redeveloping properties and to process applications. Real estate developers claimed that this virtually halted redevelopment of property in the Island City. Such conflicts would be more easily resolved.

• Redevelopment of many properties under rent control is unusually difficult now because of rent control laws. In most cities, FSI (floor space index) regulations will set the FSI at a rate higher than the existing FSI. But in Mumbai, FSI was set at a rate much lower than the existing FSI many decades ago. This has made redevelopment of many buildings unlikely. It is not clear whether this would change anytime soon. But, in a city like Mumbai any policy move that makes redevelopment of property easier would transform real estate significantly.