Increased levies to make redevelopment projects unviable, say developers

Mumbai: Shocked by the increase in charges levied by Mhada, leading developers’ body CREDAI-MCHI, which represents 1,800 developers in MMR, has made a representation to the state Housing secretary demanding that the government reconsider the sharp increase in charges on the ground that it would make redevelopment of old cess buildings unviable for developers.

The Mhada Vice President and CEO Sanjeev Jaiswal had issued a circular on September 13 revising these charges on the ground that this was to discourage developers from delaying redevelopment after obtaining NOC and ensure timely completion of the projects under Development Control Regulations 33 (7) and 33 (9). There are 30,000 cessed buildings in Mumbai

The scrutiny fees for NOC proposals for projects up to 500 sq m were revised from ₹25000 to ₹1 lakh, for area between 500 and 1000 sq m the fees were revised from 50,000 to rs two lakh, and for plot areas ranging from 1000 to 8000 sq m and more, the fees were revised from ₹one lakh to up to ₹12 lakh. Similarly the charges for annual revalidation of the NOC were revised from ₹one lakh to ₹10 lakh. The fee increase ranges from 400% to 5000% shocking developers.

In their representation to Additional Chief Secretary, Housing Valsa Nair Singh submitted earlier this week, CREDAI-MCHI President Domnic Romell pointed out that developers undertake redevelopment of old cessed buildings after investing a huge amount before commencement of work, and the sharp increase in scrutiny fees would make redevelopment unviable for developers.

He pointed out that after MHADA grants NOC to a developer, the developer submits proposal for approval of building plans to the BMC, and after BMC approves the plan, the builder has to apply for NOCs from other government departments such as NOC from the Collector for leasehold land, NOC from Railways if he plot if close to railway boundaries, NOCs from civil aviation, Metro, Mono Rail, CRZ authorities if the plots are near the airport or metro rail or the coastal area. Morever, NOCs are also required from BMC’s Estate departet, heritge department, and high rise committee if there is height restrictions which take a longer time to obtain.

Romell pointed out that after BMC approves plans, the developer has to pay hefty premiums to get the plans issued. In addition to these, as per Mhada norms, the developer to deposit transit rent in escrow account every year till the tenants are rehabilitated.

Moreover, before obtaining the Intimation of Disapproval (IOD) and before demolishing an old cess building, the NOC holder has to deposit 10% of construction cost of rehab portion in the form of a bank guarantee or fixed deposit in the name of the Chief Officer of Mumbai Building Repairs and Reconstruction Board (MBRRB).

“Thus it can be seen that a huge amount has been blocked before commencement of work and after commencement of wor if this revalidation charged have to be paid, the entire proposal will become unviable,” said Romell in a two-page representation.

The letter also pointed out that old cess buildings often require immediate and major repairs, and Mhada does not have sufficient funds to do the repairs and redevelopment of these buildings. In some cases, Mhada moved the tenants into transit camps and the residents continue to languish for indefinite periods since Mhada does not have the adequate funds to reconstruct such buildings.

The letter pointed out that in such a scenario, the developer is taking responsibility of such buildings by investing huge amounts, but huge scrutiny fees will impact the feasibility of the projects and no developer will step forward to redevelopment projects.

Romell requested that the government reconsider the increase in these charges, and reinstate the previous charges. He also demanded that instead of one year validity, the revalidation of NOC should be extended for a period of five years as the bank guarantee for 10% construction cost of rehab portion deposited by the developer is for five years.