Mumbai real estate – building approval delays, better or worse for you?

It is a well-known fact that the Maharashtra government tightened the screws on builders since the last 2 years.

For many months, fresh proposals for building construction projects did not get cleared as necessary approvals were not coming through. It felt like the builder lobby was finally feeling some heat.

Mumbai skylineSource: Wikipedia

It was met with a positive response from all. The builder-politician lobby is undoubtedly a strong force. When Chief Minister of  Maharashtra, Prithviraj Chavan, put his foot down he was lauded for the strong steps taken.

It seems positive, but I have doubts whether this was indeed for the benefit of home buyers like you and I.

What were the irregularities he tackled?

Take the case of so called “flower beds” which were constructed on the sides of the flat. These were not counted towards area that comes under permissible FSI when submitting plans to the authorities. But they were sold anyway to the home buyer.

There are fantastic buildings with parking spaces on different floors of a 10 storey buildings. I never understood those advertisements. Well, guess what? They were part of the same FSI rule avoidance.

What is the benefit of ending these irregularities?

The government later put out a set of rules in January 2012 which enabled them to charge premium for sanctioning area beyond the allowed FSI rules.

Customers were anyway paying for this area earlier so practically there was no change for them. But it gave builders a good excuse to cry hoarse about increased charges that they had to pay to the government. Notwithstanding the fact that they have made illegal profits in the past by selling area that was not allowed to be sold.

What is the state of affairs in Mumbai?

The Mumbai real estate market and most other cities across India are facing a slowdown with piling up inventory levels. Some newspaper reports talk of 37-40 months of unsold flats inventory.

Demand and supply determine price. Demand is shrinking. Flat registrations in Mumbai are at multi-year lows. In a time of shrinking demand, if supply is not reduced prices will come down.

Could there be another angle?

If fresh projects are not sanctioned, supply of flats is reduced and price will tend not to fall as much comparatively.

So was it all a charade? A smokescreen? And what better way?

There is no doubt that it brings transparency. The government can claim it is acting in the interest of consumers.

But the timing is critical. The speed-breaker for approvals came at a time which has conveniently given the builders an excuse to hold up prices and shout out loud against perceived injustice.

And this has been going on since forever.

Click on this link. It takes you to an excerpt from Maximum City, a book by Suketu Mehta, on the Google Books page. It talks about how builders got away with constructing office buildings at Nariman Point in the 1970′s.

It was actually supposed to be a residential and educational area as per the development plan at that time. Possibly, if things had happened differently, Mumbai might have shaped up to be a city less skewed in terms of development. There would lesser north-south transport issues.

There is very big money at stake in real estate. You and I are tiny players in the larger scheme of things.

I would love to hear your opinion on this issue. You can use the comments box below.

Join the Start Stock Investing E-Course. It's free.

15 lessons over 15 weeks. Over 500 people who have already signed up. Start off. Learn how to invest in stocks for the long-term.


  1. says

    Nice article. according to me we have to think why there are delays in approval of building projects in Mumbai?. I think if the delays are regarding the passing of illegal projects then it’s ok. because already there is increasing influx in Mumbai. Mumbai has no shape. only legal projects should passed with no delays.

    • says

      I agree with you that in an ideal world there should be no delays. But in an ideal world, we should also have some town planning in a city like Mumbai. Residential, commercial and retail development cannot be allowed to come up wherever the developer chooses to launch a project. In contrast look at Chandigarh. Completely planned. It’s a treat to move within the city unlike Mumbai.

      There is too much corruption here. I don’t know when it will ever happen.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>