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.
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.