Short Term Lull in Premium FSI Allocation in Chennai Realty
Premium floor space index, when introduced by the Chennai Metropolitan Development Authority 3 years ago, was seen as a tool that might encourage vertical growth of town. FSI is that the ratio of land space to the built-up area.
Over these years, it's proved its potential to be a cash spinner for the builder community and therefore the regulatory board as well. Whereas builders have cashed in on the steep hike in market costs, the CMDA has generated further revenue of 520 crore through aggregation of premium charges for the extra FSI sanctioned.
Starting with a meagre six crore aggregation in 2009-10, the revenue from premium FSI charges shot up to one hundred sixty crore the subsequent year and scaled additional up to three hundred crore last monetary year. Within first two months of this year the CMDA has earned fifty crore through allocation of premium FSI.
The euphoria over premium FSI looks to have paused for now owing to the recent exponential hike. Because of the premium charges for the extra FSI is calculated primarily based on the rule of thumb values, it doesn't create economic sense to avail premium FSI when the rule of thumb prices are beyond the market value. Matters within the outskirts of Chennai where guideline values have gone up by even ten times, matters remains worse.
But, the first 2 months of this year have yielded smart revenue for the CMDA through sale of premium FSI as a result of most of these cases had got sanctions last monetary year. Hence, they need to pay the premium charges on the premise of earlier guideline values. A sizeable phase of individuals who apply for premium FSI are those constructing buildings for self use.They would still avail the power.
Going by the estimation of growth in costs of residential property in Chennai within the last 5 years, the lull could also be short-lived. The costs of residential property in Chennai worth index of the National Housing Bank shows that the apartment costs have shot up by thrice within the central business districts of the city since 2007. Even the backwater regions of town command an apartment worth of 7000 to 8000 per sq ft currently.
Meantime, the Directorate of City and Country coming up with the regulatory board for the remainder of the Tamil Nadu, is on the edge of presenting premium Floor Space Index. It has now become a basic requirement with the introduction of the development management rules for the DTCP last year.
As the metro rail chugs along a forty five km stretch across Chennai, it should open up a gold mine for the state government and supply the town a full new look.
The government chanced upon the monetary potential of the metro rail whereas examining a proposal from Chennai Metro Rail restricted to introduce extra floor space index at intervals five hundred metres of the metro corridor.
The proposal, that came up after the meeting CMRL committee that has been forwarded to the CMDA for commissioning an in depth study. We expect the report back to be prepared in 3 months.
The potential for revenue generation through selling area is staggering. CMDA sometimes offers FSI of 2.5 for high-rise buildings within the town. If it's increased by 1.5 FSI along the metro corridor, the state will generate a revenue of about Rs 2.5 lakh crore through residential property tax by adopting the yardstick of the prevailing premium FSI scheme. If Floor Space Income is increased by 3%, the revenue can go up to rupees four lakh crore. Bangalore metro corridor is additionally engaged on the next FSI model.
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