Maharashtra government gives 'big sop' for redevpt of BIT chawls, builders say good only on paper

MUMBAI: The state government has drastically slashed the stamp duty for builders who redevelop municipal tenanted properties, which are located mainly in the island city between Colaba and Byculla. But the bonanza is only for the rehab portion of the project and not the free sale component. The sop is meant to boost redevelopment, currently stalled due to poor market conditions.


The state cabinet on Tuesday approved the reduction of stamp duty to just Rs 1,000 for the rehab component. The duty is calculated at 112 times the monthly rent plus 6% of the construction cost of the rehab tenement. "This works out to at least Rs 10 lakh per tenement and is paid by the developer," said Sunit Gupta, a valuator. "For the sale component, it is 6% of the market value of the flat, which is paid by the consumer."

A similar concession in stamp duty is already being offered for slum rehab projects, said sources.

At present, stamp duty on a tripartite agreement between the BMC, the developer and tenants attracts 2-3% of the rehab cost as stamp duty. "Duty reduction would help make a project viable," said an official.

The BMC has 4,000 such tenanted properties across Mumbai, said deputy municipal commissioner (estates) Chandrashekhar Chore. Of these, around 700 have been redeveloped. The tenanted properties are largely the Bombay Improvement Trust (BIT) chawls.

After redevelopment, the BMC continues to be the land owner. Land is leased to housing societies, where tenants have now become owners, said Chore.

"The present tenement size is around 200 sq ft. After redevelopment, tenants are entitled to 405 sq ft flats," he said. These chawls are allowed to be developed under rules for old and dilapidated buildings and for cluster redevelopment. The BMC gets a share in revenue from the sale of surplus flats as also an amenity.

An architect said redevelopment projects have virtually stalled in the island city and the fresh move "is too little an incentive". The real estate market continues to be in a slump. Pankaj Kapoor, MD of the real estate research agency Liases Foras, said that after 2012, all premiums have doubled to an extent where the developer does not have the margin to reduce apartment prices. "If the government genuinely wants to revive the real estate market, it must make taxes reasonable for all end users. Most of the housing supply is in the private sector and not in government projects like Mhada and SRA," he said.