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S. Shanker
Suresh P. Iyengar

Mumbai April 8 A founder-member of the Maharashtra Chamber of Housing Industry and now its President, Mr Mohan Deshmukh says the Mumbai realty segment has hit a roadblock despite skyrocketing prices.

In an exclusive interview to the Business Line, he spelt out the constraints in the builder community, including what his Chamber's 450-odd members face, as the race for land hot up by the day in the city.

We hear of a Rs 25-crore apartment in Bandra Kula Complex and Rs 1,13,000 a sq ft in Malabar Hills. Where is the market heading?

Don't blame the builder. He's in business to make money and the offer just came his way. See, it all boils down to Government policies. Land is scarce and unless the Urban Land Ceiling Act (ULC) and the Rent Control Act (RCA) are repealed there is no stopping runaway prices. Land price is the issue.

Will scrapping the Acts alone bring down prices?

The Rent Control Act is predominantly in favour of tenants. So, few landlords prefer to develop their buildings and hence there are many dilapidated buildings in prime locations in a precarious condition.

Similarly ULC. Any development by a promoter has to be done in the landlord's name. Moreover, mere mention of FSI (floor space index) is taboo here.

The permissible FSI at Nariman point was 4.5 in 1964. In 1991 it was made 1.33 for Mumbai city and 1 for suburbs.

A few years back, the Government permitted additional FSI for redevelopment of old buildings alone. With no clear title and possession of property, how can organised development take place. So, on one side you have 27-storeyed skyscrapers and on the other you have the dilapidated buildings and slums.

I can say for sure that after 1960 not a single building has been built for rental purposes.

Home loan rates are up and cement prices too have risen. Will it not hurt your project workings?

I don't think home-seekers will worry too much about loan rates and as of now builders are capable of absorbing material cost hikes such as in cement which in any case will not be over one per cent of total project cost.

Affordable housing, the marginalised sections apparently have nowhere to go except outside the city.

There are reports that the Brihanmumbai Municipal Corporation had approached the Government for grant of extra FSI for accommodating all the displaced mill workers' families.

As per the present FSI they can only accommodate 6,000 of the 29,234 unsettled families. The Government is also considering higher FSI for the Dharavi slums. These are welcome measures.

But rather than being selective, FSI should be raised for all projects. Procedures should also be simplified.

One needs 52 NOCs (no objection certificate) for a project and this is a major reason for many large corporates to shy away from this sector here.

So, rules and regulations favour the small builders to the extent of keeping large players away?

It is anyway at the cost of development.

The Reserve Bank of India appears to be in favour of a regulator for the realty sector. Will it bring about the much-needed transparency in the working of developers?

The construction industry should not be equated to service sectors such as telecom and aviation. Here the demand determines pricing. And, the pivot issue is land price where the landlord or developer has total ownership rights over property. Any infringement on the rights issue would be open for legal recourse. Regulation should be confined to service quality and buyer-seller contractual obligations.

More Stories on : Real Estate & Construction | Interview | Outlook | Maharashtra

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