MUMBAI: Developers here pay an average of Rs 5,400 per sqft as approval cost through various premiums exacted by the municipal corporation and other government authorities, said a report by a body representing top builders. It argued that the high premiums are ending up affecting Mumbai’s growth trajectory as the country’s premier economic hub.
Cities such as Delhi NCR, Chennai, Bengaluru and Hyderabad levy much lower costs. Mumbai collects 25 times more premiums than Delhi NCR, 50 times more than Hyderabad, and 47 times more than Bengaluru for residential projects, it said.
With developers paying much higher approval costs in the city, there is a stark mismatch in the average price per square foot for apartments in the Mumbai Metropolitan Region (MMR) compared to Delhi National Capital Region (NCR) and Bengaluru, said a report by the organisation of top builders.
The average cost of a flat in MMR is Rs 19,485, nearly double that of Delhi NCR and Bengaluru. “This discrepancy impedes job access and erodes Mumbai’s competitiveness, discouraging professionals from seeking affordability and safety,” said the CREDAI-MCHI report, ‘Retaining Mumbai’s Financial Status’.
Recently, CREDAI-MCHI asked the state to halve the exorbitant
real estate premiums. In January 2021, the BMC offered a 50% discount on premium payments for 13 months in a bid to revive business after the pandemic. The BMC raked in over Rs 13,500 crore in that period, but collections have reduced drastically after the discount ended.
“The findings highlight the urgent need for immediate policy reform and a rationalised approach to the premium structure. The exorbitant premiums levied on developers have not only soared to unsustainable levels, burdening home buyers in the affordable and mid-affordable segments, but have also set in motion a domino effect that’s adversely affecting the city’s holistic economic landscape. Timely resolution of this matter is imperative to safeguard Mumbai’s enduring growth trajectory and uphold its esteemed status as the undisputed financial capital,” said Boman Irani, the immediate past president of CREDAI-MCHI.
The report examines Mumbai’s economic trajectory, tracking the gross domestic product (GDP) over 23 years (2000-2023) and contrasts the city’s international reputation as a financial hub. The GDP registered a relatively modest 10-fold increase during this period. In contrast, cities such as Hyderabad (36-fold growth), Delhi (29 fold) and Bengaluru (27 fold) registered meteoric growth. The report’s verdict: “At the heart of this economic discourse lies the conundrum of exorbitant premiums imposed on real estate development in Mumbai.”
It argues the excessive premium rates have a cascading effect on Mumbai’s economy. “The exorbitant cost of property is discouraging potential investors, who are flocking to cities with lower property prices. High approval costs contribute to the city’s already high cost of living, making it even more challenging for residents and businesses. The prohibitive cost of property acts as a bottleneck for new real estate development, resulting in a shortage of housing, commercial spaces, and essential facilities,” it said.
“High living costs, including property costs, are pushing people to seek a better quality of life at a lower cost in other cities. The high cost of property reduces disposable income, leading to a decline in economic activity and job creation,” it added.
The builders’ association said a 50% reduction in premiums would kickstart numerous development projects, injecting new life into Mumbai’s real estate sector.