Real estate prices in Mumbai and its suburbs are set to increase by at least 25% in the next year due to a doubling of Transferable Development Rights (TDR) rates, a key factor in slum redevelopment. In the eastern suburb of Mulund, TDR rates have soared from ₹3,500 per square foot six months ago to ₹6,000 per square foot today. Similarly, in the western suburb of Borivali, TDR rates have jumped from ₹3,000 per square foot to ₹5,700 per square foot in the same period.
The surge in TDR rates is attributed to the increased demand from developers who are looking to utilize TDR to construct more homes beyond their original permitted floor space index (FSI). FSI is a measure of how much construction is allowed on a given plot of land. The strong demand for housing in Mumbai is another factor driving up prices. Over 1.5 lakh homes have been sold in Mumbai and its suburbs in the past year, and more than 40,000 homes have been sold in the past four months alone.In addition to rising TDR rates, the cost of construction materials has also increased significantly, putting further upward pressure on home prices.
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What is TDR?
TDR is a tradable permit that allows developers to construct more floor area than is normally permitted by FSI norms. Developers can purchase TDR from other projects to utilize the additional floor space.
In Mumbai, TDR is generated from slum redevelopment projects. Developers working on slum redevelopment projects are granted TDR in proportion to the area of the slum land they redevelop. This TDR can then be sold to other developers who can use it to construct additional floor area in their own projects.
Impact on Homebuyers
The rising TDR rates and construction material costs are expected to have a significant impact on homebuyers in Mumbai. Home prices are expected to continue to rise in the coming months, making it even more difficult for people to afford to buy homes in the city.