Transferable development rights and in case of Mumbai

1. TRANSFERABLEDEVELOPMENTRIGHTS(TDR)–THECONCEPT
Transferabledevelopmentrightsor tdr canbeconsideredasanimportantrawmaterialintherealestateindustry
asitallowsthedeveloperto buildoverandabovethepermissiblefloorspaceindex(fsi)undertheprevalentrulesof
therespectivelocations.On thebackofgrowingurbanizationandlackofavailabilityofspace,tdrassumesagreater
importanceespeciallyinthesuburbanareasofthecities.
When the government undertakes compulsory acquisition of individual land parcelsfor creating infrastructural
projects,itisrequiredto compensatethe landowners. Thecompensation providedby the governmentisusually
lower than the marketrate,and hence they introduced the concept of transferable development rights.These
rightsareobtainedinthe formofcertificates,whichtheowner canuse for himselfor cantradeinthemarketfor
cash.
Basedonthestageofdevelopment,acityisclassifiedintovariouszoneslikefullydeveloped,moderatelydeveloped
andsparselydeveloped.Thetransferabledevelopmentrightsareusuallytransferredfromthefullydevelopedzones
to other zones andnot vice-versa.For example,inthe caseofa citylikemumbai,the tdr whichisgeneratedinthe
island city (i.e. Southern part) will be utilized for development in the suburban areas (i.e. Northern part). The
underlying principleofsuchutilizationisalsotofacilitatedevelopmentoftheunderdevelopedareas.
Typesoftdr
Predominantly,therearefour typesoftdr that aregenerated–roadtdr,reservedplotstdr,slumtdr andheritage
tdr.Inmostofthecities,majorityoftheconstructionactivitiestakeplacewiththeaidofslumtdr.
Tdr market
Justasthestockmarket,citieslikemumbaidohaveahugetdrmarketinplace.Asthesetdrcertificatescanbetraded
inthemarketfor cash,most ofthedeveloperspurchasethesameandutilizethemforincreasingtheirpermissible
developmentrights.Tdrtradingfollowstheopenmarketprinciplewhereinthepricingisentirelydrivenbydemand,
supply andavailabilityandthereisno governmentcontrol over thesame.Inmost ofthecases,anaverageperson
doesnot gettoknowaboutthewaytdr isbought,soldor transacted.
Calculation of development right (dr):
Illustrationfor useoftransfer ofdevelopmentrights

3. Criticismtotdrconcept
On a conceptual level,tdr seemed to be a perfect urban development tool as it facilitatedthe development of
suburban locations.However,developersused itasa tool tomaximizethesaleableareaina fewprimelocations.
Thisexcessiveconstructionhasresultedincongestioninthesuburbs,haphazardandunplanneddevelopment,and
intensepressureoninfrastructure-a moveseverelycriticizedbytheplannersandenvironmentalists.
Another criticismtotheconcept isthatithas leadtoanincreaseinthereal estateprices.Sincethetdr acquisition
costisloadedonto theprojectcost, thedevelopersincreasethefinalpricingoftheproject.Inordertocurbthis,the
governmentshould havesomemechanismtokeepacheckonthe quantumoftdr availableinthemarketandthe
trading price.
In caseofMumbai
For acitythathasbeenaskingformoreareastobedeveloped throughextrafsi,throughflexibledevelopment
normsandbydoing awaywiththearchaicregulations,themaharashtragovernment'snewtdr (transferof
developmentrights)policyappearstobeawelcomemove.Sofar,tdrwasbannedinmumbai,fearingthatmore
construction wouldfurtherburden thealreadycrumblingcivicinfrastructure.Thebuiltenvironmentofmumbai's
realestatemarkethaswelcomedthestategovernment'sdecisiontorolloutitsnewtdrpolicyformumbai,where
additionalconstructionrightswillbegiventobuildersdepending onthewidth ofthe roadalongaprojectsite.
In 2010, the government of maharashtra introducedan additional fsi of 0.33 that could be purchased from the
government for properties located in suburban mumbai but that has been stayed by the bombay high court.
Thoughdeveloperscanstillavailthemselvesofanfsi oftwo, thelossoftheoptionto buyfromthegovernmentwill
meanthat developers areentirelydependent on marketpurchasesof tdr. Earlier,thegovernmentorder meant
thatapartfromtheinherentfsiofone and0.67fsithatcouldbepurchasedfromthemarket,thedeveloperscould
buy0.33fsifromthegovernmenttobeabletoprovideabuilt-upareaoffsioftwo.Nowtoachieveanfsioftwothe
owner/developer has to buy tdrs entirelyfromthemarket.Thiswill resultinincreaseddemandandpricefor tdr.
Eventually,itmeansan increaseinthe cost ofprojects, resulting inanincreaseof real estateprices.Thesaleand
purchaseoftdr isamarketphenomenon.Thepricesoftdr arevariabledependingonthelocationoftdrgeneration
andthelocationoftdr deployment.Thus,thereisa degreeofuncertaintyinpricing ofthetdr inthemarket.
The new policy 2016:
Thenewtdrpolicysuggeststhatnoextraconstructionbenefitsintheformoftdrwillbeofferedforprojectsonroads
less than nine metreswide.However, the government has alsosaidthat the bmc will convert all roadswith the
widthoflessthanninemetrestoninemetresandabove,aspersiteconditions.Ifthegovernmentacquiresaprivate
land,freeofcostandwithout anyencumbrances,theowner ofsuch aplotintheislandcity,willbeentitledtoatdr
2.5timesthearea surrenderedanda maximumoftwotimesthearea surrenderedinthesuburbs.

4. Tdrcanbegeneratedduringgovernmentacquisitionofplotsunder reservationforpublicpurposes suchasnew
roadsandroad-widening,or amenitiesasproposedinthearea’sdevelopmentplan.Other than forplotsunder
reservation,tdrcanalsobegeneratedtocompensateforunutilisedfloorspaceindexinaheritagepropertyor a
precinctor fortheconstruction ofhousing for slum-dwellers.
“thenewlandacquisitionactpavedthewayforamuchhighermonetarycompensation,whichmadeitdifficultfor
localbodiestotakeover reservedplotsfordevelopment.Localbodiesdon’t necessarilyhavemoney,but theycan
issuedevelopmentrights.Itcanalsokeeppropertypricesincheckduetoincreasedavailabilityofbuilt-uparea,”
Thegovernmenthasalsoprovidedfortheavailabilityofadditionalorincentivetdrof20percentofsurrendered
landfor landownerswhosubmitproposalswithinoneyearofthegovernment’snotification.Similarly,thosewho
submitproposalswithintwo,threeandfour yearswillgetincentivetdrof15percent,10percentand5percent,
respectively.However,thestatehasdecidedtolinkthe permissibleutilisationoftdrtothe widthofthe roadacross
thestate.Accordingly,adevelopercanloadthemaximumamountoftdr onplotsfacingaroadthatisover30
metreswide.
For plotsupto 1,000-square-metres,developerscanloadatdr of0.2ifthewidthoftheroadfrontingtheplotis
between9and12metres,and0.3iftheroadwidthishigherthan12metres.For plotsbetween1,000to 4,000-
sqm,thepermissibletdrusagewillbe0.4iftheroadwidthis9-12metres,0.5for aroadwidthof12-18metres,0.6
ifitis18-24metres,0.8for 24-30metresand1iftheroadwidthishigherthan30metres.Similarly,forlargerplots
over4,000-sqm,the permissibletdrusagewillbe0.4foraroadwidth of9-12metres,0.65for12-18metres,0.9
for18-24metres,1.15for24-30metres,and1.4forplotsfacingroadswiderthan30metres.
Thegovernmenthasalsolinkedthepermissibleusageoftdr withthelandratesoftheareasthebuilt-upareaisto
beusedintoensurebalanceddevelopment.Thepermissibletdrusagewillbelower inareaswithhigherlandrates
andvice-versa

5. Astheabovetableimplies,tdrcannotbeutilizedonprojectslocatedon roadshavingawidthoflessthan9meters.
Onthe otherhand projectslocatedalongroadswithwidthsof30mandabovewillgetthemaximumbenefit.
Widthoftheroadswillbeconsideredasperdp (developmentplan)2014-34ofmumbaiwhichisexpectedtoget
clearancebymay2017.
The advantage:
Atamacro-levelassessment,itcanbevouchsafedthat therealbeneficiarieswillbedeveloperswithprojectsalong
roadsthatare30metreswide,likelbsmarg,svroad,jogeshwari-vikhrolilinkroad,santacruz-chemburlinkroadand
e moses road. Many builders redeveloping in these areaswill be benefited as a 1,000 square metre plot can
currentlyavailof2,000sq mtobuildwithanfsioftwo.Under thenewrule,onewillget2,500sqmtobuildwithan
fsi of 2.5. The areas where the road infrastructure could not be developed by the government can now be
developedwiththetdr generating extra money.
In conclusion:
Thereisno denying that the premiumfsi will helpthecityin going vertical,thusresulting inthecreationof more
housing stock, coupled with more stability in prices. It is to be seen how the tdr plan is rolled out without
compromisingthenaturalhabitats.Moreover,ithas tobe rolledout inamanner sothat itdoesnot put anyextra
pressureonthealreadycrumbling infrastructureofthecity.
 increaseinthebuiltuparea andtheextentofutilizationwill leadtohigher populationdensitiesacrossthecity.

6.  theremoval ofrestrictionfromusing tdr intheislandcitywill leadtoanincreaseinsupplyofreal estateinsouth
mumbai.Liftingtherestrictionofutilizingthe tdr onsouthbound localitieswillgivedevelopersflexibilitytoselltheir
tdrs instronger marketswherethedemandand pricesarehigher.Thiswill alsoallowthedeveloperstogenerate
greater profitsfromsell oftdr.
linkingtdr utilizationtoroadwidthwillshiftpopulationgrowthtoareaswithbetter infrastructure.Thiswillleadto
better populationdistributionandreductionincongestion.
https://www.hdfc.com/blog/transferable-development-rights-tdr-concept
https://www.ibanet.org/publications/real_estate_newsletter/real_estate_sept_2011_india.aspx
http://indianexpress.com/article/cities/mumbai/barring-mumbai-govt-doubles-tdr-across-
maharashtra/
https://www.maharashtra.gov.in/site/upload/acts%20rules/marathi/tdr%20policy-37(1aa)(c)-
16.11.2016.pdf
https://content.magicbricks.com/property-news/mumbai-real-estate-news-industry-news/tdr-a-
realty-game-changer/89537.html
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http://hdfcrealty.com/pdf/970056nov_2016-tdr%20policy%20update%20rv%201.pdf