The Maharashtra government is planning to make it mandatory for real estate developers to reserve 20% of area in a plot of more than 2,000 sq.metres for affordable housing.

Chief Minister and Housing Minister Prithviraj Chavan said that developers preparing a layout of more than 2,000 sq meters, will have to set aside at least 30 to 50 sq mt area. While in large housing society of more than 2,000 sq m, 20 percent of the flats with sizes ranging from 27.88 sq m to 45 sq m would have to be reserved. However, there will be no cap on the prices of flats, and rates will be determined by market conditions. In exchange for this reservation, the developers will get incentive FSI in the ratio of the low cost houses built. However, the rule would only be applicable for housing properties and projects, being developed by municipal corporation and councils in cities and towns.

The plots and flats will be purchased by MHADA at construction cost and sold to needy persons through lottery system. Chavan said due to this initiative, affordable houses will be made available in large numbers which will help to control the real estate prices as well. Development Control (DC) rules of municipal corporations and municipal councils will be amended to incorporate the necessary changes.

However, the proposed scheme is likely to witness stiff opposition from most realty developers because it is is not a feasible option for small-sized plots. Moreover, combining low-income projects with luxury apartments will not be commercially viable as the low-income buyer will find it hard to pay for high maintainance which is associated with these luxury projects.

Meanwhile the  Builders Association of India (BAI) has sought Chavan’s intervention in redevelopment of old and dilapidated housing societies, and also those in the MHADA layout, besides rehabilitation of slum dwellers. BAI claimed that redevelopment projects in all Maharashtra Housing and Area Development Authority layouts have come to a grinding halt and no proposals under the new policy have come up since last September as proposals under changed policy are not at all commercially viable.

In a separate development regarding the housing industry in the state, Maharashtra government’s decision to increase the Ready Reckoner (RR) rates in the city and the state is further likely to affect the property sales which remained subdued in 2011, industry apex body MCHI said on Monday. The state government has recently hiked the ready reckoner rates for both residential and commercial properties in the city, ranging between five and thirty percent, with effect from 1 January. Ready Reckoner is used to calculate the market value of a property for stamp duty and registration charges. Therefore, any escalation in them results in higher stamp duty. “Already the stamp duty collection has fallen by over 30 percent in the last year due to low sales of property. Any more financial burden on the customer is bound to affect the sales further and this goes against the government’s policy of providing affordable housing to the shelterless,” Maharashtra Chamber of Housing Industry (MCHI) President Paras Gundecha said. The government has based its RR calculus on the built-up area, a deviation from its decision of 2008 when it was based on the carpet area of a property. Government charges stamp duty on built up area while it asks the developers to charge by carpet area. “The overall difference between carpet and built up does not work out to be more than 10 per cent. But the government calculates the built up at 20 per cent more than the carpet area. This way, the customer lands up paying more from his pocket,” he explained.