High hopes over higher FAR

The Central Government’s approval for the proposal to increase the FAR in Delhi state recently has got a positive response from the industry players. The increase in FAR is for residential plots which are 750 square meters or higher, wherein the FAR has been increased to 200 from 150. For plots bigger than 1,000 square meters, the FAR has gone up to 200 from 120 and ground coverage has been increased from 40 per cent to 50 per cent. This move will result in bigger apartments — and with no change in density norms, ticket-sizes may rise as well.

Rohit Raj Modi, President, Credai NCR, said, “On behalf of the industry, we welcome this move as it will address the rising problem of providing accommodation to all and in realising the dream of ‘Housing for all by 2022’. This extra FAR would definitely help developers with extra space and thus would help match the demand and supply gap in Delhi”.

Commenting on the impact of this move Anuj Puri, Chairman & Country Head, JLL India, said, “If used judiciously, this provision in conjunction with the increased FAR can be utilised for increasing the housing stock on residential plots going forward. Only then will some movement towards creating more houses and an associated reduction in prices will be likely. With height restrictions for individual residential plots not increased from the current 17.5 meters along with stilt parking provisions, developments are likely to remain of same height”.

Calling it an opportunity for more vertical growth Vinay Jain CMD AVJ Group, “We appreciate the decision to increase the FAR, though it will only have figurative difference on the real estate market. FAR has been increased from 150 per cent to 200 per cent on 750-1,000 sq. m plots, it has been raised from 120 per cent to 200 per cent for plots of 1,000 sq. m and above. The additional FAR allowance will be valuable for redevelopment in projects. It will positively bring in more supply in the market and create outlook for more affordable housing, this is also an opportunity for developers to grow vertical.”

There is also likely be an impact on group housing plots, where ground coverage that was previously 33.3 per cent will now be 50 per cent. This will allow for bigger apartments to be built, though FAR here was already 200 under the master plan. No height restrictions were applicable for group housing plots, and hence there is no issue for such developments with regards to height provisions.

A sizeable uptick in the stock prices of listed players which are likely to be holding prime lands in Delhi — notably DLF, Unitech and Anant Raj — has been seen. “Better valuation for such land on account of increased FAR for residential plotted developments is the likely factor behind this increase in their respective stocks. The impact may be seen in the short-term, but there should be more going forward when the mid-term review of the master plan 2021 is completed and the changes notified by the end of the year”, added Puri.

Experts are, however, keeping their fingers crossed about the exact impact of this move on the property prices as it will be clear once the issues of change in density, number of dwelling units and height are addressed in detail. Though no clarity has been given so far on an increase in the dwelling units allowed on the larger plots, there is a provision in the draft Delhi Master Plan 2021 which allows for an increase in the number of dwelling units. Under this provision, the cost of a concurrent augmentation of associated civic infrastructure has to be borne by the developer and paid to the authority. “This provision in the draft master plan can be used to increase the number of dwelling units”, added Puri.

Mohit Goel, CEO, Omaxe Limited said, “The increase in FAR will encourage vertical and new development in Delhi. It is a good move by the government to allow more space for development. This will help stem the rise in price of homes in Delhi and give a boost to affordable housing. However, this move will put immense pressure on Delhi’s infrastructure and resources for which the government must think ahead.”

“We think that increase in FAR shall be effective if it is accompanied by increase in dwelling units, density and height, said Modi.”

Source: The Tribune
Dated: 30th November 2014

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