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The government of Maharashtra is taking a proactive approach to address the persistent issue of high premiums imposed on real estate development projects in Mumbai, which is India's commercial capital. To tackle this problem, the state's Housing Minister, Atul Save, is planning to organize a meeting with key stakeholders from various departments including the Finance Ministry, Urban Development (UD), and Revenue Departments to conduct a comprehensive review of these charges.
Real estate developers have been advocating for a 50% reduction in these premiums, with the aim of making Mumbai more affordable for both homebuyers and businesses. The high costs associated with real estate development in the city have been a cause for concern and have led to Mumbai's diminishing attractiveness as the nation's financial hub.
Representatives from the Confederation of Real Estate Developers' Associations of India - Maharashtra Chamber of Housing Industry (CREDAI-MCHI) recently met with the state's Revenue Minister, Radhakrishna Vikhe Patil, to shed light on the issues contributing to the exorbitant real estate prices in Mumbai. The meeting with the Housing Minister, Atul Save, is seen as a promising step in addressing these concerns.
A reduction in premiums is expected to yield several positive outcomes. Firstly, it would alleviate the financial burden on homebuyers, making Mumbai's property market more accessible. Secondly, it could lead to an increase in tax revenue for the government, which in turn would bolster Mumbai's economy, ensuring long-term growth for the city.
Boman Irani, the president of CREDAI, emphasized the importance of addressing the issue of exorbitant premiums, stating that it has been a significant obstacle to the holistic economic progress of the city. According to their analysis, these premiums have not only deterred investments but have also stifled new developments, exacerbating the housing crisis. Consequently, addressing this challenge is crucial to ensuring Mumbai's sustained growth and prosperity.
On average, real estate projects in Mumbai incur approval costs of approximately Rs 54,221 per square meter through various premiums. Developers argue that this amount is nearly 25 times higher than the premiums charged in Delhi-NCR, 50 times more than Hyderabad, and 47 times more than Bengaluru for residential real estate projects.
To encourage developers to engage in low-cost housing, Atul Save, the Housing Minister, is expected to discuss the possibility of reducing these premiums during the upcoming meeting. This approach aligns with the government's goal of making housing more affordable and accessible to a broader segment of the population.
Dominic Romell, President of CREDAI-MCHI, commended the proactive stance taken by the Housing Minister and the government in acknowledging the pressing concerns raised through their study. This collaborative effort signifies a positive step towards fostering a more inclusive and sustainable real estate sector in Mumbai.
The importance of this issue is underscored by a comparative analysis conducted by CREDAI-MCHI. It revealed a stark difference in the economic growth trajectories of various Indian cities. Between 2000 and 2023, Hyderabad experienced a remarkable 36-fold increase in Gross Domestic Product (GDP), surging from $2 billion to $75 billion. Delhi and Bengaluru exhibited impressive 29-fold and 27-fold GDP growth, respectively. In contrast, Mumbai's GDP growth remained relatively modest, growing only 10-fold over the same period.
The study pointed out that a similar reduction in premiums implemented in 2021 had proven successful, contributing an additional Rs 12,000 crore in government revenue. The disparity in growth rates highlights the economic expansion gap between Mumbai and other major Indian cities. Hyderabad outpaced Mumbai's growth by a staggering 2683%, with Delhi and Bengaluru not far behind, surpassing Mumbai's growth by around 1,375% and 1,683.33%, respectively.
Furthermore, the study revealed a significant mismatch in the average price per square foot for apartments in the Mumbai Metropolitan Region (MMR) compared to Delhi NCR and Bengaluru. The average cost of an apartment in MMR is Rs 19,485, nearly double that of Delhi NCR and Bengaluru. This discrepancy impedes access to jobs and erodes Mumbai's competitiveness, discouraging professionals seeking affordability and safety.
The economic disparity between Mumbai and other cities can be attributed to various factors, including urbanization constraints and prohibitively high real estate prices. In contrast, Hyderabad, Delhi, and Bengaluru have harnessed their strengths, such as technology, government initiatives, and an attractive investment climate, to fuel rapid economic expansion. Addressing the issue of high premiums in Mumbai is not only a matter of economic significance but also a means to rejuvenate the city's appeal as a vibrant economic centre.
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