BENGALURU: Several real estate projects, that translate into hundreds of crores in investment, have been stuck within the corridors of Vidhana Soudha for the past 14 months. The reason being cited is that the state government has informally directed the Bruhat Bengaluru Mahanagara Palike (BBMP) and Bangalore Development Authority (BDA) — the two sanctioning agencies — to reserve approvals for projects, which involve transfer of development rights (TDR), until a new policy is rolled out.
“About 1,000 TDR files are pending with civic agencies, awaiting approval. Since September 2015, not a single one has been cleared, jeopardising our investments. When we seek explanations from officials, they claim that the files are pending before Bengaluru development minister KJ George,” said sources from the realty sector. Additional chief secretary for the urban development department, Mahendra Jain said that the new TDR policy was getting delayed owing to “inevitable reasons”, adding that the government was “trying to expedite the process, and will soon take a final call.”
The state government has been acquiring private property for infrastructure development, particularly for road-widening projects, and giving those who lose their land TDRs, especially in Bengaluru. “The delay in sanctioning TDR files, and implementation of the new policy is causing undue hardship to builders and investors. The state government should walk the extra mile to make these rules effective, easy and implementable,” said VK Jagadish Babu, president of the Confederation of Real Estate Developers’ Association of India (CREDAI), Karnataka.
Earlier this week, industries minister RV Deshpande pointed out that the failure to approve construction and building plans quickly was hurting the state’s ability to draw investments. He added that this was one of the reasons for Karnataka falling from the ninth position to the 14th in the ease of doing business (EoDB) index.
However, the proposed TDR policy has developers worried since they fear that the new rules could end up making redevelopment projects unviable. TDR is a vital tool for builders because it gives them construction rights over and above the normal floor space index (FSI), which is permitted when they construct or redevelop buildings on busy avenues. A TDR is generated when the developer or owner surrenders land to the government, in return for which a certificate that provides additional construction rights in the area or zone of the plot that has been surrendered.
Under the old rule, a loss of 100 sq ft could yield a maximum TDR of 150 sq ft in that particular zone. Although, under the new rules, loss of 100 sq ft property anywhere in the city could entitle the owner to 250 sq ft without zone restrictions, a fear lurking among the developers and builders is that the TDR could be linked to guidance value, meaning that the value recovered will be based on the prevailing guidance value in the area where the TDR is sold. “The guidance value is not based on any scientific method and in many areas, it does not reflect the market value. Builders who bought TDRs on earlier evaluations could end up getting cheated,” said a developer.
Another source said, “This will make redevelopment either unviable or drastically cut the profit margins for the builders.” Allaying such fears, Mahendra Jain said that the new policy would result in a win-win situation for the government, those who lose land and the developers. The government has been promising to unveil the new TDR policy since June 2015, after an expert committee recommended that the existing policy be overhauled. During a routine tour of the city, George said that an attractive TDR policy, one that would facilitate development projects in the city, was in the offing.
Introduced in 2010 by the then BJP government, TDR was envisaged as a too to help the government save money on land acquisition and ensure proper monetary compensation for those who lost their property using certifications. However, owing to the opacity of the rules, the TDR market has failed to take off.
Credits ET Realty