Builders in Mumbai are paying a hefty average fee of Rs 5,400 per square foot for various approvals required from government authorities, according to a report from an organization representing top builders. This high fee is impacting Mumbai’s growth as a leading economic hub, especially when compared to cities like Delhi NCR, Chennai, Bengaluru, and Hyderabad, which have much lower approval costs.
The report reveals that Mumbai collects 25 times more in premiums than Delhi NCR, 50 times more than Hyderabad, and 47 times more than Bengaluru for residential projects. This significant difference in approval costs is leading to a significant gap 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 a flat in MMR is Rs 19,485, nearly double that of Delhi NCR and Bengaluru. This disparity is hindering job opportunities and competitiveness in Mumbai, discouraging professionals from choosing the city due to affordability and safety concerns, as stated in the CREDAI-MCHI report titled ‘Retaining Mumbai’s Financial Status.’
To address this issue, CREDAI-MCHI has called on the state to reduce the high real estate premiums. In January 2021, the BMC (Brihanmumbai Municipal Corporation) offered a 50% discount on premium payments for 13 months to boost business during the pandemic. However, premium collections have significantly decreased after the discount period ended.
The report emphasizes the urgent need for policy reform and a more rational approach to premium structures, highlighting that these high premiums are burdening homebuyers in the affordable and mid-affordable segments, affecting the overall economic landscape of the city.
The report also examines Mumbai’s economic growth over the past 23 years (2000-2023) and compares it to other cities like Hyderabad, Delhi, and Bengaluru, which have experienced substantial growth. It points out that the excessive premium rates are holding back Mumbai’s economy by discouraging investors, raising the cost of living, and limiting real estate development.
The high cost of living, including property prices, is causing people to seek a better quality of life in other cities with lower costs. This, in turn, reduces disposable income, leading to a decline in economic activity and job creation.
The builders’ association suggests that a 50% reduction in premiums could stimulate numerous development projects, breathing new life into Mumbai’s real estate sector.