The most important reform that needs to be introduced is to permit the use of Transferable Development Rights (TDR) across the entire State and not just within the Municipal Corporation of Greater Mumbai (MCGM) limits.
Over the past several decades, Mumbai has witnessed very high domestic migration on account of a large variety of opportunities offered by it. As a consequence, the Municipal Corporation of Greater Mumbai (MCGM) was called upon to enlarge and upgrade its pool of civic amenities for the upcoming and existing population. Many of these civic amenities are land-centric and require private lands to be acquired. These comprise amenities such as new roads, widening older roads, public and open spaces such as gardens and parks, schools, hospitals, housing, markets and a whole range of community services.
However, acquisition of private lands requires compensation money to be paid to the private owners. Since land in Mumbai is scarce, land rates in Mumbai have been very high. The MCGM, as a result, has found it difficult to acquire lands of the order required. The situation was made worse by the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFTLARR). This Act requires MCGM to pay two times the Annual Ready Reckoner (ARR) rate, making it virtually impossible for it to find sufficient money in its budgets for land acquisition. The MCGM, therefore, needs innovative instruments to not just raise revenue but also develop urban infrastructure projects by acquiring the reserved land.
Although the MCGM prepared a Development Master Plan as far back as in 1967, which introduced the concept of land reservations for various infrastructure services, the development of infrastructure did not progress much as the conventional methods of land acquisition met severe difficulties as cited above. Of the various innovative measures that it adopted, the Transferable Development Rights (TDR) is one of the key instruments.
The United States was the first to use the concept of TDR for achieving a compact city development and preventing urban sprawl. This instrument has been used in Asian cities as well, with Mumbai being the first. The following table below gives a comparison of the various objectives of TDR in the US and Mumbai:
The Ministry of Housing and Urban Affairs, Government of India, has defined TDR as a “Development Right to transfer the potential of a plot, designed for a public purpose in a plan… for utilisation by the owner himself or by way of transfer to someone else from the present location to a specified area… over and above the permissible limit in lieu of compensation for the surrender of the concerned plot.”
According to the MCGM, TDR can be issued for the following:
i. Lands acquired under reservation for public purposes like new roads, road widening, school, hospitals, parks, etc
ii. Lands which are deemed reserved according to any law of the state
iii. Un-utilised FSI in case of heritage property as restrictions imposed on it
iv. Land utilised for slum re-development and for project affected persons (PAP)
v. If any individual voluntarily offers his land for public purpose and subject to eligibility test by the Municipal Commissioner, MCGM, a grant of TDR is made
vi. TDR, thereof, can also be issued for purposes as notified by the government from time to time
TDR is important for slum re-development. It enables the developers to build free housing for slum dwellers under the Slum Rehabilitation Scheme. Slum TDR is generated where permissible potential of the slum area does not get consumed in the same plot (in-situ development) or when private developers come forward to build houses for projected affected persons (PAP tenants) and hands over these to the government. This helps for faster slum re-development as builders are incentivised to use the upcoming TDR for their other profitable projects. Every builder in the city utilises certain percent of slum TDR to build over and above the permissible FSI.
However, the concept of slum TDR, which was introduced back in 1997, has been criticised by civic activists for intensifying densification in the already congested areas of the island city and suburbs. Over eight crore sq. ft. of slum TDR has been used by developers to build towers and redevelop housing societies over the past two decades in suburban Mumbai.
After a TDR is issued in the form of a Development Rights certificate, these are traded in the open market for cash, wherein the developers purchase the same for realising the entire potential of their plot. This creates a local, city level market for TDRs and the prices totally depend on their demand and supply. In Mumbai, these TDRs are no less than the blue-chip stocks. An average citizen does not even know when and where these certificates are traded.
Thus, it is known that TDR has a great potential for utilising any land and it becomes even more important in case of cities where land is scarce. Although reservation and amenities TDR are used on a regular basis, slum TDR lies at the helm of any development policy, which is fraught with political ramifications.
Heritage TDR, on the other hand, is largely unutilised and not very popular in Mumbai as not enough compensation is provided. However, the new Heritage Regulation Policy 2013, has allowed owners of heritage properties to sell any extra FSI available as TDR at market rates. This allows property owners to enjoy a re-development boom without harming the historical relevance of these buildings.
Despite the above-mentioned positives of TDR, they are not without their negatives:
i. There is inequality in utilisation of TDR as much of it is being used in the suburbs area which already lacks adequate infrastructure to take any additional burden.
ii. There are several limits imposed on the full utilisation of TDR as 50 percent of the additional development right has to be bought from the MCGM/government in the form of additional premium FSI and remaining is procured from the open market.
iii. Varying cost of development is not considered whilst generating TDR. For example, same value for TDR is given for the construction of same types of amenities like schools, hospitals, playgrounds, roads, etc. Some amenities like schools and hospitals involve large costs that need to be recovered through TDR.
iv. There has been limited effort to develop an efficient market for the TDR. The MCGM/government has not considered to develop a TDR bank, or a trade house of sorts, for ensuring a healthy market.
v. The TDR market involves a coterie of large developers of the city, with enough finance to acquire as much TDR as they can. This has led to severely thin volume of TDR exchange and this process has, thus, become highly non-transparent. In the US, this function is often outsourced to a professional third party.
vi. TDR has also led to an increase in the real estate prices. Since the TDR acquisition cost is loaded onto the project cost, the developers increase the final pricing of the project.
Thus, certain reforms are vital to ensure the smooth and transparent use of TDR. For example, procedure for the use of instruments should be more clearly laid out to remove confusion amongst small developers regarding the use of FSI and TDR at the same time to avoid delays in project implementation. Scientific objectives need to be put forth in line with resource availability and regional goals need to be clearly identified. The market for TDR should be made available to the public and an online portal should be created to ensure a healthy competition for buyers. A regulatory authority for TDR market is also required on the lines of SEBI, while TDR policy needs to be revamped and moulded according to current needs of the time.
Also, the most important reform that needs to be introduced is to permit the use of TDR across the entire State and not just within the MCGM limits, so that there is more equitable growth of cities and also less burden on the resources of the Municipal Corporation. This feature of the TDR has proved to be much effective in the America states of Maryland and New Jersey.
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