Edelweiss, REAL ESTATE- Event: As per media articles, the Brihanmumbai Municipal Corporation (BMC) is drafting a policy that would make at least 50 additional components a part of the chargeable floor space in new buildings. Currently, the developer gets to construct these areas for free. Under Section 35 (2) of the Development Control Regulations, the developer is not charged for constructing areas like passages, lofts, balconies, society offices and meter rooms. However, BMC is now proposing that these areas should be included in FSI calculations. Impact: Although the policy is still in a draft stage, if the proposed change in FSI policy comes through, it implies that the difference between carpet area and saleable area will reduce significantly (currently, this difference is between 50% and 100% in terms of excess area over the carpet area). However, we believe that this may bring about greater transparency in property transactions. Land prices may correct; property prices unlikely to see downside risk: With the carpet/saleable area differential reducing, saleable area would be limited to existing FSI, leading to overall saleable area reducing by 15-30%. As a result, lower supply of saleable area will reduce downward pressure on property prices. Land prices may, however, reduce as the saleable/carpet area differential will be lower. We do not expect projects that have already received FSI sanctions to be impacted, but projects yet to receive approvals (where land has been already purchased) could be hit if the policy changes come through. As different projects may be at different stages of approval, this regulation will negatively impact each developer differently. Some large developers like DB Realty (Not Rated), HDIL (Not Rated), Sunteck Realty (Not Rated), Ackruti City (Not Rated), Orbit Corporation (Buy) and Oberoi Realty (Not Rated) are likely to be impacted due to this change. BMC’s draft proposal of revising FSI policy in Mumbai may hit developers

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Event: As per media articles, the Brihanmumbai Municipal Corporation (BMC) is
drafting a policy that would make at least 50 additional components a part of the
chargeable floor space in new buildings. Currently, the developer gets to construct
these areas for free.
Under Section 35 (2) of the Development Control Regulations, the developer is not
charged for constructing areas like passages, lofts, balconies, society offices and
meter rooms. However, BMC is now proposing that these areas should be included in
FSI calculations.
Impact: Although the policy is still in a draft stage, if the proposed change in FSI
policy comes through, it implies that the difference between carpet area and saleable
area will reduce significantly (currently, this difference is between 50% and 100% in
terms of excess area over the carpet area). However, we believe that this may bring
about greater transparency in property transactions.
Land prices may correct; property prices unlikely to see downside risk: With
the carpet/saleable area differential reducing, saleable area would be limited to
existing FSI, leading to overall saleable area reducing by 15-30%. As a result, lower
supply of saleable area will reduce downward pressure on property prices. Land
prices may, however, reduce as the saleable/carpet area differential will be lower. We
do not expect projects that have already received FSI sanctions to be impacted, but
projects yet to receive approvals (where land has been already purchased) could be
hit if the policy changes come through.
As different projects may be at different stages of approval, this regulation will
negatively impact each developer differently. Some large developers like DB Realty
(Not Rated), HDIL (Not Rated), Sunteck Realty (Not Rated), Ackruti City (Not Rated),
Orbit Corporation (Buy) and Oberoi Realty (Not Rated) are likely to be impacted due
to this change.