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As per media reports, Maharashtra state government has issued a
notification for a mandatory 20% reservation for low‐income group (LIG)
to Maharashtra Housing and Area Development Authority (MHADA) in
greenfield residential projects (excluding SRS/redevelopment) in the state
exceeding 2,000 sq m or half‐an‐acre. Developers will hand over LIG units
to MHADA at cost of construction though it is not clear whether
developers will receive incentive FSI in lieu of the LIG units constructed.
We understand that suggestions/objections to the notification will be
invited from affected parties following which a formal amendment will be
made to the MRTP Act. In the event that incentive FSI is granted to
developers, we expect this notification to be neutral while absence of the
same may significantly reduce the saleable area in projects, impacting
NAVs of developers.
Event: 20% reservation for LIG housing proposed
According to media articles, Maharashtra government has decided to make a
mandatory 20% reservation for LIG in greenfield residential projects on plots exceeding
2,000 sq m. This is currently a proposal. A notification has been issued inviting
suggestions and objections. It is expected that appropriate amendments to the
Maharashtra Regional Town Planning (MRTP) Act will be made after considering
suggestions and objections.
While we are yet to see details of the notification, media articles indicate that projects
on plot sizes exceeding 2,000 sq mt will have to provide 20% space for LIG housing. The
developer will have to handover houses admeasuring 27 sq m to 45 sq m (270‐450 sft)
to MHADA at cost of construction which will then sell it through a lottery system. The
developer is likely to get an incentive FSI in lieu of the space handed over to MHADA.
The Maharashtra government had earlier attempted to introduce this provision, which
was, however, struck down by courts, citing lack of provision for compensation to
developers and that suggestions and objections were not invited. The news articles also
quote government officials stating that the decision will be applicable only to greenfield
projects and not for redevelopment or SRA schemes.
Impact: Neutral if developers get incentive FSI
We believe that developers might be offered incentive FSI in lieu of the space handed
over to MHADA as the LIG housing component may significantly reduce the saleable
area in projects, impacting NAVs. However, any adverse ruling in this regard is a clear
negative for Mumbai based developers. Additionally, the proposed LIG housing scheme
may be difficult to implement in case of relatively smaller plots.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
As per media reports, Maharashtra state government has issued a
notification for a mandatory 20% reservation for low‐income group (LIG)
to Maharashtra Housing and Area Development Authority (MHADA) in
greenfield residential projects (excluding SRS/redevelopment) in the state
exceeding 2,000 sq m or half‐an‐acre. Developers will hand over LIG units
to MHADA at cost of construction though it is not clear whether
developers will receive incentive FSI in lieu of the LIG units constructed.
We understand that suggestions/objections to the notification will be
invited from affected parties following which a formal amendment will be
made to the MRTP Act. In the event that incentive FSI is granted to
developers, we expect this notification to be neutral while absence of the
same may significantly reduce the saleable area in projects, impacting
NAVs of developers.
Event: 20% reservation for LIG housing proposed
According to media articles, Maharashtra government has decided to make a
mandatory 20% reservation for LIG in greenfield residential projects on plots exceeding
2,000 sq m. This is currently a proposal. A notification has been issued inviting
suggestions and objections. It is expected that appropriate amendments to the
Maharashtra Regional Town Planning (MRTP) Act will be made after considering
suggestions and objections.
While we are yet to see details of the notification, media articles indicate that projects
on plot sizes exceeding 2,000 sq mt will have to provide 20% space for LIG housing. The
developer will have to handover houses admeasuring 27 sq m to 45 sq m (270‐450 sft)
to MHADA at cost of construction which will then sell it through a lottery system. The
developer is likely to get an incentive FSI in lieu of the space handed over to MHADA.
The Maharashtra government had earlier attempted to introduce this provision, which
was, however, struck down by courts, citing lack of provision for compensation to
developers and that suggestions and objections were not invited. The news articles also
quote government officials stating that the decision will be applicable only to greenfield
projects and not for redevelopment or SRA schemes.
Impact: Neutral if developers get incentive FSI
We believe that developers might be offered incentive FSI in lieu of the space handed
over to MHADA as the LIG housing component may significantly reduce the saleable
area in projects, impacting NAVs. However, any adverse ruling in this regard is a clear
negative for Mumbai based developers. Additionally, the proposed LIG housing scheme
may be difficult to implement in case of relatively smaller plots.
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