MHADA Revises Premium Charges and Payment Terms to Accelerate Mumbai's Old Housing Redevelopment
The Maharashtra Housing and Area Development Authority (MHADA) has updated its 2007 redevelopment policy, revising premium charges and payment terms to ease the financial burden on developers and accelerate the redevelopment of old housing societies in Mumbai.
MhadaRedevelopmentPremium ChargesPhased PaymentsMumbai Real EstateReal Estate MumbaiOct 06, 2025
Under the new policy, the premium for allocating commercial built-up area will be determined using a formula that factors in land rates, market values, and the intended usage. This new approach replaces the earlier rule that required developers to pay 1.5 times the residential rate for commercial space, a system that developers had argued made projects financially unviable.
According to MHADA officials, the revised approach balances residential and commercial market rates to arrive at a more equitable premium structure. The revision follows representations from the real estate developers' apex body CREDAI–MCHI, which highlighted the need for parity between residential and commercial charges to ensure balanced growth.
MHADA has also introduced a phased payment system for the premium on additional built-up area. Housing societies and developers can now pay the premium in four equal installments with interest. This aligns MHADA's policy with the existing policy of the Municipal Corporation of Greater Mumbai (MCGM) for staggered payment of charges and premiums related to building permissions. By allowing phased payments, MHADA aims to reduce the financial burden on stakeholders and enable smoother project execution.
For projects with a plot area of less than 4,000 sq. m, the premium can be paid in five installments. The first installment, 10% of the total premium amount, must be paid within one month from the date of issuance of the Letter of Intent. The subsequent installments of 22.5% each will be due at the end of 12, 24, 36, and 48 months, respectively, all with applicable interest.
For projects with a plot area of 4,000 sq. m and above, the premium amount will be payable in six installments. The first installment, 10% of the total premium, must be paid within one month from the date of issuance of the Letter of Intent. The subsequent installments of 18% each will be due at the end of 12, 24, 36, 48, and 60 months, respectively, all with applicable interest, MHADA said in its statement.
In Maharashtra, several old buildings, particularly those comprising two to seven storeys, are currently undergoing redevelopment. Redevelopment of housing projects involves demolishing the existing structure and replacing it with a modern, larger building, subject to various regulations. Additionally, residents of the old building receive larger apartments in the new building at no cost, as the builder sells a certain number of apartments in the new building for a profit in the open market. The government also earns revenue by selling the floor space index (FSI) to the builder.
Premiums are various charges levied by authorities at different stages of a real estate project, including initiation, development, and completion of an area or additional built-up space. These include fungible premiums, FSI (floor space index) premiums, open space deficiency charges, fees for additional ground coverage, and premiums for lobbies, lift wells, staircases, and other similar components. In Mumbai, developers typically pay more than 20 different types of premiums, which can account for 20–30% of the total project cost, according to a developer who requested anonymity.
Built-up area refers to the total area of a property, including all usable spaces within the walls, the thickness of internal and external walls, balconies, and sometimes other covered areas, such as terraces or verandahs. It is slightly larger than the carpet area, which measures only the actual usable floor space inside a home or office. By revising the premium charges and payment terms, MHADA aims to facilitate more redevelopment projects, benefiting developers, residents, and the city's overall infrastructure.
Frequently Asked Questions
What is the main change in MHADA's new policy for redevelopment?
The main change in MHADA's new policy is the revision of premium charges for commercial floor space and the introduction of phased payment terms to reduce the financial burden on developers.
How are the new premium charges for commercial space calculated?
The new premium charges for commercial space are calculated using a formula that factors in land rates, market values, and intended usage, replacing the previous rule of 1.5 times the residential rate.
What is the phased payment system introduced by MHADA?
MHADA has introduced a phased payment system where the premium for additional built-up area can be paid in four equal installments with interest, reducing the initial financial burden on developers.
What is the benefit of the new policy for housing societies and developers?
The new policy benefits housing societies and developers by making redevelopment projects more financially viable, reducing the initial financial burden, and enabling smoother project execution.
What is the built-up area in the context of real estate?
Built-up area refers to the total area of a property, including all usable spaces within the walls, the thickness of internal and external walls, balconies, and sometimes other covered areas, such as terraces or verandahs.
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