MHADA Revises Premium Charges and Payment Terms to Boost Old Housing Redevelopment in Mumbai

The Maharashtra Housing and Area Development Authority (MHADA) has announced significant revisions to its 2007 redevelopment policy. These updates aim to make the redevelopment of old housing societies in Mumbai's real estate market more financially viable by adjusting premium charges and payment terms.

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 replaces the earlier rule that required developers to pay 1.5 times the residential rate for commercial space, a system 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 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 allowed housing societies and developers to pay the premium for additional built-up area 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. The premium payable for the grant of additional built-up area under Regulation 33(5) can now be paid in phased installments, reducing the financial burden on stakeholders and enabling smoother project execution.

For projects with a plot area of less than 4,000 sq. m, the premium will 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.