MHADA Revises Premium Charges and Payment Terms to Boost Old Housing Redevelopment in Mumbai
The Maharashtra Housing and Area Development Authority (MHADA) has updated its 2007 redevelopment policy to make the redevelopment of old housing societies in Mumbai more financially viable. The changes include revised premium charges for commercial space and phased premium payments.
MhadaRedevelopmentPremium ChargesMumbai Real EstateHousing SocietiesReal EstateOct 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 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.
Frequently Asked Questions
What is the main change in MHADA's redevelopment policy?
The main changes include revised premium charges for commercial built-up area and the option for phased premium payments, which aim to make redevelopment projects more financially viable for developers.
How are the new premium charges for commercial space determined?
The new premium charges for commercial space are determined using a formula that factors in land rates, market values, and the intended usage, replacing the earlier rule of 1.5 times the residential rate.
What are the new payment terms for the premium?
Housing societies and developers can now pay the premium for additional built-up area in four equal installments with interest, reducing the financial burden on stakeholders.
What is the impact of these changes on developers?
These changes are expected to reduce the financial burden on developers and make redevelopment projects more financially viable, potentially leading to an increase in redevelopment activities in Mumbai.
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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