MHADA Revises Premium Charges to Boost Mumbai Redevelopment
The Maharashtra Housing and Area Development Authority (MHADA) has introduced key amendments to its 2007 redevelopment policy, aimed at enhancing financial viability for projects. These changes include a new formula for calculating commercial premium charges and a phased payment option for premiums.
MhadaRedevelopmentPremium ChargesReal EstateMumbaiReal Estate MumbaiOct 18, 2025
Under the revised framework, MHADA has moved away from the earlier practice of levying a flat 1.5 times residential rate for commercial built-up area. Instead, the premium will now be calculated using a formula that takes into account prevailing land rates, market value, and proposed usage. This change follows multiple representations from the Confederation of Real Estate Developers’ Associations of India – Maharashtra Chamber of Housing Industry (CREDAI–MCHI), which had highlighted that the previous rate structure made many redevelopment projects unviable due to high upfront costs.
MHADA officials stated that the new approach ensures a fairer balance between residential and commercial charges, improving project feasibility and aligning with real-time market conditions. This change is expected to stimulate redevelopment in aging housing societies across Mumbai, particularly in suburban zones where mixed-use projects are increasingly common.
In addition to rationalized premium calculations, MHADA has introduced a provision for installment-based payment of premiums, mirroring the system used by the Municipal Corporation of Greater Mumbai (MCGM). This step allows developers and societies to manage project finances more effectively by spreading the premium burden over several years instead of making a one-time payment.
As per the revised terms, projects with plots smaller than 4,000 square meters will be permitted to pay premiums in five installments. The initial 10% must be paid within one month of receiving the Letter of Intent, followed by four equal installments of 22.5% each, due at 12-month intervals up to 48 months, with applicable interest. Projects with plot areas of 4,000 square meters or more can opt for six installments—10% initially and 18% each in subsequent five payments over 60 months. This phased structure is designed to ease cash flow constraints and reduce project delays linked to funding issues.
Redevelopment of old buildings on MHADA layouts is governed by Regulation 33(5) of the DCPR 2034. Such projects involve demolishing dilapidated structures and constructing new buildings with enhanced amenities and higher permissible floor space index (FSI). In most cases, existing residents receive larger and upgraded apartments at no cost, while developers recover expenses and earn profits through the sale of additional flats in the open market.
Premiums form a significant part of the total cost of any redevelopment project. They include payments for additional FSI, open space deficiency, fungible area, staircases, lift wells, and other building components. Industry data suggests that premiums account for nearly 20–30% of a project’s cost in Mumbai. Developers have consistently sought rationalization of these charges, arguing that high premiums restrict redevelopment in mid-income housing clusters, especially in suburban and island city areas where existing societies are small and financially weak.
The new MHADA policy aims to address this challenge by creating parity between residential and commercial premiums and providing a staggered payment mechanism. The Authority believes this will encourage faster decision-making among housing societies that have delayed redevelopment due to financial uncertainties.
Industry observers say the revised approach also aligns with broader state housing goals of increasing urban renewal activity across Mumbai’s aging housing stock. Several thousand MHADA-constructed societies are over 40 years old and in need of reconstruction. By reducing the immediate financial outgo for developers and introducing market-based premium rates, the Authority expects a rise in project proposals under the redevelopment scheme in the coming quarters.
With this revision, MHADA’s redevelopment policy is now more closely aligned with that of MCGM, ensuring consistency in premium recovery practices across the city. This harmonization is expected to minimize procedural confusion, reduce project-level disputes, and streamline the redevelopment approval process.
The move has been welcomed by many in the real estate community, who view it as a step toward sustaining Mumbai’s redevelopment ecosystem amid rising construction and financing costs. Experts also anticipate that the phased payment schedule will improve liquidity management for smaller developers while safeguarding government revenue through interest-bearing installments.
As redevelopment continues to be a major driver of housing supply in Mumbai, MHADA’s revised policy represents a structural effort to balance regulatory revenue needs with the practical economics of urban renewal projects.
Frequently Asked Questions
What is MHADA's new policy for premium charges in redevelopment projects?
MHADA has introduced a new formula for calculating commercial premium charges and a phased payment option for premiums associated with additional built-up area, aiming to improve financial viability for redevelopment projects.
How does the new premium calculation formula work?
The new formula takes into account prevailing land rates, market value, and proposed usage, moving away from the flat 1.5 times residential rate for commercial built-up area.
What are the payment terms for premiums in the new policy?
Projects with plots smaller than 4,000 square meters can pay premiums in five installments, while projects with plots of 4,000 square meters or more can opt for six installments.
Why were these changes made?
The changes were made to address the high upfront costs that made many redevelopment projects unviable, as highlighted by industry associations like CREDAI–MCHI.
What is the expected impact of these changes on redevelopment in Mumbai?
The changes are expected to stimulate redevelopment in aging housing societies, reduce project delays, and increase the number of project proposals under the redevelopment scheme.
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