MHADA Updates Premium Charges and Payment Terms to Boost Old Housing Redevelopment in Mumbai
The Maharashtra Housing and Area Development Authority (MHADA) has revised its 2007 redevelopment policy to make the redevelopment of old housing societies in Mumbai more financially viable by updating premium charges and payment terms.
MhadaRedevelopmentReal EstateMumbaiHousing SocietiesReal Estate MaharashtraOct 06, 2025
The key changes include the revision of premium charges for commercial floor space in projects carried out under Regulation 33(5) of the Development Control and Promotion Regulations (DCPR) 2034. 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 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. These changes follow representations from real estate developers' apex body CREDAI–MCHI, which highlighted the need for parity between residential and commercial charges to ensure balanced growth.
Another significant change is the introduction of staggered payment options for the premium for additional built-up area. MHADA has allowed housing societies and developers to pay the premium in four equal installments with interest. This aligns the 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, 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, with applicable interest.
Redevelopment of buildings on MHADA layouts is governed by Regulation 33(5) of the DCPR 2034. For such projects, developers are required to pay a premium on the additional built-up area available after deducting the existing built-up area from the total permissible built-up area. This policy ensures that the financial burden is distributed more equitably and that projects can proceed without significant financial strain.
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. These changes are expected to make the redevelopment process more transparent and financially feasible for all stakeholders involved.
Frequently Asked Questions
What are the key changes made by MHADA to its redevelopment policy?
The key changes include revising premium charges for commercial floor space and introducing staggered payment options for the premium for additional built-up area. The new premium for commercial built-up area will be determined using a formula that factors in land rates, market values, and usage. Additionally, developers can now pay the premium in four equal installments with interest.
How will these changes benefit developers and housing societies?
These changes will make redevelopment projects more financially viable by balancing residential and commercial market rates and reducing the financial burden on developers through staggered payments. This is expected to encourage more developers to take on such projects, benefiting housing societies by improving their living conditions.
What is the new formula for determining the premium for commercial built-up area?
The new formula for determining the premium for commercial built-up area 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.
What are the payment terms for the premium for additional built-up area?
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, is due within one month from the date of issuance of the Letter of Intent, followed by four installments of 22.5% each at the end of 12, 24, 36, and 48 months, 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, with the first installment of 10% due within one month, followed by five installments of 18% each at the end of 12, 24, 36, 48, and 60 months, with applicable interest.
What is the significance of the floor space index (FSI) in redevelopment projects?
The floor space index (FSI) is a measure of the total floor area that can be built on a given plot of land. In redevelopment projects, the government sells the FSI to builders, who use it to construct larger, modern buildings. The FSI is a crucial factor in determining the additional built-up area and the premiums that developers must pay.
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