Mumbai Real Estate Developers Push for Overhaul of Premium Payment Policies

Real estate developers in Mumbai are pushing for a comprehensive overhaul of the premium deferment policy applicable to payments made to civic bodies and the state government. They are advocating for a more flexible and long-term framework to alleviate financial stress during the execution of projects.

At a recent discussion with stakeholders, developers highlighted several key concerns with the current policy, which is revised every three years. They have proposed that the policy be made permanent to ensure continuity and avoid disruptions in project planning.

The CREDAI-MCHI, a real estate apex body association, has pointed out that the current policy is valid for a period of three years and is further revalidated for the next three years. Developers have suggested that instead of providing validity for a period of three years, the policy should be made permanent. This would avoid the process of revision and the associated delays, ensuring the policy continues without any breaks.

Among the demands is a reduction in the interest rate on deferred premium payments to 8%, with a linkage to benchmark lending rates such as the SBI Prime Lending Rate or MCLR. Developers also proposed adopting a 10:10:80 payment structure, which would significantly reduce the upfront financial burden during the early stages of a project.

Industry representatives have noted that raising large sums at the initial stage remains a significant challenge, especially as banks and NBFCs are reluctant to fund premium payments. As a result, developers often face liquidity constraints before project cash flows stabilize.

Jitendra Mehta, Senior Vice President of CREDAI-MCHI, emphasized that the move is long overdue. He pointed out that instalment-based premium payments are already allowed in other jurisdictions. “Except BMC, in other areas where UDCR is applicable, premium payments in instalments are permitted. In MMR, it follows a 20:80 structure, and even SRA offers similar flexibility, but this is not available in BMC despite significantly higher premiums,” he said.

Front-loading payments makes project execution difficult. “Arranging funds at the initial stage is extremely challenging. Allowing instalments ensures the government also has certainty of revenue over the project lifecycle,” Mehta added. He further noted that housing prices have remained largely stable since 2019, leaving limited room for developers to absorb rising costs.

If developers are forced to borrow at high interest rates to meet upfront premiums, it will eventually increase housing costs for buyers. Instalment options will help avoid passing on this burden, he said.

In redevelopment projects, funding is typically arranged by mortgaging the land parcel after obtaining a no-objection certificate from the housing society, or by mortgaging saleable flats, or both. Anand Gupta, Chairperson of the Housing and RERA Committee of the Builders Association of India, highlighted that a significant portion of government revenue comes from premium payments.

“Nearly 50 per cent of the authority’s revenue is derived from premiums. Allowing instalment facilities will provide much-needed support to the sector while ensuring steady revenue flow for the government,” he said. Gupta emphasized that generating cash flow at the initial stage of a project remains a major hurdle. “Pumping in large amounts upfront is difficult. A staggered payment mechanism will ease liquidity pressure and help maintain project momentum,” Gupta added.

Developers have called for a balanced and flexible framework. They argue that a reworked deferment policy with lower interest rates and flexible payment structures would not only improve project viability but also support timely completion without increasing the financial burden on homebuyers.