In comparison, cities such as Delhi NCR, Chennai, Bengaluru, and Hyderabad levy significantly lower costs, turning real estate development in Mumbai into a formidable fiscal challenge. This staggering difference leads to Mumbai collecting 25 times more premiums than Delhi NCR, 50 times more than Hyderabad, and 47 times more than Bengaluru for residential real estate projects. These findings were released in a report (Retaining Mumbai's Financial Status) prepared by CREDAI-MCHI, a body representing top builders.
In 2021, the BMC offered a 50% discount on premium payments for 13 months from January 2021 till January 31, 2022, in a bid to revive business after the pandemic. However, these collections have reduced drastically after the discount was discontinued.
The report said there is a stark mismatch in the average price per square foot for apartments in the Mumbai Metropolitan Region (MMR) compared to Delhi NCR and Bengaluru.
The average cost of an apartment in MMR is Rs 19,485, nearly double that of Delhi NCR and Bengaluru. "This discrepancy impedes job access and erodes Mumbai's competitiveness, discouraging professionals from seeking affordability and safety," it said.
Said Boman Irani, Immediate Past President - CREDAI MCHI, "The report's findings undeniably highlight the urgent need for immediate policy reform and a rationalised approach to the premium structure within Mumbai's real estate sector.
The exorbitant premiums levied on developers have not only soared to unsustainable levels, particularly burdening home buyers in the affordable and mid-affordable segments but have also set in motion a domino effect that's adversely affecting the city's holistic economic landscape. Timely resolution of this matter is imperative to safeguard Mumbai's enduring growth trajectory and uphold its esteemed status as the undisputed financial capital."
The report examines Mumbai's economic trajectory, tracking the Gross Domestic Product (GDP) over 23 years (2000-2023) and contrasts Mumbai's international reputation as a financial hub. The city's GDP registered a relatively modest 10-fold increase during this period. In stark contrast, cities such as Hyderabad, Delhi, and Bengaluru experienced meteoric growth, witnessing their GDPs surge by 36-fold, 29-fold, and 27-fold, respectively.
The report argues that the excessive premium rates have a cascading effect on Mumbai's economy. The exorbitant cost of property is discouraging potential investors, who are now flocking to cities with lower property prices.
High approval costs contribute to the city's already high cost of living, making it even more challenging for residents and businesses.
The prohibitive cost of property acts as a bottleneck for new real estate developments, resulting in a shortage of housing, commercial spaces, and essential facilities," it said.
"High living costs, including property costs, are pushing people to seek a better quality of life at a lower cost in other cities. The high cost of property reduces disposable income, leading to a decline in economic activity and job creation," it added.
The builders' association said a 50% reduction in premiums would kickstart numerous development projects, injecting new life into Mumbai's real estate sector.
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