Property developers to be hit by falling TDR

TDR means making available certain amount of built-up area in lieu of the area surrendered or relinquished by the owner so that he can use extra built-up area either for himself in some other place or transfer it to others for certain sum.

The Maharashtra government, in  its state budget, increased the floor space index (FSI), the ratio at which developers can develop the land, in Mumbai suburbs from 1 to 1.33. However, the cap for the maximum developable area has been capped at 2. Additional increase of 0.33 can be purchased by  the  developer from the government as specified by the state government on April 10 notification.

The report states that the additional FSI comes cheaper than the prevailing TDR prices in the market. Developers are expected to opt for this and hence TDR prices have started falling, report says.

"We believe the incremental FSI available to the developers will come at substantially lower rate than the ready reckoner rate (the government determined rate for calculating stamp duty).  This  shall  exert pressure on the TDR prices as developers will opt for  incremental  FSI  from  the government rather than buying TDR from the market," the report from Emkay said. 

According to estimates, TDR prices have already fallen from Rs 4000 to Rs 2,700-Rs 2800 per sq ft.

HDIL, according to report, is expected to be negatively impacted due to this decline since it is expected to generate 38 million sq ft in the form of airport rehabilitation project.The brokerage has lowered its estimate of HDIL's TDR realisation from Rs 2500 per sq ft to Rs 1750 sq ft.