Developers in Mumbai are burdened by exorbitant premiums, with an average cost of Rs 5,400 per sqft as approval cost, according to a report by a body representing top builders. This high cost is significantly impacting Mumbai’s growth trajectory as the economic hub of the country. In comparison to other cities like Delhi NCR, Chennai, Bengaluru, and Hyderabad, Mumbai collects 25 times more premiums than Delhi NCR, 50 times more than Hyderabad, and 47 times more than Bengaluru for residential projects. The elevated approval costs in Mumbai cause a stark mismatch in the average price per square foot for apartments in the city’s Metropolitan Region (MMR) compared to those in Delhi NCR and Bengaluru.
The average cost of a flat in MMR is Rs 19,485, nearly double that of Delhi NCR and Bengaluru. This discrepancy hampers job access and erodes Mumbai’s competitiveness, discouraging professionals from seeking affordable options and safety. The CREDAI-MCHI report titled ‘Retaining Mumbai’s Financial Status’ emphasizes the urgent need for immediate policy reform and a rationalized approach to the premium structure.
Recently, CREDAI-MCHI requested the state to reduce the exorbitant real estate premiums by 50%. In January 2021, the BMC offered a 50% discount on premium payments for 13 months to revive business after the pandemic. However, the collections have drastically reduced after the discount period ended, signaling the need for a long-term solution.
Boman Irani, the immediate past president of CREDAI-MCHI, stresses the importance of resolving this matter in a timely fashion to protect Mumbai’s enduring growth trajectory and uphold its status as the financial capital. The report investigates Mumbai’s economic trajectory, tracking the gross domestic product (GDP) over 23 years (2000-2023) and comparing it with other cities renowned for their economic growth, such as Hyderabad, Delhi, and Bengaluru. During this period, Mumbai’s GDP only registered a 10-fold increase, while the other cities experienced meteoric growth of 36-fold, 29-fold, and 27-fold respectively. The report concludes that the exorbitant premiums imposed on real estate development in Mumbai are at the heart of this economic discourse.
The excessive premium rates in Mumbai have a cascading effect on the city’s economy. The high cost of property discourages potential investors, who prefer cities with lower property prices. Moreover, the high approval costs contribute to Mumbai’s already expensive cost of living, making it challenging for residents and businesses. This, in turn, acts as a bottleneck for new real estate development, leading to a shortage of housing, commercial spaces, and essential facilities.
The cost of living, including property costs, is pushing people to seek a better quality of life at a lower cost in other cities, leading to a decline in economic activity and job creation in Mumbai. The builders’ association proposes a 50% reduction in premiums to kickstart numerous development projects, injecting new life into Mumbai’s real estate sector. It emphasizes the necessity of immediate policy reform and a rationalized approach to overcome the challenges faced by the industry.
