Fungible FSI – an incomplete solution!

By Ar. GauravSanghavi, MD, Pentaspace Consultants Pvt. Ltd.

By Ar. Anmol Warang, CEO, Pentaspace Consultants Pvt. Ltd.

Floor Space Index (FSI) is the ratio of permissible built-up area vis-à-vis the land size. For example, if the land size is 1,000 sqft and if the FSI granted is 2, then one can construct twice the plot size, i.e. 2,000 sq ft. Anything over this is either illegal, or requires special permission from the civic authority.FSI thus is the most important factor in determining the development potential of any plot. Over the years,almost all developers and builders have been using mindboggling tactics to obtain more than the permissible development potential on plots. One of the most used ones is that developers would invariably seek concessions and relaxations for free of FSIcomponents, ornamental projections or features like flower beds, dry areas, niches, ducts, order to build more and get sanctions by discretionary powers of authorities. Due to the limitations of the Development Control Regulations (DCR), it was difficult to determine the need or authenticity of these elements for the project, while there so was an evident ambiguity in its grant. All developers would build about 30 to 40 per cent more than the permitted FSI. Eventually they would either skip these features and add the additional space in some other form or would create such features and then compel buyers to include them in the flat area once the OccupationCertificate was granted by the MCGM. These “Free of FSI” areas were included in computing area of a flat by Builders/ Developers and sold to the consumers at a market price under the garb of Super Built Up area or Useable area or saleable area of a flat, or by whatever name given. The developers would thus rip off the buyer by charging for every inch of this external space at the same rate as that of the legal space although nothing of it was accounted for in the plot potential. It is safe to say that ‘air’ was being sold, at the rate of diamonds.

In an attempt to put a final halt against these practices, the DCR were amended.It is a step towards curtailing malpractices propagated by developers by envisaging a compact plan where all areas are included for the computation of FSI and a cap is fixed so that there is no room to manipulate the rules by creating excess non-habitable areas and overcharging consumers. The most important reason for the conception of amended development regulations has been unidirectional – ‘stop rampant malpractice, while generating revenue for the MCGM’.

Nowall areas such as balconies, flower beds, terraces, voids and niches would be counted in the Floor Space Index (FSI) and shall no longer be available as ‘Free of FSI’ areas as was the norm earlier.In order to compensate for the loss of ‘Free of FSI’ areas, developers now avail of ‘Fungible Compensatory FSI’, which may be used like regular FSI. The word ‘fungible’ suggests something that is freely exchangeable or replaceable, in whole or in part, for another of like nature or kind.Fungible FSI to the tune of 35 per cent for residential development and 20 per cent for industrial and commercial developments has been allowed with premium. Fungible Compensatory FSI may also be used to construct larger dwelling units and/or to construct additional dwelling units. Hence, it may be used in the same manner as regular FSI.

In cases of redevelopment of properties, the Fungible Compensatory FSI admissible on the rehabilitation component is granted to developers without charging premium. In order to protect the interest of existing tenants/ occupants, it is clearly stated that Fungible Compensatory FSI admissible on the rehabilitation component cannot be transferred to the free sale component. Such Fungible FSI can only be used to give additional area, over and above the eligible area, to existing tenants/occupants. The concept as it is presented today most benefits many families with small homes where 300 sqft of space is the minimum area made available by developers in redevelopment projects.

Although it seems to have succeeded in its prima facie motive, conceptually the idea of fungible FSI could have been made flexible. The additional 35% free component for the rehabilitation component could also have been allowed to be used as regular FSI albeit only for the use of the existing occupants. This would have made it similar to the use for fungible FSI in sale component but at the same time given tenants a choice – if they want a bigger home or two homes; one of the same size that they had and a smaller one that could be used as a flexible commodity. The largest advantage is this could have increased the density of housing stock in many areas. The flexible small home belonging to the existing tenants could have now generated an increase in rental housing stock as well. This could have benefitted many tenants with sizeable existing homes. It can also allow flexibility in the permutations for housing stock planning. Also there could have been flexible use of the fungible component vis-a-vis location of the plot: areas with many small housing units, especially in the city could have been given fungible FSI as additional area to tenants to increase their home size and boost redevelopment while areas with medium and large housing units could have allowed variable use of additional fungible FSI to create more housing stock.

The impacts of the change are many

  • The “Free of FSI” areas are now included in the computation of FSI, thus bringing in greater transparency. This will curb Builders/ Developers from making exorbitant profits at the cost of consumers.
  • Builders/ Developers will have to pay a premium for availing Fungible Compensatory FSI. MCGM expects to earn up to Rs.1,000/-crores a year, which would be used in development of infrastructure in Mumbai.
  • The said notification will result in faster clearance of plans, approvals and projects.
  • The discretionary powers given to authorities will come to an end and there will be more consistency by providing a level playing field to all developers.
  • It will enable consumers to calculate the total area of the flat/ unit sold to them and the exact price they pay for such area.
  • With the new rules, Mumbai will witness increase in net FSI at 1.79 in the island city and 2.7 in the suburbs, which should ideally bring down costs.
  • The given FSI cap would bring cost rationalisation as developers would need to invest in quality design, maximising revenue by offering maximum value to end-users.

However, in reality since no additional concessions are being given to commercial developments, the premium for additional FSI would increase developer costs and reduce profit margins by upto 10-30%, if the incremental costs are not passed on to the buyers.This could mean slowdown in the pace of development.

Also even though net FSI has increased, it does not necessarily increase the density or quantity of housing stock, which Mumbai needs desperately. The change should have been visionary in this aspect but fails as it is meant to be unidirectional. Maybe it is a matter of resolving one problem at a time. The change in regulation is a small step towards greater transparency and will benefit home buyers while providing a level playing field for all developers and will hopefully boost redevelopment and infrastructure projects in a city where shortage of homes and urban development is a growing concern.However, the practical implementation of the said notification and whether it results in mature and controlled development of the city is yet to be seen.

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2 thoughts on “Fungible FSI – an incomplete solution!

  1. Great writeup guys !!!!. I think increase in FSI is not the solution for MUMBAI specially as the city is still not ready for High rise buildings. There need to be a “PAN -INDIA” policy for development / construction which will not be area / region / state speciifc & help in decongestation of overall areas incoprorating many breathing spaces.

  2. one q, who is responsible to pay the fungible FSI amount, for e.g. i am allotted additional 100 sq ft as part of design changes by builder which comes under fungible fsi, is builder is supposed to pay this amount or the owner? appreciate if you clarify

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