UD Minister Eknath Shinde’s puppet “Ashar’ is on the radar of LoP Devendra Fadnavis

Deduction in premium would benefit select developers in crores; alleged Fadnavis

Thackeray Govt favouring select developers – claims Fadnavis

@vivekbhavsar

Mumbai: The ‘defamed’ builder from Thane – ‘Ashar’ who is close aide of Urban Development Minister Eknath Shinde is on the radar of Leader of Opposition Devendra Fadnavis. Without naming ‘Ashar’, Fadnavis alleged that there are some individuals who are also doing some ‘resource’ collection (to favour builder community.)

A proposal to reduce 50 per cent in premium was put before the state cabinet last Wednesday at the eleventh hour by the UDD department. Congress and Nationalist Congress Party (NCP) ministers opposed the proposal and hence could not be approved. 

The sources said it was Ashar who drafted the proposal to favour builder lobby. Fadnavis without naming Ashar on Sunday said that some individuals had collected ‘resources’. He also wondered on how the cabinet agenda, which is to be kept secret until a decision is taken and the proposed Government Resolution (GR), was in circulation with note and draft with all developers and also on social media.

According to Fadnavis, if the cabinet proposal was approved and even if five developers will be beneficial of 50 per cent reduction in premium, it would be loss of Rs 2000 crore to the state exchequer. 

Fadnavis in a letter sent to Chief Minister Uddhav Thackeray alleged that Maharashtra government’s policies for helping real estate sector to mitigate COVID effect are aimed at and resulting into windfall gains to a few real estate developers.

Fadnavis strongly demanded corrective actions by the state government and thereby not to allow the state resources to be exploited and squandered for private gains.

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He alleged that the recommendations suggested by the committee formed by the state government for the revival of the ailing real estate sector are being implemented selectively without considering the true effect of the same.

Fadnavis also claimed that the co-founder of HDFC Ltd, Deepak Parekh led committee was formed for seeking suggestions to revive the ailing real estate sector due to the on-going corona pandemic. He however alleged, “The recommendations suggested by the said committee, it seems, are being implemented selectively without considering the real effect of the same”. 

“It seems certain vested interest have colluded for extending benefits to a few handful parties at the expense of State exchequer”, Fadnavis said.

The senior Bharatiya Janata Party (BJP) leader came down heavily stating that Deepak Parekh led committee analysed only a few projects of selected five developers to capture the effect of reduction of ready reckoner.

He added that it was found out that this will lead to a windfall gain of more than 2000 crores. He further informed that the selected developers have a large chunk of land parcels in western suburbs by the sea, eastern suburbs, and city. 

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In his letter, Fadnavis stated that the following steps below show further details and extent of the modus operandi initiated in few cases. I have many such cases in hand which I can submit to the appropriate authority. 

Step 1: Chain and Triangulation Number (CTS) no. of a land parcel in western suburbs were subdivided into three zones. One of the zones which comprise of premium land by sea admeasuring 200,000 Sq. mts is now defined as a new zone. Earlier ready reckoner rate was Rs 1,18,000 per square meter. However, overnight it has now become Rs 35,000 per square meter which is a 72 per cent reduction.

Step 2: Cascading effect of this 72 per cent reduced ready reckoner rate can be seen when it goes for further permissions of development as only 1 Floor Space Index (FSI) zonal is free. Transferable Development Rights (TDR) 1 FSI, 0.5 FSI by paying a premium to state government. So, the total FSI comes to 2.5. 

Now, say the total FSI on this plot becomes 500,000 Sq.mtrs, 35 per cent fungible FSI is 175,000 Sq.mtrs. In total 675,000 Sq.mtrs built-up area is allowed for construction and sale. This is barring staircases, floor lobbies, lift areas, which comprises of 30 per cent of the built-up area which in this case comes to 225,000 Sq.mtrs, using paying premium i.e. 25 per cent of the ready reckoner rate. So, before the reduction in ready reckoner rates as mentioned in step one the premium of 

A) 0.5 FSI amounts to revenue of Rs 730 crores + B) staircase, lift, lobbies

Step 3: Premium before reduction amounts to Rs 663 crores i.e., total A+B = Rs 1393 crores. Now after reduction in ready reckoner rate the revenue to be paid will be Rs 390 crores. Thus, it is clear that a windfall gain of Rs 1000 crores goes straight to the developer.

With the new proposed 50 per cent reductions in premiums by the state government, the payment of Rs 390 crores will become Rs 185 crore. Thus, the windfall gain to the developer now stands at Rs 1185 crores. 

Fungible FSI (as mentioned in step 2) is 35 percent of 175000 Sq.mtrs @118000 = Rs 722 crores. With new ready reckoner rate as mentioned in step one, the payment becomes Rs 204 crores which leads to a gain of Rs 518 crores to the developer. 

With a new 50 per cent reduction in premiums, the payment will become Rs 102 crores. So finally, the developer gains Rs 620 crores.

Total windfall gain in one big premium land parcel is Rs 1185 crores + Rs 620 crores = Rs 1805 crores to one developer owning 2 lakh metres of land parcel in the western suburb.

This is just one example and there are many such cases which are brought to my knowledge, stated Fadnavis.

The former Chief Minister stated that if the policy of 50 per cent reduction comes into effect the midsize developers of Mumbai who undertake standalone redevelopment projects and Slum Rehabilitation (SR) Schemes would lose the competitive edge. He added that once SR schemes which are not financially viable would militate against the topmost priority of the government of Maharashtra to have a slum-free Mumbai.

He said that he supported steps taken to boost the demand during pandemic and decisions like rationalisation of stamp duty rates, Ready Reckoner (RR) rates and Premiums. However, he stated that under the garb of reduction for rationalisation, windfall gains cannot be allowed to a handful few. 

He stated that the actions of the state government must be free from the vice of arbitrariness and must conform to Article 14 of the Constitution of India.