Mumbai’s coastal real estate sector is confronting fresh regulatory challenges after the Slum Rehabilitation Authority (SRA) introduced revised permissions for projects governed by the Coastal Regulation Zone (CRZ) framework. Changes in the calculation of Floor Space Index (FSI) have sparked concerns among developers over construction potential, project profitability and the future supply of housing.
The revised interpretation could reduce permissible construction areas by 20-30%, potentially affecting redevelopment projects in premium neighbourhoods such as Bandra, Juhu and Versova. However, industry estimates of the number of affected projects differ from the SRA’s assessment.
Developers Flag Reduced Construction Potential
Kamlesh Thakur, President of Naredco Maharashtra, said the association estimates that over 45 coastal redevelopment projects could be affected by the revised net plot area calculations under CRZ 2019, compared with the SRA’s estimate of seven to eight projects.
Explaining the impact, he said, “Calculating FSI strictly on net plot area – after deducting reservations, buffers, and setbacks – leads to a severe 20 per cent to 30 per cent reduction in overall buildable footprint,” potentially limiting saleable space across coastal developments.
Housing Supply and Project Viability at Risk
Chintan Sheth, Chairman and Managing Director of Sheth Realty, clarified that the revised permissions do not directly affect his company’s projects. However, he highlighted the importance of FSI in determining development costs, revenue and project feasibility.
“FSI is a fundamental input in real estate development, underpinning land valuation, project feasibility, construction planning, saleable area, revenue projections and financing structures,” Sheth said.
He added that reduced development potential could restrict housing availability and increase property prices in locations with strong demand.
Financial Pressure on Redevelopment
Bhushan Bhanushali, Founder of VB Group, said lower permissible FSI could make it difficult for developers to recover investments in land, rehabilitation, statutory premiums and construction.
“A reduction in permissible FSI can have far-reaching implications for redevelopment economics, as fixed costs relating to land, rehabilitation, statutory premiums and construction have to be recovered from a potentially smaller saleable area,” Bhanushali said.
He warned that lower saleable inventory could affect margins, cash flows and construction plans.
Industry Seeks Regulatory Clarity
Developers have also raised concerns about applying revised calculations to projects that already have approvals or are under construction, citing possible disruptions to financial arrangements, contractual commitments and possession schedules.
Thakur called for protecting existing approvals or introducing compensatory FSI provisions. “Naredco Maharashtra strongly advocates for grandfathering existing approvals or offering compensatory FSI mechanisms to maintain investor confidence, protect homebuyer interests, and preserve stability across Mumbai’s real estate ecosystem,” he said.
The BMC was approached for its comments but had not responded before publication.
Source: Construction World
