Article Regarding “Provide public parking place and get extra F.S.I.”

(property advocates in Bangalore, property lawyers in Bangalore)

Developers in Mumbai can build more if they set aside some space for publi0063 parking. The Maharashtra government has come out with an incentive floor space index (FSI) provision that encourages developers and housing societies to earmark space for a public cause in return of permission to build more.

This would not only free up some privately-owned plots or surplus space in housing societies for public parking but also have some impact on the property market since the developers will get extra FSI to build more.

In areas where the FSI has been caped at 1 or 1.33, this provision would virtually be a windfall for developers if they can set aside the required space for public parking. Additional FSI is big enough an incentive for developers. In the island city, the maximum permissible FSI, which determines vertical growth of a building in proportion with the plot area will be 4 under the new parking policy proposed by the Government. In suburbsand extended suburbs, the maximum permissible FSI will be 3, according to an amendment made by the state to the section 37(2) of Development Control Rules (DC Rules). The general FSI in the island cityand suburbs is 1.00 and 1.33.

The provision says the minimum area of a plot being offered for public parking should be 1000 sq m in the island city and 2000 sq m in suburbs. The minimum number of motor vehicles publicparking space should not be less than 50 subject to minimum parking space of 700 sq m. The maximum permissible FSI that the policy offers is inclusive of the FSI actually used by the developers or societies. The policy will be implemented by the Brihan Mumbai Municipal Corporation (BMC).

The provision will work like this. Suppose a developer or housing society offers a 20,000 sqm plot for public parking, after that building or society has fulfilled parking requirements of the residents, to the municipal corporation and if the corporation accepts the proposal, the developer or the society concerned will get an additional FSI (depending upon location) over and above the FSI granted earlier. People using the parking space will have to pay charges to the BMC. But the developer or society will not claim any share in this revenue and the only incentive will be extra FSI.

The provision makes a distinction for areas near railway stations, bus depots, metro stations, water jetties, government offices, and prominent places of worship. If the parking space proposed bydevelopers or societies is within 500m distance from any of these places, the permissible additional FSI will be available on 50% of the built of parking area. In other parts of the city and suburbs, this will be 40%. This provision has been included to facilitate public parking around prominent places of worship like Siddhivinayak, Mahalaxmi temple, Haji Ali, Mount Mary church etc.

The provision would not only create parking space around the popular places of worship but also lead to creation of additional housing stock by offering extra FSI. The provision at places of worship also takes into account the security aspect since shortage of parking has always been a security threat.

Home loandefault on the rise:

Defaults on housing loans are said to be on the rise, with individuals facing the brunt of the high interest rate regime. An indicator of this is the fact that of the total security receipts (SRs) of Rs,1,100 crore issued by Asset Reconstruction Company (India) Ltd (ARCIL) to banks between April -September 2008 for acquiring bad loans 20% were from home loan defaults.

Asset Reconstruction Companies (ARCs) expect a further jump in housing loan defaults in the coming quarters if interest rates do not climb down. When an ARCacquires bad debts from a bank, based on a valuation they either pay cash or issue SRs which are held in a trust and redeemed after realization of the assets ARCIL, which is the pioneer in acquiring distressed assets, had acquired these bad loans in question from around 20 banks. While a detail of individual banks is not available, it is learnt that ICICI Bank’s portion of the total SRs issued by ARCIL was about 30%. According to ICICI Bank, the total value of delinquent loans sold by the bank to Arcil April 2008 onwards stands at Rs 608 crore for a sale consideration in excess of62% of the gross loan book. However, it is not known what portion of this comprises retail loan defaults.

According to an ICICI Bank spokesman: Sale of retail NPAs has been one of the many tools adopted by the bank to proactively manage delinquencies in the portfolio. It is a standard activity undertaken in the normal course of business by all international banks. Sometimes the sale is conducted every quarter. Also, this is only a very small portion in the over all delinquency management strategy of the bank.”

NPAs have an adverse impact on shareholders’ value of banks and financial institutions by eroding margins. ARCs acquire distressed assets at a discount depending on the credit realization potential of the asset.

An industry expert said that banks would increasingly use ARCs to hive off their distressed retail assets so that they are not required to sully their hands in dealing with bad retail loans. An official from a newly floated ARC said that even though bad retail assets offers a huge opportunity, it requires that right machinery to gain monetary realization from such assets.



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