News | Oct 26, 2022
Around Rs 150 crore is outstanding from defaulting developers for which the BMC plans to give one last chance for repayment with 12.5 percent interest.
The Brihanmumbai Municipal Corporation (BMC), the Mumbai civic body, has decided to extend the instalment payment scheme offered to developers for various premiums and fees to be paid by them against approvals during the construction stage of a real estate project for another three years.
The BMC introduced a five- and six-instalment payment scheme in September 2019 for two years. However, considering that the outstanding is running into nearly Rs 150 crore, it has proposed to extend the facility given to developers until September 2025, according to a circular made public by the BMC on its website on October 12, 2022.
The local authorities in Mumbai collect 22 types of premiums under various headings including an additional Floor Space Index (FSI) that determines the height of a building, staircases, lift wells, and lobbies. In Mumbai, a developer has to spend 30 percent of the project cost, on an average, on payment of premiums.
Owing to this, the BMC introduced the instalment facility that will allow developers to pay premiums and fees payable to the Mumbai Civic Body in instalments. This allows developers to hold on to liquidity and maintain the cash flow from bookings.
The BMC in September 2019, following representation from various stakeholders including the developer's apex body, had decided to give the instalment facility. The scheme was introduced for two years, and was later extended till 2022. Now, it has been extended till September 2025.
For buildings up to 70 metres or about 21 floors, the instalment facility was granted for a period of 48 months wherein a total of five instalments, starting with the first initial payment of 10 percent, followed by four instalments of 22.5 percent at an interval of 12 months.
Further, for buildings above 70 metres or above 21 floors, the instalment facility was granted for a period of 60 months wherein there will be a total of six instalments, starting with the first initial payment of 10 percent, followed by five instalments of 18 percent each at an interval of 12 months.
The BMC's Development Plan department has now decided to extend the instalment until September 3, 2025.
According to BMC's data, after introducing the instalment facility, several developers have not paid due instalments within the stipulated period for which stop-work notices have been issued.
The figures reveal that as of August 2022, the BMC's receivable for default payment in form of instalments of premium stood at nearly Rs 150 crore. Mumbai city is divided into three parts namely City division from where the BMC is to get Rs 4.84 crore, western suburbs from where BMC is yet to get Rs 23.41 crore and eastern suburbs from where it is yet to receive over Rs 119 crore.
The BMC has decided that the developers who have defaulted on payment of instalments will be given a separate instalment facility for the defaulted amount. These defaulted amounts shall be paid in eight equal instalments for two years with 12 percent interest on reducing balance, subject to several conditions.
A senior BMC official from the Development Plan Department said, "We have extended the instalment facility up to September 2025. We have got a good response from developers for this scheme, and we have also decided to give a push to the defaulters by giving them one last chance. This scheme is like a loan where developers can avail instalment by giving us a certain interest rate."
Industry players have welcomed the move.
Harshul Savla, managing partner, Suvidha Lifespaces (M Realty) said, "We welcome the move of the BMC, but along with it we are also requesting authorities to consider rationalising the premiums."
In 2021, the BMC announced a 50 percent waiver in premiums that resulted in a revenue of Rs 12,000 crore from premiums. The developers have been demanding an extension of this waiver citing that Mumbai has the highest number of 22 premiums levied compared to Chennai, Bangalore, Delhi, and Hyderabad.
Maharashtra Chief Minister Eknath Shinde and Deputy Chief Minister Devendra Fadnavis have assured the developers to look into the waiver of premiums.