The Rise in FSI to escalate land parcels

FSI

Recently, the State Government of Maharashtra announced some new amendments in Integrated Industrial Area Policy, 2013 as Industrial Area Policy, 2018 which brought good news for the private practice players dealing in planned industrial areas. These amendments promise to increase the investment flow in the state specially to underdeveloped industrial region, providing great scope of job opportunities.

The earlier Integrated Industrial Area Policy, 2013 caused a lot of difficulties for private players who were dealing in small land parcels. Though, these land parcels were for building and developing small and medium enterprises, the private players were undergoing problems specially in Maharashtra.

The Integrated Industrial Area Policy, 2013 was announced for the welfare of small and medium enterprises in a planned industrial area. The low rate of FSI build hurdles for the private players who were involved in dealing of these small land parcels. The high stamp duty rate was another trouble for them. The amendments under Industrial Area Policy, 2013 did not get such a good response from Maharashtra, as compared to the other states like Gujarat, Karnataka and Tamil Nadu because of the good concessions provided to them by their state government. But with the new amendments, a good response has been gained from Maharashtra even.

But with new amendments under Industrial Area Policy, 2018, the State Government of Maharashtra seem to attract these private players to enhance the incentives issued and the development of the small land parcels. According to these amendments, the floor space index of the industrial undertakings, which develop on small parcels of land, has been doubled to 2 and on the contrary, there is relaxation of 50% in stamp duty.

FSI (floor space index) is basically the index number of the total floor area of a building to the size of the land upon which the building is built. In Mumbai, the norm of FSI is 1.33 but it is higher along the metro rail line and slum areas like Dharavi. Now, according to the new amendments, it has just been doubled from 1.33 to 2. Higher allowable FSI increases the price of land value. Thus, FSI has a major impact on the land value.

The stamp duty along with registration charges is one of the major way of getting revenue in a large State government of Maharashtra. The State government has continuously being earning through the real estate business of Mumbai and has experienced a good amount of growth as well as development. The residential charges for residential places till 31st December, 2014 were INR 25,000, while from 1st January, 2015, this has risen to INR 30,000. But the stamp duty is still being charged at the standard rate of five per cent all over Maharashtra for both residential as well as non-residential places. The stamp duty is charged for every Rs.500 according to the market value. It should be paid at the time of implementation of the agreement. Otherwise, the penalty for late payment is 2% per month on deficit stamp duty amount, which is subjected to maximum of 2 times of the deficit stamp duty amount.

The officials from Maharashtra have reported that the requirement of the land to set up a planned industry, under small and medium enterprises, has seen a decline from 40 hectares to 20 hectares under the new policy. This is because of the reasons that there is a considerable difficulty in acquitting land and also there is increasing unavailability of land. But with the new amendments, the government land too can be used for enhancing industrial growth all over the state.

80% of the land is reserved for the private players and rest in industrial region and the rest 20% of it is used for other purposes. Earlier, this percentage was 60% and 40% respectively. Such a major change is believed to help in improving the situation.

Maharashtra Industrial Development Corporation (MIDC) works with the objective of setting up industrial areas in the State of Maharashtra for systematic and planned growth and industrial development. The MIDC offers developed plots with all the infrastructural facilities which include internal roads, electricity, water, as well as other internal services to set up the business in the industrial areas. This allures the small enterprises and industries to build their business in these areas and also encourage the potential entrepreneurs to take the risk.

Now, MIDC under the State Government has announced that the industrial areas would get a hike in seeking electricity. Now, the industrial area would be having an open access to electric power. This would be according to the provisions set under Open Access Regulations, 2013. This Act has set the electric power consumption for all the industrial areas. Under the new amendments in Industrial Area Policy, 2018, the customers of the industries would be getting an additional power, who were seeking electric power in excess of 1 MegaWatt, through the providers of the open access.

The major shift which took place with the evolution of MSMED Act, 2006 is the involvement of services sector in the Micro, Small and Medium Enterprises. It is based on investment in plant and machinery which are useful for manufacturing and production of the goods, in equipment which are useful for providing services. The Industrial Area Policy, 2018 focuses on the development of micro, small, and medium scale enterprises (MSME) as well as other industrial areas in the state.

The State Government of Maharashtra has enacted the SEZ Policy for the enhancement and growth of Special Economic Zones in the state. The SEZs are duty-free, and have a business flexible policy, which aims at fostering faster growth of industrial development and good job opportunities which result in higher employment generation. The state government of Maharashtra has granted permission to special economic zone of Khed to now be developed into an integrated industrial area. Few weeks back, the Maharashtra state cabinet granted the permission to special economic zone of Navi Mumbai to be developed as an industrial city.

Thus, this Industrial Area Policy, 2018 aims at the overall development of industrial area in the state of Maharashtra.

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