MUMBAI: India’s hottest property market, Mumbai, could see some shakeup in the commercial realty space. In a significant development, the Mahrashtra government has decided to allow all upcoming IT parks and IT specific buildings in the city to utilise 80% of the total constructed area for financial services, besides IT and IT enabled services. At present only 30% of the total constructed area can be given to financial services.
In a notification issued last week, the state government said in order to develop Mumbai as an international financial hub and to generate additional employment, it has been decided that all such building which are eligible for additional FSI of 100%, can now utilise 80% of the total constructed area for financial services, apart from IT and ITES.
The government also considered the increasing demand of investors in the financial services sector before changing the IT-financial services ratio, the notification said.
The government’s move is expected to increase supply of commercial space in Mumbai and correct property rentals. It may be noted that a lack of supply has pushed Mumbai’s commercial property prices to $400 per sq ft, a rate close to the ones prevailing in London and New York.
Currently, more than 100 IT specific building are coming up in Mumbai and its suburbs. Besides, three to four IT SEZs have also been proposed in Mumbai. The state government has also extended the new amendment in the policy to other areas of financial services such as corporate finance, asset and fund management, broking, NBFC, research advisory tax and audit, business and management consultancy, transactions services, treasury operations risk management and credit services.
According to international property consultant DTZ’s latest report, with over 15 million sq ft office space expected to be completed in 2008, the demand from banking and financial services and ITES and other sectors could play a major role in determining the future growth of the commercial property market in Mumbai.
“This change in regulation is extremely positive, and will accelerate the expected commercial space market correction. Previously, only domestic companies could take advantage, now, we will see many MNCs also safely occupying this type of buildings,” said Pawan Swamy, MD (Markets) Jones Lang Lasalle Meghraj said. IT-specific buildings in Mumbai, for instance, have seen a significant upgrade in inquiries as result of this changed regulation.
Previously, there was a lack of enthusiasm about the potential of IT-specific buildings, since non-IT occupiers would not qualify for them. This impacted developers overall interest in launching such projects. However, there seems to be some confusion about the new proposal. Announced in 2003, the state’s IT policy is understood to be undergoing a major review after five years.
“The state government is currently working on new initiatives to be included in the said policy. The policy in its new avatar will come into force from January 2009,” a top official from the concerned ministry told. Under the circumstances, it’s unclear when the proposed decision about the use of developed space would come into force. The policy promises many tax sops, including 100% exemption on stamp duty, for the IT industry.
