The dream of owning a home in Mumbai remains elusive for millions, even with government initiatives like the Pradhan Mantri Awas Yojana (PMAY) aimed at promoting affordable housing. So, what’s holding the city back from turning that dream into a reality? According to real estate veteran Dr Niranjan Hiranandani Founder & Chairman of the Hiranandani Group and Chairman of NAREDCO the problem runs deep, and it starts with systemic inefficiencies and fiscal policies that directly impact housing costs.
The Hidden Cost of Buying a Home: Taxes Take Center Stage
In a video shared online, Dr. Hiranandani breaks down the real cost of home ownership in Mumbai. A striking revelation he makes is that nearly 50% of the total cost of a home ends up with the government, not the developer. This includes GST, stamp duties, development premiums, and additional FSI charges.
“When you buy a home from me, half your payment goes to the government in some form or the other,” he says. “This tax burden alone makes affordability extremely difficult to achieve.”
Regulatory Restrictions: The Ready Reckoner Rate Dilemma
Another barrier to affordable housing lies in the ready reckoner rate, the government mandated minimum property valuation. Dr. Hiranandani explains that this rate is often unrealistically high, making it illegal for developers to sell homes below a certain threshold, even if they want to.
“This artificially inflated pricing mechanism has the unintended consequence of pushing housing out of reach for the average buyer,” he notes. “The system has been designed in a way that it’s nearly impossible to deliver genuinely low-cost housing.”
Slum Rehabilitation Takes Priority, But at What Cost?
In urban hubs like Mumbai, real estate developers are frequently involved in slum redevelopment projects, where they are required to rehouse slum dwellers at no cost. While this policy is rooted in social welfare, it often leads to a disproportionate allocation of resources, leaving less room for middle-income and lower-income homebuyers in the open market.
Red Tape and Slow Approvals: A Development Bottleneck
Dr. Hiranandani also touches on the bureaucratic maze developers must navigate. Long delays in approvals, complex regulations, and steep compliance costs drag projects and drive up final prices.
“Ease of doing business in real estate is far from reality,” he says. “It’s not just about delays, it's about the inefficiency that inflates everything.”
Planning in Silos: A Fragmented Urban Development Approach
Urban development in Mumbai is managed by multiple bodies from the MCGM and MMRDA to MHADA, MIDC, and SRA each with their own agendas. Dr. Hiranandani criticizes this fragmented approach, calling for better coordination and unified city planning.
“Everyone works in isolation,” he points out. “What we need is a cohesive, long-term masterplan that integrates infrastructure, housing, and quality of life improvements.”
The System Punishes Affordability
Perhaps the most startling part of Dr. Hiranandani’s message is that developers are actively discouraged from offering homes at lower prices. He warns that if a builder attempts to sell below the ready reckoner rate, they risk being investigated or penalized by the income tax authorities.
“So ironically, the system penalizes affordability,” he says. “The middle class ends up bearing the burden while slum dwellers get free homes and the government collects revenue from the rest.”
The Way Forward: Fix the System, Reap the Rewards
Dr. Hiranandani ends on a hopeful note. According to him, the future of urban housing can still be bright if government agencies work together to correct longstanding issues.
“All that’s needed is for the authorities to sit down, acknowledge the mistakes, and fix them,” he states. “If we do that, the next 10 years could be transformative for housing in cities like Mumbai.”
Key Takeaways from Dr. Niranjan Hiranandani’s Message
- Half of a home’s cost goes to taxes and government fees.
- The ready reckoner rate limits the ability to offer truly affordable homes.
- Real estate development is slowed by red tape and outdated approval systems.
- Fragmented planning across government bodies hinders efficient urban development.
- Developers face penalties for selling homes at genuinely lower prices.
FAQs
Q1: Why is housing still unaffordable in Mumbai despite government schemes?
Government schemes exist, but systemic issues like heavy taxation, high ready reckoner rates, and slow approval processes undermine their effectiveness.
Q2: What role does taxation play in housing prices?
Dr. Hiranandani explains that around 50% of the cost of a home goes to government levies such as GST, stamp duty, and FSI charges, significantly inflating prices.
Q3: Can developers legally offer affordable homes below market rates?
Not really. Due to high ready reckoner rates, selling homes below a certain price can attract scrutiny and penalties, making it nearly impossible to deliver truly low-cost housing.
Q4: What changes are needed to improve housing affordability?
Better city planning, streamlined approval processes, fairer taxation, and unified policymaking among urban development bodies are essential to solving the crisis.
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