Why an overloaded fee structure is driving up costs, shrinking homes, and pricing out Mumbai’s middle class.
In November 2024, NAREDCO Maharashtra, in collaboration with research partner 1 Finance, released a landmark study titled The Reality of Mumbai Realty. This comprehensive report examines the state of Mumbai’s housing market, highlighting the city’s pressing affordability crisis and identifying one of its biggest structural roadblocks: an overloaded premium structure.
The findings reveal that Mumbai imposes 19 different premiums on developers — far more than Bengaluru’s 4 and Hyderabad’s 3. While intended to regulate construction and fund urban infrastructure, this excessive and fragmented premium regime has become a significant barrier to project viability, housing affordability, and inclusive urban growth.
What Are Premiums in Real Estate?
Premiums are charges paid by developers to obtain certain construction rights, permissions, or additional space allowances. They can include:
- Buying extra Floor Space Index (FSI)
- Adding fungible space (balconies, flower beds, etc.) to the FSI
- Constructing staircases, lift wells, or lobbies
- Meeting infrastructure and environmental obligations
While these fees are common in most cities, Mumbai’s unusually high number and rates have a disproportionate effect on housing prices.
Mumbai’s 19 Premiums — The Complete List
According to The Reality of Mumbai Realty, developers in Mumbai currently navigate this extensive list of premiums:
- Fungible FSI
- Premium for Staircase
- Premium for Lift
- Premium for Lift Lobby Area
- Additional Premium FSI
- Paved R.G. Premium (Residential Ground)
- Carriage Entrance
- Layout Infrastructure Deposit
- Parking Projection in FOS (Front Open Space)
- Cantilever Building Line Projecting Within 3.0 M from Compound Wall
- Infrastructural Charges
- Environmental and Social Impact Fees
- Premium Paid to MSRDC
- TDR (Transferable Development Rights) Rates
- Development Cess
- Other Regulatory Fees & Charges
- Projection Beyond 2 M from Building Line Premium
- Building Line Projecting Within 2.5 M from Compound Wall Premium
- Fire Service Charges
Each has its own calculation formula, often linked to Ready Reckoner Rates (RRR) or project area. Together, these premiums can account for 20–30% of the total project cost.
The Financial Burden
For a residential project spanning 800 sq. metres and costing around ₹55 crore, government premiums, taxes, and compliance fees can total ₹15–20 crore — before construction even begins.
This massive upfront cost means:
- Developers pass on expenses to homebuyers, pushing property prices higher.
- Affordable housing projects become financially unfeasible.
- Luxury housing dominates, squeezing out middle- and lower-income segments.
Impact on Affordability
Greater Mumbai already has the highest property prices among major Indian metros:
- ₹32,150 per sq. ft on average
- Prime localities reaching ₹61,922 per sq. ft
Compare this to:
- Pune: ₹15,187 per sq. ft
- Bengaluru: ₹14,265 per sq. ft
- Hyderabad: ₹10,103 per sq. ft
In Bengaluru and Hyderabad, lower premiums mean:
- More units fall within affordable price ranges.
- Larger carpet areas are viable.
- Sub-₹1 crore homes are more common in central areas.
In contrast, Mumbai’s median apartment size has shrunk from 900 sq. ft in 2014–15 to just 700–750 sq. ft, as developers try to keep ticket sizes manageable.
Why This Hurts Everyone
The 19-premium structure creates a triple impact:
- Developers struggle with cashflow, high capital requirements, and delayed project starts.
- Homebuyers face inflated prices and smaller living spaces.
- The city risks becoming an enclave for only the wealthy, pushing middle-income families to far-off suburbs.
This fuels suburban sprawl, lengthens commutes, and strains already overburdened infrastructure.
Report’s Recommendations
The Reality of Mumbai Realty report calls for a rationalisation of government premiums:
- Consolidate the 19 premiums into 4 categories: FSI, Infrastructure, Environmental, Development Rights.
- Cap total premiums as a percentage of RRR.
- Introduce a staggered payment structure (40% at approval, 20% at commencement, 40% before occupation certificate).
- Reform Ready Reckoner Rate calculations to reflect real market transactions.
Lessons from Bengaluru & Hyderabad
The report points out that Bengaluru and Hyderabad show it’s possible to maintain city revenues without overburdening developers:
- Bengaluru focuses on a smaller set of development-linked charges.
- Hyderabad keeps its premium structure minimal, leveraging its commercial real estate growth to fund civic infrastructure.
The result? Lower home prices, larger apartments, and faster absorption rates in these markets.
The Road Ahead
Mumbai’s ongoing infrastructure boom — from the Coastal Road to the Metro network and the Mumbai Trans Harbour Link — will unlock new development corridors. But without premium reforms, much of this potential will be cornered by the luxury segment, missing the government’s ‘Housing for All’ goals.
Reducing and restructuring premiums is not about cutting revenue — it’s about making revenue collection sustainable so that developers can deliver more housing at prices the city’s workforce can afford.
Conclusion:
The Reality of Mumbai Realty makes it clear: Mumbai’s premium-heavy system is a structural bottleneck choking affordability. A move from 19 fragmented charges to a leaner, more predictable system could lower housing costs by 15–20%, unlock supply in the affordable segment, and keep Mumbai competitive with other Indian metros.
The time for reform is now — before the city’s dream of inclusive growth slips further out of reach.
Archonet’s LandWise: Simplifying Real Estate Feasibility
If you’re a developer, society, or landowner evaluating a project in Mumbai, understanding exactly how much approval fees and premiums will cost you is critical before making investment decisions. Archonet’s LandWise tool can help you instantly estimate permissible FSI, applicable DCPR schemes, and expected premium costs — so you can make faster, data-backed go/no-go calls.
To read case study on Rustomjee’s GTB Nagar redevelopment proposal, click here.