Price of Apartments in Kerala Expected to Shoot up - Impact of KMBR 2019

With the new amendments in Kerala Municipal Building Rules (KMBR) coming to effect from this month onwards, the planning and construction of apartment projects in Kerala will never be the same as before. While the previous norms were more suitable and practical, the revised norms are likely to pose many challenges for both real estate firms and homebuyers.

Kerala has distinctive geography with the Western Ghats, seashores, backwaters and paddy fields, etc. occupying half of the state. Thus identifying suitable quality land for apartment projects in cities is a difficult task. On top of this, other limitations due to more stringent norms, outdated structural and master plans are making things worse for developers. All this is ultimately causing a shortage of land in Kerala to a certain extent.  

Also, the revised rules regarding the width of public access roads for plots does not do any justice as in Kerala, most of the access roads are 6 meters or less. Another bottleneck is that previously the construction was based on the FAR (Floor Area Ratio), but as per the new rule, it is FSI (Floor Space Index). If we consider FSI, the calculations will differ entirely and will lead to a reduction in area. This means that the builder will have to put an additional investment for land and development charges which will straightaway jack up the price of the homes.

Due to this new rule, the achievable built-up area will be almost 20 - 25 % less than the previous rule and this deficit in the area will lead to a hike in construction costs by a certain percentage. To be precise, if the area of construction is less, the cost of construction will be more, and the developer will have to operate at a higher cost of construction. Apart from this, elements like sales and marketing expenses, overheads and drop in the operating margin of the developer will lead to another 10 % hike in price per sq ft area. 

As most of the above-mentioned factors will be directly impacting the cost of construction, we are anticipating a 20-25% hike in the price of properties. So it’s time to accept the fact that the new revision of Kerala Municipal Building Rules (KMBR) will cause a sudden rise in the price of apartments in Kerala.

To gain more clarity on the price change aspects, we took an example of “Confident White House” a premium project located in Kochi, near the international stadium which is under process as per the old rule. So when I applied the new rule criteria for this project, the variation in the land price alone will be approximately Rs.331 per sq feet than the previous rule. More specifically my launch price is fixed Rs. 5250, out of which the land component is Rs.1265 per sq ft. As per the new rule, the land cost component will be 1265 + 331 = Rs. 1600. This difference is because of the new rule calculation based on FSI. (Refer the table below for detailed calculations).

 

In short, the latest changes in the building rules will call for a minimum of 20% price hike in Kerala’s housing sector. My advice is that if you are planning to buy your dream home in Kerala, invest right away in an ongoing apartment project because if you postpone it, you may have to pay 20% extra for the property. 

 

The detailed analysis of the Confident Whitehouse project comparing the old rule and the new rule is given below for your reference. We hope that this comparative study will provide more clarity about the factors that will increase the price of apartments when the new rule comes into effect. 

KMBR ANALYSIS FOR CONFIDENT WHITEHOUSE, KALOOR
OLD RULE KMBR 1999 - FAR
NEW RULE KMBR - 2019 -FSI
VARIATIONS
KMBR ANALYSIS FOR CONFIDENT WHITEHOUSE, KALOOR
OLD RULE KMBR 1999 - FARNEW RULE KMBR - 2019 -FSIVARIATIONS

Land Area - 90 cents / land price 20 lakhs

Land area -90 cents / land price 20 lakhs

Allowed FAR ( floor area ratio ) with normal fees is 3. FAR - fee per sq mtr is Rs 10 therefore in sqft it is roughly Rs 1. and anything above 3 FAR to 4 FAR developer has to pay additional ( premium ) fee of Rs 465 per sq ft

Title changes to FSI and fee etc will be similar (Indirectly there will be an increase of 25% in fees)

As per the old rule, deductions are allowed from the Built-up Area (BUA) to derive the saleable area (SBA). Deductions such as lift shaft, ducts, % of balcony, car park area in basement and ground floor etc. Hence after deducting the above areas from the BUA, SBA or FAR 3 is 1,17,700 sqft

Normal Fees up to 3 FAR is Rs 1 sqft and the total fee will be Rs 1,17,700 /-

Premium FAR 3 to 4 , we will get additional SBA or FAR 39,260 sqft. Additional fee of 39,260 x 465= Rs 1,82,55,900. Therefore total fee = 1,17,700+1,82,55,900=1,83,73,600

As per the new rule, no deduction is allowed, maximum construction can be done 4 FSI = 1,56,960 sqft built up area. Since there is no deduction, the saleable area gets 25% less of this area (1,17,700 sqft). Thus the shortage compared to the old rule becomes 39260 sqft. In case if we want to compensate for this area, the company has to procure additional 23 cents of land.

Therefore additional fee for FAR 3 to 4 is = 39,260 sqft x 465= Rs 1,82,55,900.

Additional land cost 23 cents is 23 x20 lakhs = 4,60,00,000. so the total additional cost = 1,82,55,900+4,60,00,000= 6.43 Cr.

As per the new rule the developer has to invest additional for land 23x20= 4.60 CR to achieve the same area as per old rule.

As per the old rule calculation, 4.5 cents land has to be provided in ground as recreational area.

As per the new rule calculation, 7.5 cents land has to be provided in ground as recreational area.

Additional land area of 3 cents will be required for the project

Here the total investment for land is 20 lakhs x 90 cents = 18 Cr and with the normal and additional fee of Rs 1.84 Cr the total investment is Rs 19.84 CR. Therefore land cost reflection on each saleable area will be 19.84 Cr / 1,56,960 sq ft = Rs 1264 /sqft

As per the new rule land cost is (90+23+3) 116 x 20 = 23.20 CR and with normal fee of Rs 1.57 lakhs and additional fee of 1.86 Cr, the total investment is 25.04 CR .Therefore land price reflection on each sqft of apartment area will be 25.04 CR / 1,56,960 sqft =1595 / sqft

Variation on land price due to the changes in rule = Rs 1595 - 1264 = Rs 331 per sqft . This Rs 331 /sqft increase will reflect on the apartment price


. Interest of additional investment of 5.5 Cr for land development charges reflects on the sale price.

Here with additional payment developer can purchase premium FAR. Therefore the saleable area becomes 1,56.960 sqft and premium of additional FAR of Rs 465 x 39,260 (1,56,960 - 1,17,700 ) = 1.83 Cr. Practically developer gets 39,260 sqft of additional SBA for construction.

Maximum utilised (4 FSI) no more additional benefit

We can expect atleast 20% hike in sale price of apartments

T A Joseph, MD & Founding Director - Confident Group

ABOUT THE AUTHOR

As the most trusted real estate brand in the nation, we at Confident Group strive to create a positive, smooth and transparent medium for potential home buyers with anything and everything related to home purchase. We provide informative and engaging articles which cover useful details across many verticals from the real estate sector. Our 2-decade long expertise in building infrastructure projects across Kerala and abroad backed by the trust of over 10,000 customers earned us the reputation of being the best as a real estate brand in Asia. We hope that our blogs will help in translating our experience for the prospective buyers who are looking for their dream home.

Comments (2)

Sukumarank November 28, 2019

Informative

Shibu ID November 21, 2019

Well said sir

VIEW ALL COMMENTS

POST YOUR COMMENT

Your email address will not be published. Required fields are marked *

budget home new

Subscribe to Realestate News

Quick Enquiry

Enquire Now

Realize Your Dream Home With
Confident Group









Disclaimer

Thank you for visiting our website. We would like to take this opportunity to keep you up-to-date with the changes currently being deployed in accordance with the rules and regulations stipulated by RERA – Real Estate Regulatory Authority.

This process may take time, and it’s duly advised not to take any information currently mentioned on the website like images, material, stock photography, projections, details, descriptions, etc. to make a final purchase decision. All information should be deemed to be or considered only as advertisements, solicitations, marketing, offer for sale, an invitation to offer, an invitation to acquire, including within the purview of RERA.

You are therefore requested to personally verify all the details and aspects of any booking/acquisition of units/premises, directly with our sales department. To reiterate, please do not rely on the information contained on this website to make a final purchase decision until all the revisions and updated are completed.

Also, please note that we’ll not be accepting any bookings or allotments based on the material, images and descriptions mentioned on the website. We request you to contact our sales department for expert advice and information on the same.

Thank you for your patience.

I Agree