Transfer of Development Rights (TDR)

Transfer of Development Rights (TDR) means making available certain amount of additional built up area in lieu of the area relinquished or surrendered by the owner of the land, so that he can use extra built up area either himself or transfer it to another in need of the extra built up area for an agreed sum of money.

Transferable Development Rights or TDR can be considered as an important raw material in the real estate industry as it allows the developer to build over and above the permissible Floor Space Index (FSI) under the prevalent rules of the respective locations. On the back of growing urbanization and lack of availability of space, TDR assumes a greater importance especially in the suburban areas of the cities.

Broadly speaking TDR is the development potential of the land (benefit arising from land), which was suspended because of the reservation of land in the Development Plan for city by the State Government to be acquired for public purposes (reserved land). In order to avoid the payment of heavy compensation and the lengthy proceedings involved, the Government found an exclusive way of compensating the landowner under which the development potential of the land is detached from the reserved land itself, the land stands transferred to the Government and, in return, the development rights, equal to the development potential attached to the reserved land, are transferred to the owner, to be used in some other land as per the provisions of DCR. The owner of the reserved land is thus compensated by additional FSI which can be used on some other land over and above the normal FSI permitted in relation to that piece of land. These detached rights are known as TDR, which are formalised by the issue of Development Right Certificates (DRC) by the municipal commissioner. The owner of such DRCs can transfer them like a negotiable instrument for valuable consideration if he himself is not inclined to exploit DRCs in his own properties.

If a property developer surrenders his plot of land and offers to build homes free of charge for slum dwellers or those displaced due to infrastructural projects, he gets proportionate property development rights northward of that plot. He can then sell the property so developed on the open market. The TDR was to be an incentive for builders to construct homes for the underprivileged. It is an extra right used to make rehabilitation projects possible. If the FSI of plot is too small, it is possible to get some development rights as TDR, to be transferred to that plot or to a more northern area pursuant to the provisions of DCR.

Types of TDR

There are prominently following types of TDR:

Reservation TDR: The award of DRC to land owner for the surrender of land reserved for public purposes proposed under the Development Plan. It also covers deemed reservations prepared under the provisions of MRTP Act, 1966.

Road TDR: The award of DRC to land owner for the surrender of land reserved for new roads and road widening proposed under the Development Plan or the provisions of Mumbai Municipal Corporation Act 1888.

Heritage TDR: The award of TDR towards unutilised FSI of any structure or precinct under the DCRs due to restrictions imposed on them. It therefore compensates the owners of such structures for the loss of additional FSI (apart from that already developed).

Slum TDR: The award of TDR in lieu of constructing housing for slum-dwellers according to the regulations under MRTP Act, 1966.

Amenity TDR: The award of TDR for undertaking the development of public amenities on the reserved land. The public amenities eligible under the scheme are listed in DCRs.

Miscellaneous TDR: The award of TDR for any purposes as may be notified by the Government through either modification of addition of the provisions of sanctioned DCRs.

Development Rights Certificate (DRC)

The owner of any land which is required for road widening for formation of new roads or development of parks, play grounds, civic amenities etc., those proposed in the plan shall be eligible for the award of Transferable Development Rights. Such award will entitle the owner of the land in the form of a Development Rights Certificate (DRC) this can be use for he may use for himself or transfer to any other person.

Purpose of TDR

The process of land acquisition in urban areas for public purpose especially for road widening, parks and play grounds, schools etc., is complicated, costly and time consuming. In order to minimize the time needed and to enable a process, this could be advantageously put into practice to acquire land for reservation purposes mentioned above. 

Legal Basis of TDR

As per Maharashtra Regional and Town Planning Act, 1966 u/s Sec. 2 (9A) "Development right", means right to carry out development or to develop the land or building or both and shall include the transferable development right in the form of right to utilise the Floor Space Index of land utilisable either on the remainder of the land or partially reserved for a public purpose or elsewhere, as the final Development Control Regulations in this behalf provide.

Rule 34 of the Development Control Regulation defines TDR as: In certain circumstances, the development potential of a plot of land may be separated from the land itself and may be made available to the owner of the land in the form of Transferable Development Rights. These rights may be made available and be subject to the Regulations in Appendix VII of DCR.

Calculation of Development Right (DR):

1)    Illustration for use of transfer of development rights

Illustration No. 1: In a plot area of 500 square meters at road “A”, where floor area ratio is 1.5 :

I.	Plot area	: 500 sqm
II.	Permissible floor area	: 1.5
III.	Buildable Floor Area	: 500 x 1.5 sqm =750 Sqm.
IV.	Area surrendered	: 100 sqm
V.	Additional     floor Development rights	area
VI.	Plot area after surrender	: 500 – 100 = 400 sqm
VII.	Buildable floor area in plot area of 400 sqm (after surrender) a)      If Additional Floor area is not utilized in the same plot b)      If Additional Floor area is utilized in the same plot	: 750 sqm : 750 + 150 = 900 sqm

Illustration No. 2: In a plot area of 500 square meters at road “B”, where floor area ratio is 0.75 :

I.	Plot area	: 500 sqm
II.	Permissible floor area	: 0.75
III.	Buildable Floor Area	: 500 x 0.75 = 375 sqm
IV.	Area surrendered	: 100 sqm
V.	Additional     floor Development rights	area
VI.	Plot area after surrender	: 500 – 100 = 400 sqm
VII.	Buildable floor area in plot area of 400 sqm (after surrender) c)              If Additional Floor area is not utilized in the same plot d)             If Additional Floor area is utilized in the same plot	: 375 sqm : 375 + 150 = 525 sqm

Illustration No. 3: In a plot area of 500 square meters at road “C”, where floor area ratio is 0.75 and Development right of 150 sqm originated at road “A” is transferred :

I.	Plot area	: 500 sqm
II.	Permissible floor area	: 0.75
III.	Buildable Floor Area	: 500 x 0.75 = 375 sqm
IV.	Additional floor area transferred for road “A”	: 150 sqm
V.	Total Buildable floor area	: 375 + 150 = 525 sqm

Utilization of DRC pertinent to Mumbai: 

1.   The DRC so permitted may be utilized either at the remaining portion  of the area after surrender which will be limited to a maximum of 1:60 or 0.6 times eligible floor area ratio as additional floor area ratio in lieu of transfer of DRC, irrespective of road width.

2.   The receiving plot shall abut not less than 9 mtr. wide road.

3.   The receiving plot can utilize a maximum of 1:60 the eligible FAR for that plot.

4.   The utilization of DRC in favour of NRI or Foreign Nationals will be subject to rules and regulations of the RBI.

5.   The Authority may charge a fee of Rupees one hundred for grant / transfer / utilization / revalidation etc., of DRC.

6.   The instrument of utilization of DRC shall have to be executed by both the parties – transferor and transferee.

7.   For each request to utilize the DRC separate utilization form shall be submitted to the Authority.

8.   The utilization form requesting to utilize the DRC shall be valid for six months from the date of issue of utilization form.

9.   The DRC shall be valid for a period of 10 years. The DRC shall however, shall lapse after expiry of 10 years.

Following are the major changes in TDR as per the new DCPR 2034 for Mumbai:

a)  TDR will now be permissible for use in the island city, which was not allowed earlier. However, the use of TDR is not permissible in industrial zone.

b)  If the developer is using TDR for its real estate project, then it is mandatory for developers to buy minimum 20 per cent and maximum 50 per cent of it from slum rehabilitation (SRA) projects.

c)   The TDR generated in case of land surrendered to the government for a public project has been increased to 2.5 times of the land area for the island city and 2 times for the suburbs.

d)   Utilization of TDR Not Permitted: Areas in SDZ , MMRDA, MHADA , MPT or any other planning authority appointed by GOVT, and areas where zonal (basic) FSI is less than 1.00. Also, in CRZ (except in cases where TDR is permitted as per CRZ Notification of 2011 & its amendments.

The TDR cannot be utilized (for Mumbai) under following circumstances:

• Where permissible FSI is less than 1.0
• On plots falling within 50 m on roads on which no new shops are permitted, particularly as prescribed in Sub-regulation (2) of Regulation 52 of 1991 DCRs
• In the island city and the following non-receiving corridors: (a) Western Corridor – between tracks of Western Railway and S V Road and between tracks of Western Railway and Western Express Highway (b) Eastern Corridor – between the tracks of Central Railway and LBS Marg.
• In the Coastal Regulation Zone as defined by the Ministry of Environment and Forests
• On plots located in M Ward, except TDR generated from M Ward and slum TDR generated elsewhere
• In the No Development Zone (NDZ) and Tourism Development Zone (TDZ) and in those areas where either MMRDA or MHADA is the special planning authority
• On plots for housing schemes of slum dwellers for additional FSI is permissible under sub-regulation (7), (9)and (10) of Regulation 33
• In areas having any development prohibition or restrictions imposed by any notification issued under the provisions of any Central/State Act or the regulations.

Criticism to TDR Concept

On a conceptual level, TDR seemed to be a perfect urban development tool as it facilitated the development of suburban locations. However, developers used it as a tool to maximize the saleable area in a few prime locations. This excessive construction has resulted in congestion in the suburbs, haphazard and unplanned development, and intense pressure on infrastructure - a move severely criticized by the planners and environmentalists.

Another criticism to the concept is that it has lead to an increase in the real estate prices. Since the TDR acquisition cost is loaded onto the project cost, the developers increase the final pricing of the project. In order to curb this, the Government should have some mechanism to keep a check on the quantum of TDR available in the market and the trading price.

“We would like to express our gratitude to Rushikesh Nikam (MT- TSG, PNB Housing), for his help and support for writing this article. You can reach out to him at rushikesh.nikam@pnbhousing.com ”