CHENNAI: The recent increase in floor space index from 1.5 to 2 for residential projects has left realtors worried as they fear the commercial or office properties supply will be hit as it is not given preference on a par with residential projects.
Ajit Kumar Chordia, president, Chennai Real Estate Development Authority of India (CREDAI), Tamil Nadu, told Express there is an extreme shortage of commercial office space and the State should have increased FSI for non-IT commercial space on a par with residential projects. This move to increase FSI for residential space will encourage prime commercial space to be converted into residential projects. This will be detrimental to the office space sector which is already facing space crunch, he said.
Interestingly, developers fear that the GST road stretch, which is full of commercial space, could be converted into residential space.The commercial sector or office space is the driver of the State’s economy and non-availability of it deters new generation of companies to set up offices, he says.
Interestingly, Knight Frank, a property consultant, said inadequate supply of office space is continuing to limit transactions. Office rentals have continued to increase with central business district of Chennai seeing increase of `65 to `95 per sq ft a month while southern business districts’ rentals have increased by `50 to `76 per sq ft.
Vacancy levels have come down drastically with occupier demand outstripping supply. Interestingly, the growth in office space is far from adequate when demand is taken into account, Knight Frank said.
While the share of IT and IT-enabled services has come down in the office sector by 10 per cent, it is the banking, financial services and insurance sector, whose share has gone up from 16 per cent to 23 per cent. Chordia said it is the non-IT office space sector which is being ignored by the state government.
With growth in Metro Rail corridor, there is a huge demand for office space along Anna Salai and in Anna Nagar. Earlier, it was restricted to Nandanam and Guindy.
T Chitty Babu, chairman and CEO of Akshaya Pvt Limited, echoed the view of Chordia. “Increase in FSI is a welcome step, but the government should also treat non-IT commercial space on a par with residential sector. They should look at jobs and office space,” he said.
This comes after two Government Orders were issued by Housing Secretary S Krishnan about increasing the floor space index from 1.5 to 2. However, experts are of the opinion that without relaxing the development regulations, the floor space index of 2 cannot be achieved.
“There is a lot of clarity required over increasing the FSI,” says the CREDAI executive member and vice-president of Newry Properties, S Sridharan.
FSI rules are implemented to limit the amount of floor area that can be built on a given plot of land. For instance, say, an FSI of 1 allows one floor of 100 sq ft to be built on a 100 sq ft plot of land, or two floors of 50 sq ft each on that same land. An FSI of 2 allows two floors of 100 sq ft on the 100 sq ft of land, or 4 floors of 50 sq ft on that same land.
Indian cities have some of the most restrictive FSI regimes in the world. For instance, Mumbai has a maximum free FSI of 1.33 in most of the island city and Bengaluru 3.25. By contrast, Hong Kong and New York City have a maximum free FSI of 12 and 15 respectively in their central business districts.
A Shankar, COO, Strategic Consulting, India & Sri Lanka, Jones Lang LaSalle, told Express that the GO would result in densification of Indian cities and government should work on augmenting required infrastructure.
1.33 is the maximum free FSI in most of Mumbai and Bengaluru has 3.25 in contrast to Hong Kong & New York
10% reduction is seen in the share of IT and IT-enabled services in the office sector in the Chennai city