Hike In Floor Area Ratio in Noida: A Boon Or A Bane?

Noida will be a much more lucrative area for real estate developers after the government moves to hike floor area ratio (FAR) along the Delhi Metro corridor. This will cover areas along the existing Delhi Metro as well as the areas in the vicinity of the upcoming extension of Metro line, thus, including major parts of Noida and Greater Noida.

How can increased FAR help?

FAR is the extent of development that can be done on a land. When this ratio is increased, a builder stands to gain as it allows him to build more homes on a plot.  

The Uttar Pradesh government increased the FAR in Noida by 0.5 per cent to 3.25 per cent. It means that a builder will be able to use 3,250 sq m in a 1,000 sq m plot. Earlier, they were able to build only 2,750 square meters per a 1,000 square meter plot.

A boon for buyers and new projects?

The new launches in Noida area fell by 51 per cent last year, according to a report by Proptiger.com. So an increase in the FAR could be a good news for the builders who were looking to launch projects in Noida.

Theoretically, if a builder can add more units onto a plot, the overall costs will come down due to the ability to sell more. This benefit can be passed on to homebuyers in the form of discounts, especially for the properties that are still under construction.

A bane for unsold inventory

Noida, which has the largest amount of unsold inventory of over one lakh units, will be hurt if new constructions come up. The unsold inventory, of which 24 per cent is up to three years old, is burdening builders by adding to the maintenance costs of such unsold flats. So, the hike in FAR might affect the demand and supply dynamics of property in Noida.

A large amount of unsold inventory exists in Noida due to various reasons. A large number of projects were launched in 2010 in anticipation of growth which didn't happen as expected. On the other hand, many projects in Noida were stuck due to legal and other issues including the National Green Tribunal halting at least 50 projects around the Okhla Bird Sanctuary. If new supply is added, existing projects might witness decline in demand.

Effect on the quality of living

If more projects with high FAR come in, Noida might become much more crowded in the years to come. This might have an adverse effect on the physical infrastructure in the area like roads, availability of water and other civic amenities.

Moreover, Luxury apartments in Noida and Gurgaon owe their existence to the lack of crowd in the area. Ample parking, good roads and lack of congestion have been the USPs which attracted many premium home buyers to Noida.  The quality of residential properties has also matched the standards of the independent villas in Greater Noida and many such. This advantage might soon vanish if many projects with numerous homes are constructed.

But, this can happen only when overall demand for homes goes down. With India's growing needs for homes, this is very unlikely, especially for a city just a few kilometres from the heart of the national capital of Delhi.

(Katya Naidu has been working as a business journalist for the last nine years, and has covered beats across banking, pharma, healthcare, telecom, technology, power, infrastructure, shipping and commodities)