How Shelter Fee Will Impact Chennai Realty

In July this year, the Chennai Metropolitan Development Authority (CMDA) issued an order to levy “shelter fee” with an aim to build affordable housing for the economically weaker sections and the low-income group. To be accumulated from real estate developers, these charges would be put in a shelter fund to meet the Housing-For-All-by-2022 target.

Shelter fee of 75 per cent of the prevailing infrastructure and amenities (I&A) rates has been imposed on all the proposed developments that have a built-up area of 3,000 square metres and above. According to a report by The New Indian Express, the new levy has increased the cost of residential projects by Rs 25 per sqft and commercial projects by Rs 50 per sqft. After the move to levy shelter fee came into effect, builders have to pay an additional Rs 250 per sqm for residential projects and Rs 500 per sqm for commercial projects.

Real estate developers of the state have been protesting against the move, asking for an immediate withdrawal of the fee — some of them approached the Madras High Court to seek relief. According to media reports, Akshaya Pvt Limited and Dugar Homes have challenged the shelter fee in the high court, and a decision on the matter is awaited. In case of an unfavourable judgement, the Tamil Nadu government will counter the move by giving statutory protection to the new levy by amending the Town and Country Planning Act.

How will this new levy impact the real estate market of Chennai?

Financially stressed developers will pass on the increased burden to homebuyers which will increase the rate of property in Chennai. It is worth mentioning here that Chennai is the third most expensive property market among nine major cities of the country after Mumbai and Gurgaon. A homebuyer has to pay an average Rs 5,000 to buy a square foot of space in the Tamil Nadu capital, data available with PropTiger.com show.

Here is more.

According to a PropTiger DataLabs report, home sales in the city fell 23 per cent in the second quarter when compared to the previous quarter. The number of new launches also fell 91 per cent during the same period. Ahmedabad and Chennai had the highest share of ready-to-move-in units in unsold inventory in the second quarter of the current financial year.

While imposing the shelter fee may assist the state in meeting in the housing-for-all target, it would certainly make homes much costlier for the middle-income groups.