Transfer of Development Rights (TDR) means making available certain amount of additional built up area in preference 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.
The main purpose of this TDR is that developers purchase the TDR certificates available in the market and utilize them for increasing their permissible development rights. In TDR trading, price is primarily based on demand and supply concept. Due to the TDR trading, the real estate prices are increasing day by day.
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.
When the Government undertakes compulsory acquisition of individual land parcels for creating infrastructural projects, it is required to compensate the land owners. The compensation provided by the Government is usually lower than the market rate, and hence they introduced the concept of Transferable Development Rights. These rights are obtained in the form of certificates, which the owner can use for himself or can trade in the market for cash.
Based on the stage of development, a city is classified into various zones like fully developed, moderately developed and sparsely developed. The Transferable Development Rights are usually transferred from the fully developed zones to other zones and not vice-versa. For example, in the case of a city like Mumbai, the TDR which is generated in the island city (i.e. southern part) will be utilized for development in the suburban areas (i.e. northern part). The underlying principle of such utilization is also to facilitate development of the underdeveloped areas.
Purpose of Transferable Development Rights (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, which could be advantageously put into practice to acquire land for reservation purposes mentioned above.
Types of Transferable Development Rights (TDR) :
Predominantly, there are four types of TDR that are generated :
- Road TDR.
- Reserved plots TDR.
- Slum TDR.
- Heritage TDR.
In most of the cities, majority of the construction activities take place with the aid of slum TDR.
Market for Transferable Development Rights (TDR) :
Just as the stock market, cities like Mumbai do have a huge TDR market in place. These TDR certificates can be traded for cash, which is what most developers buy and use to increase their permissions development rights. TDR Trading adheres to the principle of open market in which pricing is governed solely by demand, supply and availability, with no government control. In most cases, the average person is unaware of how TDR is sold, sold or transacted.
Important points regarding TDR:
1. It is a certificate obtained from the Municipal Corporation which an owner of the property obtains where his property is reserved for the purpose of public utilities such as road, garden, school, etc. The certificate obtained is equal to the reserved rights obtained by the owner on surrendering his property to the Municipal Corporation.
2. It means making an available a certain amount of additional built-up area in place of area surrendered by the owner of the land so that the extra built-up area can be used by him in an optimum manner.
3. In a city like Mumbai, these rights are usually transferred from fully developed zones to other zones.
4. The basic motive behind this transfer is to facilitate the development of the underdeveloped areas.
5. As per explanation I to Rule 5 of the MAHARERA Rules, 2017, the TDR Acquisition Cost is included while calculating the land cost, therefore, it finally increases the property prices.
6. It has come up as an urban development tool which has resulted in the congestion in a haphazard manner.
7. This concept came up when there used to be land acquisition by the Government authorities for the formation of roads, civic amenities, etc. This certificate minimizes the time needed and easily helps in the process of acquisition as the owner can transfer his rights with the help of this certificate.