Urbanization is the talk of the modern age of construction. From the outside, it is seen as the key to the urban lifestyle sprawling with growth and the benefit of world-class amenities, but on the inside, its roots to a city's growth are much deeper. It turns cities into magnets of development that leaves the sub-urbs, townships and the rest to continue on their struggle to development. In the eyes of the government, one of the major solutions to such unplanned development is the introduction of concepts like Transferable Development Rights in the construction industry.
Introduction—What is a TDR?
Transferable development rights refers to the set of rights that can be transferred from one person to another—commonly given by the government to the developers or landowners for a planned development that extends beyond the owned piece of land. A part of the development originally planned for this land/ zone can be withdrawn and executed in a different land/ zone instead. E.g. A mixed residential development planned in one zone can be limited to a residential development in that land/ zone, while the commercial development can happen in a designated site at a different land/ zone.
In industry terms:
- The given zone that sends the rights is called the sending zone.
- The new zone that is given for further development is called the receiving zone.
The Transferable Development Rights is usually employed as a tool to change the direction of development from urban or developed zones to sub-urban or underdeveloped zones for two main reasons that include:
- The congestion of buildings and overpopulation in urban zones can be prevented by restricting land development
- The underdeveloped zones can be developed for directing growth and distributing the population equally
Although these are primarily introduced as per the interest of the government, it is established under conditions that also benefit developers in a number of ways, to channel growth all across.
Pros & Cons of TDRs and How to Make the Most Out of Them for Your Investment
Transferable Development Rights are certainly beneficial for the developers in India, given its great scope and financial benefits. It offers profitable outcomes in buying, selling and investment purposes equally, making TDR a common choice for developers in top Indian cities.
The Pros of TDR for different purposes are listed below:
- Buying TDR property: While buying TDR property, a developer adheres to the government's vision and initiatives for planned urban development and is thus given fair financial compensation.
- Developing TDR property: While developing TDR property, a developer can develop an area beyond the Floor Space Index (FSI), Open Space Reservation (OSR) and other limitations without compromising on the land or its value.
- Selling TDR property: While selling TDR property, a developer is able to sell a part of the development rights to a different person or a government body without undergoing tedious, time-consuming processes.
- Using a TDR for investment property: While using a TDR for an investment property, a developer is promised positive future outcomes from the growth curve of real estate and land pricing that are steadily increasing as a result of TDR trading.
- Using TDR for trading: While using TDR for trading, a developer is able to trade it in the market for money.
Amidst the promising offerings, transferable development rights, much like any other process has limitations that pose issues in certain project typologies.
The Cons of TDR are:
- The area restricted for the development in the sending zones may be utilized by the government for any type of public development plans including roads, parks or any other public utility, which may hinder the ambience of the site.
- The entire process needs meticulous planning and structuring of all development programs, ownership details etc. that consumes time for emerging developers.
- Development programs planned for the sending zone may not be relevant to the surroundings of the receiving zone, making the project goals unfulfilled. Understanding the types of TDR may help in refraining from such situations.
Types of TDRs in India—It's Not All Just One Thing!
The Transferable Development Rights is obtained as a certificate called the TDR certificate or Development Rights Certificate (DRC) from a competent authority, typically a corporation or municipality. Although it is given as a single document, it gives different rights to different types of development projects.
The 5 main types of transferable development rights include:
- Road TDR
- Slum TDR
- Agriculture TDR
- Heritage TDR
- Reserved plots TDR
Each type of TDR denotes the nature of the given site and its surrounding, helping the developer compare and evaluate the developed program and its relevance.
How to Choose Which TDRs Interest You—Allowing You To Invest In Specific Areas And Property Types!
The urban zones of today are coming up with transferable development rights (TDR) more than ever. The different types and nature of these rights help in better planning of development programs for the developers. They can now buy transferable development rights based on their project plan and the set of desired outcomes.
It is notable that most of the modern-day projects use slum TDR more than the other types.
When a developer comes across the question "how do I use TDR" or "how do I invest in a TDR", the right direction can be given by the Development Control Rules of the respective city/zone.
The links to DCR of top cities in India exercising TDR are given below:
- Mumbai Development Control Rules: Click here
- Bangalore Development Control Rules: Click here
- Chennai Development Control Rules: Click here
Transferable Development Rights (TDRs) in construction are put forth as a mutually significant legal binding that not only benefits the macro-level urban development but also gives greater scope for a developer. It is the key to creating smart cities in the future by bringing the developers and the government together and working towards a common goal—building a better tomorrow.
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