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Tata Capital > Blog > Loan for Home > What Are Transferable Development Rights and How Are They Beneficial?

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What Are Transferable Development Rights and How Are They Beneficial?

What Are Transferable Development Rights and How Are They Beneficial?

Most of the residential property in India is developed by the central/state governments or local bodies. Over the last few years, there has been unprecedented growth in the population, but the subsequent infrastructure development has failed to match the pace. This implies that centre and state governments find it challenging to acquire land due to the tedious mechanism and thus fail to develop residential infrastructure in time.

In such a scenario, transferable development rights are a land acquisition mechanism that proposes a win-win situation for both the government and the landowners. Below, we look at how the transfer of development rights works and how it can be beneficial.

What is TDR?

In real estate terms, TDR refers to the rights of the landowners or builders to construct over and above the permissible limit. This limit, or the Floor Area Ratio (FAR), is pre-decided for every locality or area.

However, landowners who acquire the Development Rights Certificate (DRC) after transferring the development rights to the government can exceed the Floor Area Ratio limit. Essentially, this allows them to construct more floors in the building and reap the benefits.

This facility has a lot of benefits for both the parties involved. TheTDR related to housing sector can have the following advantages.

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Tackling overcrowding in urban areas

The previous process of land acquisition was complicated, time-consuming, and expensive. The transfer of development rights has significant advantages for government planning to develop essential infrastructure in overcrowded urban areas. It can quickly acquire the land and use it to construct schools, hospitals, roads, etc.

Flexibility for the landowner

After obtaining the DRC, the landowner can choose to retain the certificate or sell it for money in the free market. The property owner can either use it to develop the remaining part of the land or use it on any other property.

Financial compensation to landowners

Landowners who choose to obtain the DRC certificate and choose not to develop their land get financial compensation. They can legally surrender their rights for development and get corresponding compensation from the government. They can also choose to sell these rights to real estate builders and earn a competitive price for their land.

Landowners can also arrange financial compensation by exchanging the development rights with the construction undertaken by the developer. When the newly constructed flats are sold, both the developer and landowner share the profit.

Additional Read:  Five Real Estate Rules All Home Buyers Must Know

To sum up

Many builders are using the TDR incentive to build affordable houses. If you are on the lookout for a house and want a reliable home loan, end your search at Tata Capital! Our loan tenures go up to 30 years with a loan amount capped at Rs. 5 crores.

Get the most affordable home loan interest rates at Tata Capital, starting from 6.70%*. Choose your EMIs according to your convenience and finance your house purchase without difficulty. Apply now!

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