Mumbai Developers Seek Overhaul Of Premium Deferment Policy, Demand Lower Interest And Instalment Relief To Ease Project Funding

Mumbai, April: Real estate developers have sought key changes to the premium deferment policy applicable to payments made to civic bodies and the state government, calling for a more flexible and long-term framework to ease financial stress during project execution.

At a recent discussion with stakeholders, developers flagged concerns over the current policy, which is revised every three years. They have proposed that the policy be made permanent to ensure continuity and avoid disruptions in project planning.

Demand for permanent policy and lower interest rates

As per the CREDAI-MCHI, a real estate apex body association, the current policy is valid for a period of three years and is further revalidated for the next three years.

It was pointed out that instead of providing validity for a period of three years, the policy should be made permanent, so that the process of revision and the delay in the process of revision shall be avoided and the policy shall continue without any break.

Also among the demands is a reduction in the interest rate on deferred premium payments to 8%, with a linkage to benchmark lending rates such as the SBI Prime Lending Rate or MCLR.

Developers also suggested adopting a 10:10:80 payment structure, which would significantly reduce the upfront financial burden during the early stages of a project.

Liquidity challenges and funding constraints

Industry representatives pointed out that raising large sums at the initial stage remains a challenge, especially as banks and NBFCs are reluctant to fund premium payments. As a result, developers often face liquidity constraints before project cash flows stabilise.

Jitendra Mehta, Senior Vice President of CREDAI-MCHI, said the move is long overdue, noting that instalment-based premium payments are already allowed in other jurisdictions.

“Except BMC, in other areas where UDCR is applicable, premium payments in instalments are permitted. In MMR, it follows a 20:80 structure, and even SRA offers similar flexibility, but this is not available in BMC despite significantly higher premiums,” he said.

Concerns over upfront payment burden

He added that front-loading payments makes project execution difficult. “Arranging funds at the initial stage is extremely challenging. Allowing instalments ensures the government also has certainty of revenue over the project lifecycle,” Mehta said.

He further pointed out that housing prices have remained largely stable since 2019, leaving limited room for developers to absorb rising costs.

“If developers are forced to borrow at high interest rates to meet upfront premiums, it will eventually increase housing costs for buyers. Instalment options will help avoid passing on this burden,” he said.

Industry backs staggered payment model

In redevelopment projects, funding is typically arranged by mortgaging the land parcel after obtaining a no-objection certificate from the housing society, or by mortgaging saleable flats, or both, he added.

Anand Gupta, Chairperson of the Housing and RERA Committee of the Builders Association of India, said that a significant portion of government revenue comes from premium payments.

“Nearly 50 per cent of the authority’s revenue is derived from premiums. Allowing instalment facilities will provide much-needed support to the sector while ensuring steady revenue flow for the government,” he said.

He emphasised that generating cash flow at the initial stage of a project remains a major hurdle. “Pumping in large amounts upfront is difficult. A staggered payment mechanism will ease liquidity pressure and help maintain project momentum,” Gupta added.

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Call for balanced and flexible framework

Developers said that a reworked deferment policy with lower interest rates and flexible payment structures would not only improve project viability but also support timely completion without increasing the financial burden on homebuyers.

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