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In March, 2022, Mumbai saw its third-highest number of housing registrations in 10 years. While many had their say (secondary market resilience, 1% metro cess in April, FOMO, et al), there is no denying the impact of the Permanent Alternative Accommodation Agreement (PAAA), per Vishal Bhargava.
What is it?
🔖 An agreement for housing redevelopment in Mumbai.
🔖 2021 saw these transactions surge with the Government’s FSI discount.
🔖 Home-owners in older buildings get flats in newer, redeveloped buildings without paying anything, while some flats are sold by the developer.
🔖 Developers (on paper at least) get to recover their costs while making some profits too.
🔖 Those getting these apartments have their PAAA legally executed. It is almost similar to the regular agreement for sale though the consideration is different.
Pros, Cons and Developments
🔼 Older flat owners get new accommodation, while vacating properties swiftly for developers to begin demolition.
🔼 They vacate after the inking of the PAAA.
🔼 This segment is surging in 2022, increasing the total registration count.
🔼 January-March 2022 saw 5,994 PAAA deals, comprising 24% of all housing registrations.
🔽 PAAA deals have reduced average transaction sizes (INR 1.15 crore in 2022 from INR 1.45 crore historically) too.
What lies ahead.
Today, redevelopments involving PAAAs are contributing significantly to the Mumbai housing market. Yet, the redevelopment boom is not going to be forever. Sometime soon one is going to run out of old buildings and the PAAA buzz may whittle down afterwards.
Ironically, as Mumbai knows all too well, reigning superstars do not rule the box office forever.