What is TDR in Real Estate?
TDR stands for Transferable Development Rights. It is an important tool for the real estate industry. It gives permission to a builder to build above the previously allowed floor space index. Due to fast urbanization, TDR is very important for suburban areas.
A city is classified into zones like fully developed, moderately developed, and sparsely developed depending on the stage of development. The TDR generated from a developed area is transferred to the other lesser developed area.
The TDR generated is of four types:
- Road TDR
- Reserved Plots TDR
- Slum TDR
- Heritage TDR
Metropolitan cities have a huge TDR market in place. It is a good source of expansion for many real estate investors. There are TDR certificates than can be sold for a good amount of money. Developers need these certificates for increasing their permissible development rights. It is used as a tool by developers in some prime locations to increase their saleable area. Due to unplanned construction by some real estate developers, the suburbs are becoming more congested which also negatively impacts the environment. The price of the TDR certificates also affects the price of the property.
TDR is also used in the construction of things in the public interest such as parks, playgrounds, schools, hospitals, etc. The people who surrender their land are given compensation. Nowadays, People also give a piece of their land to real estate developers in exchange for good value.
TDR is an important tool for land development because it makes it easy for real estate investors to utilize the land available at many prime locations. It is theoretically a very good concept but there are some problems with it when it comes to ground reality. Unplanned construction is the biggest problem that harms the environment and also increases congestion.
This technique is also used by the government to protect pieces of land with high conservation value. The pieces of land with potential resources like farmland, land with natural resources, and land with cultural resources. The focus of investors is taken on the land which actually needs development but it also gives developers land to expand their projects.
TDR is not taxable until the development rights are not transferred for the construction of residential buildings, The tax will only be charged when these residential units are sold. TDR is taxable for commercial units.
This has many pros and cons but there is no denying in saying that TDR is a very effective tool for the quick development of cities. TDR has laid down certain rules which are to be followed by real estate developers. Landowners get a good amount of money for their land because of the TDR and developers get the land and resources they need for their projects which makes it beneficial for both of them.
TDR favors the fast development of cities and it also maintains land value by protecting certain pieces of land. There might be some loopholes in the application but this scheme is in favor of the real estate investors, land owners, and the government.
