Transferable Development Rights (TDR): Definition, Meaning, and Concepts

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10 OCTOBER, 2024

When purchasing a house, several things are important, including the property type and size, neighbourhood, home loan accessibility, realtor, etc. People compare various projects to get the best deal in terms of their requirements and budget. One such parameter to consider is the Transferable Development Rights(TDR) . Builders use these rights to develop areas beyond their permissible floor space index.

The main objective of TDR is to increase a builder's permissible development rights over a property. Read on to understand the TDR meaning, working, benefits, types, and calculation methods.

What are Transferable Development Rights?

It is a zoning technique that permanently protects land plots with conservation value. These include cultural and, natural resources, farmlands, open community spaces, etc. With TDR, the government protects and redirects developments on such land spaces. Instead, it encourages development in areas that require growth and development.

What is TDR in Real Estate?

It allows builders to construct beyond their permitted Floor Space Index (FSI). They must act according to the regulations in the prevailing area or neighbourhood. The land acquisition process in urban areas is usually meant for public purpose, particularly building schools, parks, and playgrounds, widening roads, etc.

How Does TDR Work in Real Estate?

The certificate primarily aims to promote development in various regions while minimising traffic. The certificate allows landowners to transfer their rights to ease the purchase and shift growth to less developed areas. It works by optimising land usage and fosters a balanced distribution of the population.

What are TDR Benefits?

After understanding the TDR meaning, let uslook at its benefits:

Effective Land Usage: Moving development rights from one area to another through Transferable Development Rights allows the development of underused or unoccupied properties. It controls urban development and encourages efficient land usage.
Infrastructure Development: TDR encourages the development of public infrastructure in an area, such as roads, parks, playgrounds, schools, etc., contributing to an organised urban setting.
Increased FSI: With TDR, developers receive more built-up space than the typical Floor Space Index, thus raising the property value and ROI.
Sustainable Urban Development: TDR contributes to sustainable urban development through mixed-use projects, walkable neighbourhoods, and reduced traffic congestion.
Environment and Public Health: TDR encourages land conservation, which results in fewer floods, better public health, and cleaner water.

How is TDR Calculated?

TDR are calculated by first determining the gross area of the plot that is being relinquished. This area is then multiplied by the allowable FSI for the zone where the plot is located. The owner of the designated property is issued a printed Development Right Certificate (DRC), which includes FSI credit. This calculated FSI credit is documented in a Development Right Certificate (DRC) issued to the property owner, which can then be used, sold, or transferred according to local regulations.

How Does TDR Benefit Land Owners?

Transferable Development Rights compensate landowners who do not develop their land or a part of it. In return, they can legally sever their development rights under their municipal zone. Landowners also have the right to sell their rights to other owners and real estate developers.

A conservation easement or restrictive covenant permanently protects land with severed development rights and enhances its development value. Without TDR, the growth and redevelopment of these land areas would be impossible. Therefore, it benefits society and, eventually, the landowners.

What are the Different Types of TDR?

Based on the TDR meaning, it can be of three types:

Slum TDR: Under the Slum Rehabilitation Project (SRP), people living in slums receive rehabilitation BUAs (Built-Up Areas). The owner, society, or developer may use or sell the extra space according to a specified ratio as per the total rehab.
Reserved Plots TDR: Landowners may donate their property to the municipality for public use and receive a Development Right Certificate (DRC). The calculation depends on the plot’s gross area as per the permitted zone's FSI.
Heritage TDR: According to the historical committee, people who own historic structures have restricted development rights and receive heritage TDR as compensation. Even if the structure is in a suburban area or island city, owners may use it within the ward after getting clearance from the state government.

Read Also: What is a Relinquishment Deed?

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Frequently Asked Questions

What is the meaning of the Transfer of Development Rights?

In the real estate industry, Transferable Development Rights refer to the rights builders use to construct beyond the permitted FSI. The developers must carry out the construction based on the rules prevailing in the area.

What is the meaning of TDR in development?

In terms of development, TDR is a zoning tool that governments and municipalities use to preserve designated land areas and manage urban growth. Using TDR, property owners can transfer their land development rights to others in exchange for monetary benefits.

What is an example of a TDR?

A city has several zones based on its level of development, including poorly, moderately, and completely developed areas. Usually, TDR from completely established zones transfers to other zones. For instance, in Mumbai, TDR in the southern half of the city can be used for suburban districts of the northern parts. The basic idea behind this is to accelerate the development of underdeveloped areas.

What is the meaning of TDR in property?

In India, TDR is a building permit detached from a property’s ownership. People owning restricted land, such as farmland and heritage sites, can sell their unused permissions to developers in specific development zones.