Redevelopment of a Housing Society

June 25, 2019
By Rahul Sarkar
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Redevelopment is the process of demolishing an existing building altogether and constructing a new one. It is a massive undertaking that requires a highly proactive and careful approach on behalf of the housing society. Let’s dive into the specifics of redevelopment and its many components.

What is the procedure for the redevelopment of a housing society?

Before opting for redevelopment, the society must complete a Structural Audit of the existing building. Once that is accomplished, you’d have to consider the below-mentioned steps.

1. Call a Special General Body Meeting (SGM)

The managing committee should convene a special meeting of the members to discuss the redevelopment project. The bye-laws state that 75% of the total number of members should be in agreement with the redevelopment project before it can be officially undertaken. (According to a redevelopment law amendment in Maharashtra, older and smaller buildings only need 51% of member approval). It is also recommended that a special redevelopment committee be set up to supervise the entire process.

2. Get quotations from Architects/Project Management Consultants (PMC)

The Committee should invite bids from at least 5 architects/PMC and present their quotes to the members before zeroing in on one of them in another SGM. They should be empaneled with the government or a legitimate authority and have a good reputation in real estate development. The members are allowed to give valid inputs and suggestions throughout the process.

3. Submit proposal for Building Redevelopment Project

After finalising terms and conditions, scope of work for the project with the architect/PMC, the committee must submit a proposal for the said project.

4. Receive Project Report

Within two months of their appointment, the architect/PMC will present to the committee a Project Feasibility Report. This report considers factors such as Floor Space Index (FSI) and Transfer of Development Rights (TDR) with respect to total residential area, common spaces, gardens, etc. The Report is made available to all members of the society and suggestions are invited before any approvals are made.

5. Invite Tenders from developers

The Architect/PMC prepares a Tender document to receive competitive bids from developers. One primary requirement is decided, which cannot be changed. This could be carpet area or corpus fund (an amount paid by the developer due to redevelopment). In a subsequent SGM attended by the officials of the developers, all the tenders are discussed in open in the presence of the members.

6. Choose a developer

The Architect/PMC makes a comparative study of the tenders considering factors such as financial expenses, market reputation, technical soundness, successful projects of each developer and shortlist at least five. One of them is selected by the 3/4th majority of the members and the project can be initiated after making an agreement with the selected developer.

What are the documents needed for redevelopment?

Legal documents needed are society registration certificate, conveyance deed (necessary for self-development projects), sale deed, title certificate, a certified property card (showing ownership in the name of society), the original building plan, structural audit report, redevelopment agreement, copy of new approved plan, flat-wise carpet area list, Development Plan (DP) remark (details of the land and its surrounding area), electricity bill, water bill, and all other legal documents pertaining to the land and the buildings.

Self-redevelopment of a housing society

In recent times, more and more societies have started to opt for self-redevelopment, a process in which the builder/real estate developer is not involved in the equation at all. Societies hire architects/contractors and carry out the entire process by themselves. By choosing this option, the profit remains in the hands of the society and the possibility of fraud, delayed construction, loss of FSI does not occur. The members end up getting a higher incremental carpet area and the entire profit on the project gets divided equally among the members.

Financial loans and government schemes are available for self redevelopment. As of January 2019, the government of Maharashtra is already considering giving a boost to the self-redevelopment model by sanctioning Rs.780 crore to redevelop 19 housing societies. In Mumbai alone, around 5800 projects are stalled due to glitches or setbacks at the hands of developers. Reportedly, around 50% of co-operative housing societies in Mumbai are in need of redevelopment. It was declared in March that the government will set up a special panel to incentivise self-redevelopment projects, especially in the suburbs. Mumbai Bank is giving a loan of Rs 50 crore per project. Other states are expected to follow suit in lieu of affordable housing initiative.

A word to the wise

Once you give your consent in writing for redevelopment, it is irrevocable in the court of law. Therefore, the decision must be deliberated upon with caution. Also, it is imperative that you hire the services of a competent lawyer to draw out the agreement between the society and the developer and ensure that the timeframe clause is strongly captured with applicable penalties if the developer is not able to finish the project on time.

A developer is expected to finish the redevelopment project in two years with a maximum extension of one additional year. Along with the agreement, the developer is expected to give a bank guarantee of minimum 20% of the total project cost. Members residing in the building will have to move to temporary accommodation while the work is in progress. The developer usually provides alternative accommodation in the vicinity or pays monthly rents to the members for a year.

Before the residents can move out and the building can be demolished, the developer must submit the building redevelopment proposal to the municipal government, who then issues an IOD (Intimation of Disapproval). NOCs from fire authority, environment authorities, etc. are obtained. After these procedures, the Commencement Certificate is given. The residents can also claim expenses of moving and packing. You are also entitled to receive a security deposit from the developer which is the entire amount of the cost of redevelopment.

What are the benefits of redevelopment?

If your building is at least 25 years old or in dilapidated conditions, structural repair and renovation will only increase its lifespan by 4 to 5 years. Redevelopment is a more feasible and sustainable choice for the long run. The market value of a redeveloped apartment is higher than that of a repaired one. Its saleability and resale value increase by manifold. A redeveloped building offers wider, cleaner, newer living spaces for the residents, thus raising their standard of living.

Additionally, a redeveloped property usually gets upgraded amenities, such as swimming pool, gym, playground, community hall, the latest security systems, fire fighting systems, better lifts, bigger parking spaces among others. If your building is in a premium area and is slated to go for redevelopment, the market value will be even higher after redevelopment. Societies also have the provision to ask for an extra room in their apartment from the developer, thus making their living condition even more comfortable. If additional storeys are constructed, they can be sold off for profit, which, in a self redeveloped project. can become a massive source of revenue for the members.

All said and done, a poorly managed or unsupervised redevelopment project can be a nightmarish experience for the members. The members should ensure a reliable managing committee looks after their interests and exercises utmost caution in handing over the project to a conscientious developer and keep a vigilant watch over every procedure of the entire process.

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