Redevelopment of buildings: 11 things societies must keep in mind

Redevelopment of buildings: 11 things societies must keep in mind

6 minutes read

Author : MyLegalWork Staff

Posted on: 06th Feb, 2017

The CM, Mr Devendra Fadnavis launched the new housing policy in the previous year. This policy is aimed at creating affordable housing for Mumbaikars in the suburbs. The government has given the go-ahead to developers for picking up and redeveloping buildings on MHADA-owned lands. This is an ongoing cluster redevelopment initiative which will increase the supply of houses to Mumbai’s middle-income families.

Mr Prakash Mehta, the Housing Minister sharing his views on this new policy, said , “MHADA plots up to 2,000 sq.m. in size will be up for redevelopment. As much as 85 per cent of MHADA layouts are between 700 and 1,200 sq.m. and will qualify for the scheme. The government will only take a premium for redevelopment, and the condition that builders must give a certain quota of redeveloped housing units back to the government or MHADA has been done away with.”

At this stage, redevelopment is being undertaken in clusters all around Mumbai, from MHADA lands to the Bhendi Bazaar redevelopment project by the Saifee Burhani Upliftment Trust. Individuals must know what redevelopment entails so that whenever their building needs an overhaul, they know exactly what to expect from their developer in the initial stages.

What is redevelopment? To improve the strength of the building and avoid any water seepage, drain corrosion or gas pipe leak, an old building needs to be overhauled every 5-10 years. After a long period, the costs of repairs become much more than the monthly maintenance amount which the members of a society contribute. Repairing the building every 5 years, hence becomes an expensive affair. Many builders are on the lookout for such old buildings for redevelopment. By redeveloping an existing property, the builders get prime locations to build upon. The flat owners are promised a lot of incentives in the form of a bigger flat, more amenities, etc.

However, in  many cases, the developers, in order to make profit, dupe the society members and create a loophole out of technicalities. This tilts the balance in their favor.

If the building is in need of redevelopment, then the society members need to be alert and make sure they get exactly what they asked for.

A few things which must be kept in mind are:

  1. Redevelopment can take place only if 75% of the members agree to it.
  2. It must be remembered that the developers first draft agreement will be in favor of the developer. The members of the society should not be afraid to ask for changes in it. They can even change the entire agreement if they so feel.
  3. The builder must give a bank guarantee equivalent to a specific percentage of the total project cost. This is a precautionary measure in case the project stops midway or is not completed in time.
  4. The builder has to purchase additional TDR in the name of the society. This is done to make the society feel secure about the development process. The process of loading the TDR in the name of society must be done before the members vacate the house because if the rules for obtaining TDR change, then the builder may be unable to provide the extra flat area that he had earlier promised.
  5. Society should appoint a lawyer of their own before the redevelopment deal is finalized. The lawyer will help merge the rules framed for this regard with the demands of the society,  in a legally binding agreement called a Redevelopment Deed.
  6. The society should make sure that the TDR, redeveloped building, other amenities and future increase in FSI remain in the name of the society. Many times the builder includes a clause which makes the development agreement a “Transfer of Property” rather than a “Transfer of Development Rights”.
  7. The society must not suffer losses if the builder abandons the project. The agreement must be comprehensive to ensure that the members do not suffer any financial losses in such a case.
  8. Individual agreements between each member and the builder are recommended to ensure that each and every member has a record of exactly what he/she will get from the redevelopment.
  9. The contract with the builder needs to have all of the following details: All amenities provided The time of completion of the project
    1. The size of the new houses
    2. Car parking spaces
    3. Alternate accommodation or the mode and nature of monetary compensation for rent which the members will incur when they shift to alternate accommodation
    4. Corpus fund towards granting of development rights
    5. The nature of penalties and consequences in case of default by either party
  10. All costs incurred by the society directly or indirectly connected with construction related activities shall be reimbursed by the developer.
  11. Society must have the power to terminate the development agreement if the construction is not completed within period specified in agreement.

When a dilapidated building goes in for a revamp, home owners rejoice. Redevelopment is welcome in the time of shiny high-rises and glittering towers. However, the risks are as high as the rewards. The members of the society must go in for redevelopment with open eyes and make sure that they are not taken for a ride.

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