Highlights
- More than 50% of the 35,000 co-operative housing societies in Mumbai housing about two million people require redevelopment.
- 5800 projects are stuck due to the developer not fulfilling his obligations.
For residents of many ageing housing societies, going for redevelopment of their society can be a harrowing proposition. Builders are notorious for making tall promises only to renege on them, leaving homeowners stranded. Fed up of being short-changed by builders, housing societies are increasingly going for self-redevelopment. Here, the residents keep builders out of the equation and instead appoint a contractor and project management consultant to help execute the project. The trend has gathered steam in Mumbai where 750-odd societies have opted for self-redevelopment. Should your housing society consider it too?
Taking back control
Builders find redevelopment projects
attractive as there is a huge potential for profits from selling the
extra inventory, left after allocating units to original members. The
builder gets to pocket the entire gains from the saleable area. However,
under a self-redevelopment project, any surplus accrued from the sale
of additional inventory is entirely retained by the society, to be
distributed equally among its members. “The major advantage of
self-redevelopment is that society members reap the benefits of the
unused potential of the property rather than the builder,” says Anuj
Puri, Chairman, ANAROCK Property Consultants.
Besides, society members can expect up to 40-50% more carpet area compared to 15-20% promised by builders. Any extra area allotted to the members but not included in the development agreement also attracts stamp duty and tax later. The society also retains control over all aspects of the redevelopment. It can decide the type of amenities—parking lot, pool, children’s play area, etc.—to be included in the project as well as reserve the choice of new members for the saleable area. While the builder takes an irrevocable power of attorney (POA) from the members, whereby the land rights are vested in his hands, all property rights remain with the society in the case of self-redevelopment.
How to go about it
To execute a self-redevelopment project, the housing society must
have conveyance in its own name—the society must be the owner of the
land. To get the project off the ground, the housing society first needs
to get consent from its members. It must convene a special meeting with
clear notices to all members and also to the local registrar’s office,
which sends a representative to conduct the meeting. While there is no
law in place demanding 100% consent from all members, most banks
offering loans for self-redevelopment are making it mandatory to get
100% written consent. “In theory, 100% consent is a tad difficult and,
usually, a majority works to get such a project under way,” says
Niranjan Hiranandani, National President, NAREDCO.
Once the members have consented, the society can hire a project management consultant. The consultant can manage the entire process for the society— get the feasibility study done, hire and coordinate with contractors and engineers, get the needed approvals, secure loans to arrange for the sale of unused flats and ensure timely execution of the project. “Essentially the consultant can act as a one-point contact for the housing society, taking care of all aspects until project completion and even beyond,” says Pranay Goyal, Managing Director, Wedevelopment. If the society doesn’t hire a consultant, it will have to initiate tenders to hire a builder, an architect and get a lawyer as well.
Currently, the funding options for such projects are fairly limited. In Maharashtra, the Mumbai Central District Co-operative Bank has taken the initiative of providing loans to societies opting for self-redevelopment. However, with Maharashtra Housing and Area Development Authority and the state government promoting this concept, various banks and financial institutions are opening up to lending for such projects. In fact, the state government is mulling the creation of a state policy on self-redevelopment.
Needs a team effort
Despite the potential benefits of the concept, experts point out
that self-redevelopment is not an easy task, given the complexities
involved. The permissions and clearances required, and delays in
execution can be frustrating. “The entire society has to come together
and plan ahead to ensure success of a self-redevelopment project,” says
Goyal. “From getting the requisite approvals to getting the paper-work
done and securing the no-objection certificates, society members have to
do it themselves and need to cooperate to get things done,” says Puri.
With around 56 no-objection certificates required from local bodies,
getting all the approvals is quite a task. Hiring a consultant to handle
these aspects can be helpful to some extent, but will add to the cost
of the project. Hiranandani also points out that residents should not
make unreasonable demands, as they can stall the projects. “They need to
be realistic about the various aspects of the project, and not add
demands as it moves ahead.”
Benefits:
- All profits from saleable area go to the society, not the developer.
- Extra carpet area of up to 50-60%, compared to 10-15% that builder’s offer.
- Since amenities are decided by members, they are expected to be more utilitarian.
- New members are selected by existing ones.
- All property rights remain with the society as no power of attorney needs to be executed in favour of the developer.
- No member of a society has to mortgage his/her fl at to the bank.
Challenges:
- Securing consent and cooperation of all members.
- Getting clearances and permissions can be exhausting.
- Limited funding options.
