Redevelopment is an age-old concept in the books of real estate development. Though traditional, redevelopment involves innovation in providing holistic solutions to – existing residents of the society in terms of additional space, real estate developers in terms of profits from sale of additional flats and government in terms of accommodating additional citizens in the city. However, redevelopment may not be feasible for the developer in certain cases. This may be due to the lack of availability of FSI, height restrictions as imposed by Airport Authority of India or some other concerns. In order to resolve these concerns and promote redevelopment, Honourable Chief Minister of Maharashtra Devendra Fadnavis had announced the Self Re-Development Scheme 2018.
Self-Redevelopment is the process in which the society is in the driving seat of the entire redevelopment process. In this case, the society committee is the developer. So, the appointment of contractors, architects or project management consultants is at the discretion of the housing society. Also, the CM has requested the Maharashtra Housing and Area Development Authority (MHADA) for ‘single window clearance’ under this scheme.
As financing a real estate development is a crucial task, government has provided this assistance through loan by Mumbai District Co-operative Bank (MDCC). MBCC will facilitate self-redevelopment by providing assistance as well as loan to societies registered as per Maharashtra Co-operative Act, 1960.
Key things for society members to keep in mind for self-redevelopment are –
- The project needs to be registered under RERA, as there is an offer to sell an apartment post redevelopment. So, all the rules and regulations of MahaRERA will prevail.
- Society should abide by all the regulations prescribed by the state in building reconstruction process.
- It is mandatory that all the members of the society should have the consent for redevelopment of the society.
- Society should not have any outstanding dues and all the members of the society should have no pending maintenance
- Atleast 15% of the project cost needs to be paid by the society. However, if the finance is not available, then the society can obtain the required finance for Intimation of Disapproval (IOD) from any financial institute.
- Disbursement of the loan will be made post Commencement Certificate (CC). The minimum interest rate applicable would be 12.5%.
- Any change in the by-laws of the housing society would require prior approval from the bank.
Apart from the 100% preservation of legal property rights with society and transparency in redevelopment process, societies can earn from the sales of the additional flats. The proceeds from the sale of the flat can be used to make society maintenance free and/or develop amenities for its residents.
As mentioned earlier, society committee would be the developer and have the power to take the decision regarding the redevelopment, such as appointment of contractor, etc. As the process of redevelopment is long term and cumbersome, at times, society committee needs to act with prudence and care all through the process. They should be aware about the laws of the redevelopment thoroughly. Rental and mobilization compensation should be decided fairly and objectively. As the project is RERA registered, compliance and timely delivery of the flats would be necessary to avoid any fines. If construction loan is taken, then timely repayment of the principal and interest becomes critical.
Having said that, as per certain media reports, self redevelopment is the need of the hour for almost 10,000 societies of Mumbai. As redevelopment is in the self-interest of the society, prompt delivery of the flats can be considered as a possible outcome. For the real estate market, new supply of apartments with reasonable price can be expected out of the Self Re-Development Scheme.