Redevelopment

Redevelop Or Be Doomed
By Gajanan Khergamker

It is but inevitable! For the city to progress, it has to embrace redevelopment in a comprehensive way. It’s only change that’s constant in a city’s growth.

According to the New Bye-laws of Cooperative Housing Societies, a structural audit is to be conducted by architects on the panel of the municipal corporation for societies situated in municipal limits. In other cases, structural audit have to be carried out by government-approved architects. For buildings between 15 years and 30 years of age, a structural audit has to be done once in five years whereas for buildings above 30 years old, a structural audit has to be done once in three years.

With most of the residential structures in the Western suburb being old and needing regular audits and repairs at fixed intervals, it makes best sense to opt for redevelopment and procure a new structure that won’t need major repairs for a long time to come.

Also, older buildings were designed with archaic construction norms and hence unable to tackle new climatic situations in contrast to new buildings which are constructed on the basis of state-of-the-art models capable of withstands harsh geographic conditions.

In contrast to old buildings where members have to pool in funds to undertake major repairs off and on, members opting for redevelopment, not just get benefits in terms of money but also get additional area for their existing homes at no extra cost.

Where structural stability is concerned, the steel inside concrete beams and columns start corroding after 15-20 years. The corroded steel simply cannot be treated in repairs and needs to be replaced. In case of redevelopment, as the buildings are new, such issues just do not arise.

In the case of redevelopment, society members not just get a brand new building; they also get monetary benefits and top-up areas to their flats that would otherwise have cost a fortune. The advantages accrued include brand new flats that are free of cost thus indirectly fetching an earning for members. Popular fears of being left homeless during the period are tackled by the inherent provision of alternative accommodation during the course of construction after the demolition of the buildings.

Needless to say, the new structures will all be earthquake resistant and designed to take care of additional wind load too. In order to provide the green patch so essential to homes today, a lot of redeveloped structures opt for landscaping in order to meet requirement of a myriad range of residents. The landscaping may include a children park, jogging tracks and silent zones for the elderly. The effort will be to improve the living standards of members. In keeping with neoteric demands, a club, a sports room, swimming pool and other recreational facility could be provided to the residents in the redeveloped project. To meet the new changes in demands, the brand new structures will be tailor-made to suit the modern living. New buildings will be created with state-of-the-art looks that indirectly boost the realty prospects.

As opposed to crammed entrances littered with illicit shops and thelas that may have accumulated over the years, new redeveloped structures will be constructed with beautiful lush entrances.



Deemed Conveyance Aims To Correct Malpractice
By Gajanan Khergamker

By law, the builder or the developer of a property is bound to convey the land and the building within four months of formation to the cooperative housing society formed.

That said the reality at grass-root level is starkly different. A majority of promoters which include builders and developers refuse to convey the land and building to legal entities as laid down by the law. And, it is for this very reason that the State amended the Maharashtra Ownership Flats Act, 1963 providing the option for deemed conveyance to check the practice.

Following the amendment, things have changed for the better. Now, after the expiry of four months of formation of the legal entity, the land and building is ‘deemed’ to have been conveyed to it. And, in order to include it in the revenue records, a designated Competent Authority shear the parties on the basis of applications received from the aggrieved party and transfers the title after passing the necessary order and deemed conveyance certificate. The authority even appoints an authorised officer to execute the conveyance deed in favour of the society and execute it on behalf of a non-cooperative builder or the land owner.

Normally, the builder or developer prepares a conveyance deed, executes the same and appears before the Sub-Registrar of Assurance for admission, but in the case of the developer or their heirs failing to cooperate the aggrieved parties have little choice but to opt for deemed conveyance. Then, the parties appear before the Designated Competent Authority who, after hearing the parties, passes the necessary order of conveyance. Once passed by the Competent Authority, the deemed conveyance deed will be executed by the Authorised Officer in favour of the legal entity in question before it is registered. Additionally, there is no appeal against the deemed conveyance order passed by the competent authority.

After the deemed conveyance order and conveyance deed is executed, Index II has to be obtained and submitted to the Talati office or City Survey office to incorporate the name of the legal body in the 7/12 extract or in the property card.

According to the process of law, the affected party makes an application to the competent authority in the prescribed form with documents available against the developer who fails to convey the land and building to the said party within four months of its formation.

After scrutinizing the application, the Competent Authority will collect the documents from the developer or from the authorised officer appointed by him and get the application admitted. Once the application has been admitted, the competent Authority conducts a hearing and decides whether the legal entity is a fit case to be granted the deemed conveyance. Once an order to the same effect is passed, he appoints an authorized officer who executes the conveyance deed.



Find A Developer Through A Tendering Process
By Gajanan Khergamker

In the case of a redevelopment project, the best way for a society to identify a developer is to invite sealed tenders through a public notice. There should be basic eligibility criteria for the tendering process that should aim to bring in transparency in selecting a developer.

The public notice should be advertised in three local newspapers. The procedure should involve identification of a developer and evaluation of offers and recommendations. There should be specialized guidance when it comes to negotiation. A suitable agreement needs to be formed for the process too.

There are a string of benefits in tendering when used as a procedure to identify a developer in the case of a redevelopment. For one, making the publication of a public notice in three prominent newspapers will ensure that the members obtain good offers from reputed developers instead of the fly-by-night sort.

Also, keeping the transparency in mind, since the offers are invited in a sealed tender form, there’s severe competition among bidders thereby facilitating the best for the members. To further the transparency of the process, all specifications and terms and conditions are the same for all the bidders making it easier to compare, evaluate and zero in on the best offer.

In order to ensure unwanted or non-interested parties do not bid nor waste any time where the project is concerned, earnest money deposit in the form of a pay order payable to the society could be taken from every bidder. This should ensure that no time is wasted in the process.

The mode of measurement of carpet area and the authority certifying the same should be clearly defined to facilitate the process. In order to safeguard the society in case of any issues faced by the developer, the entire proposal is to be done in the name of the society itself. Also, importantly too, a clause clearly detailing that the Right to change and or remove developer stays with the society should be included as a safeguard.

The element of ambiguity or dispute is tackled with all details pertaining to commercial terms such as Bank Guarantee, temporary accommodation, cost of additional area etc., being clearly defined.
Under every separate head of technical specification in the tender document, a detailed technical methodology of work is laid out clearly. Also, the basic rates are mentioned clearly in order to enable members change any specification for their individual uses. The society will need to retain the right to check amendment of plans during the progress of work.

Where brand names are concerned, all material to be used has to be clearly spelt out to avoid any confusion. And once all the items are defined clearly, the chances of getting a good offer are higher.
Also, to cover any loss caused by delays, the consequences of any delay have to be clearly defined in the tender document which is a legally binding instrument.



Legal Facilities To Modify Existing Redevelopment Proposals
By Gajanan Khergamker

It isn’t that incentives in FSI are offered only to fresh proposal. Even existing proposals, housing societies of landlords or occupiers may convert their earlier proposals in accordance with the modified regulations, provided the redevelopment scheme is in progress and has not been completed, i.e. where full occupation certificate is not granted.

The additional FSI is provided only subject to submission of a licensed structural engineer’s certificate for structural stability. The submission must ascertain that the building is designed to take the additional load for constructing additional FSI, if granted. It should also certify the feasibility for structural modifications i.e. it should be feasible to convert the tenements earlier proposed with180 sq. ft. carpet area into tenements of 225 sq. ft. carpet area.

Higher FSI does not automatically becomes permissible in cases where construction is already underway as per old plans, unless a provision was made in the plans, foundation, etc., for the subsequent increase in area of rooms or the number of floors, without endangering the structural stability of the buildings.

In order to simplify the cumbersome process for granting NOCs for redevelopment, the procedure of issuance of letter of intent prior to the issuance of NOC has been completely omitted. It is no longer necessary to obtain a letter of intent. Now, the landlord or co-operative housing societies or occupiers can directly submit their proposal for the redevelopment of their old cessed properties in A to G wards of Mumbai but as per the prescribed format attached, along along with required documents and information.

After the proposal complete with documents is received, it will be scrutinised by the Board and an NOC for redevelopment granted after the Board is satisfied that all requirements are fulfilled by the applicant and after approval has been given in the MBRRB meeting. For each proposal, a scrutiny fee of Rs. 5,000 or whatever amount fixed by the Board from time to time, will be charged.

After all the documents have been received along with application and all legal and technical requirements completed, the NOC will be issued within three months. In case, even after this, the NOC-holder fails to start the redevelopment work within 12 months from the date of issue of NOC, the Board reserves the right to cancel the NOC.

The NOC-holder is expected to complete the construction of new buildings for the rehabilitation of old occupiers within 30 months from the date of issue of NOC. Should he fails to do so, extension to the time limit of 30 months may be granted by the Board, depending on the merits of the case and on payment of an extension of fee of Rs 5,000 or an amount as decided by the Board.

On being granted the NOC for redevelopment, the onus of carrying out repairs to the old cessed buildings at his own risk and cost, whenever such repairs are deemed to be necessary as decided by the repair board, rests on the NOC holder.

An Occupation Certificate for the free sale buildings will be given after all the old occupants, including those who may be staying in the Repair Board’s Transit Camps, have been rehoused in the newly-reconstructed buildings.

Concessions/benefit granted by the government vide its notification dated 25-1-1999 are quite attractive and make the scheme for redevelopment of old cessed properties economically viable. The benefit of the new scheme of redevelopment are expected to be exploited at a large scale by landlords and co-operative housing societies thereby aiding the replacement of old and dilapidated cessed buildings with new, well-lit and ventilated self-contained flats.



Pay Heed To Details In Developer Agreement
By Gajanan Khergamker

A cooperative housing society should enter into an agreement with the developer, as finalised, but only in accordance with terms and conditions as approved by General Body Meeting. Also, the society has to act under the guidance of the architect/project management consultant and consider the points suggested by the architect/ project management consultant as appointed by the society. Here go a few issues that any party entering into a redevelopment agreement with a developer should ensure are covered:
• For one, it’s imperative that the period for completing the redevelopment project of the society does not exceed two years. In exceptional cases, it should not exceed three years.
• The carpet area to be allotted to members must be clearly mentioned in the agreement.
• The developer should give a bank guarantee for an amount equal to a fifth - 20 per cent - of the project cost.
• More importantly, during the period of redevelopment, the developer will make available said members alternative accommodation in the same area as far as possible; arrange to pay monthly rent and deposit as acceptable to members or make available transit camp accommodation.
• The said agreement will be registered under the Registration Act, 1908.
• Once the redeveloped project is complete, new members will need prior approval of the society’s General Body Meeting before admission.
• It should be clearly stated that only after all legal approvals are received for the redevelopment of the building will members vacate their premises.
• Rights of those in possession of the flats will remain unaffected.
• Should any dispute arise during the process of redevelopment, provision should be made in the agreement to resolve the same.
• Care should be taken to ensure that no committee member of office-bearer of the society is the developer or related to the developer. This should ensure that there is no conflict of interest.
• Building plans sanctioned by the Municipal Corporation/ competent authority should be placed before the General Body Meeting for information. If any member wants copies of the approved documents, he should submit an application for the same to the society and it will be binding on the committee to furnish the information by charging the necessary fee.
• After receipt of Occupation Certificate, flats in the redeveloped building should be allotted as per present conditions floor-wise. If necessary to allot flats by drawing lots, on completion of construction the developer should make arrangements for drawing lots. At that time, flats should be allotted in the presence of Registrar’s representative and this process should be videotaped too.



For Redevelopment, Permanent Alternative Accommodation Agreement Is Must
By Gajanan Khergamker

In the case of redevelopment, a development agreement is executed between the society and the developer on the land owned by the society by using available FSI, TDR, etc. The deal usually includes provision of new flats with additional area to the existing members at no cost. The consideration for redevelopment of the plot of land may also include rent, corpus, shifting charges.

The benefits of transfer of development rights move from the society to the developer through this instrument which records the transaction too. Now, in turn for the transfer of development rights, the developer pays monetary consideration by way of cheques for rent and a corpus as well as in kind by way of a flat with free additional area to the members. As the cheque is a movable item, it needs no additional documents or registration processes by law.

However, with regard to the immovable property by way of new houses in the new project provided by the builder to the existing members as laid in the Development Agreement, a separate agreement - a ‘Permanent Alternative Accommodation Agreement’ - has to be executed. And, as per the Bombay Stamp Act, Stamp Duty for the same has to be paid for the agreement which is also registered. Stamp Duty and Registration of the instrument is inevitable as the new flat will have a new number, new area and completely different floor space details as provided by the developer.

The property constructed by the developer as per the Development Agreement is transferred to the existing members. And, in order to establish the legal title of the new entity, a fresh and separate agreement in respect of the new flat has to be provided by the builder. Also, by law, any transaction of an immovable property exceeding Rs 100 needs to be in writing and has to be registered as required under the Registration Act, 1908.

The agreement for ‘Permanent Alternative Accommodation’ has to be mandatorily executed between the builders and the existing members failing which, the members the members will not have a clear and legal ‘title’ which will prevent them from selling their flats nor mortgage them or raise any loans.
It would be interesting to note, as per the amendment in Article 25(d) of the Schedule 1 of the Bombay Stamp Act 1958, even if the society gives an allotment letter in respect of the new flat in the new building, the same will be treated as an agreement and applicable stamp duty will have to be paid. It is, hence, mandatory to get the agreement executed for the new flat with the builder.

The Permanent Alternative Accommodation Agreement provides the much-needed legal standing to the flat purchaser that the new flat number, area, etc., is identified. Also, in the case of the developer failing to fulfill his commitment or breach of sorts, flat purchasers can initiate necessary legal actions against the builder under Maharashtra Ownership Flats Act, 1963.