In Focus

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.

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