For last few years in Mumbai real estate business, there has been addition of one more business line and that is of the redevelopment of old building/housing Societies, and govt is also encouraging the same. Govt, in general give the incentive to this type of projects by allowing additional floor space and the old flat owners generally are offered 35 to 40 % additional area plus rent for the alternative accommodation during the period of construction. Generally the developer gets the permission to built double the existing area, so after giving extra area to flat owners developer gets to sell the remaining 60 to 65% area at the market rates. As the current market rates of the flats have become very high, the developer makes huge profits. There are some issues which are still not addressed by the govt
1.On paper this scheme looks very attractive for the flat owners of old housing societies, but unless the housing society members take care in selecting the developer, who has the capacity to invest huge sum of money to finish the project. Generally as per the agreement developer has to construct the new houses for existing flat owners first, and then only he can construct and sell the additional area in the open market. There have been many cases, where developer has left the project mid way or sold the project to some other developer mid way, in that case flat owners are left in lurch.
2. If the area to be redeveloped (specially large housing societies with multiple buildings)is located in the locality where market rates are very high, then local politicians and so called pseudo re developers start taking interest and from all corners they put pressure on the Managing Committee of housing society, to allot the contract to such a such person/company. Recently a case has come into limelight where members of the managing Committee of certain Housing Society located in the elite area of western suburbs of Mumbai started getting calls and messages from various people/developers to allot the project to them,the fact of the matter is that till that time society has not applied for re development with Municipal authorities, in fact the consent of 70% of members were not obtained for the redevelopment. On top of this society received a letter from local MP from ruling party that this project should be allotted to such & such company, and further funny part is that the Deputy Registrar of Co Operative Housing Societies of that Municipal ward also wrote a letter to the Committee that the same company recommended by MP should be awarded the contract. The Society then decided to complain to Registrar of Housing Societies about the letter written by Deputy Registrar. There are many more such instances where local Corporators/MLAs/MPs take keen interest in the redevelopment projects for obvious reasons, as all of them think there is huge amount of profit and everyone wants to have his pie.
Although the govt has brought certain laws like RERA to safe guard the interest of buyers in normal Real Estate Housing Projects but for the redevelopment projects still lot is to be done by govt, although they have formed the rules for the Housing Societies regarding redevelopment and given the guidelines about how to proceed in this regard, but laws are not clear about developers of the redevelopment projects. There have been many cases where theses types of projects have gone for litigation and poor flat owners are left without their flats and no one to pay for their rents, and in that case they have to depend on the mercy of the courts and you know the cases can drags on for years in various courts. I sincerely hope the govt to come out with new guidelines and laws in this matter.
What you say my friends.
Awaiting for your feed backs and comments.