Those who are resident of Mumbai, and rest of Maharashtra state are facing/ are about to face this problem of redevelopment of their buildings or housing complexes where they are residing. As here all the housing comes under Maharashtra State Co Op Housing Society act. In general terms it means that the housing building or complex where you are residing is a Co Op Housing Society, where lands/buildings/other assets belongs to society , and when you buy the housing premises, you are issued share certificate by the Co Op society, which permits you to occupy the said property, and when you sell that the particular housing premises, which you are occupying, then that particular share certificate you hand over to the new occupant and Co Op society transfers the share certificate in the name of new occupant.
Now, there are many housing buildings/housing complexes/commercial complexes, which have been occupied as per Co Op society’s act are getting old, and they require redevelopment, which means demolishing the old structure and constructing new structure with modern amenities. In these type of cases Govt offers initial floor space , which can be constructed by offering more Floor Space Index (FSI) then the earlier constructed space. This way original occupants get more space/area after redevelopment, and balance additional area can be sold at new market rates to prospective buyers, which should cover the cost of construction and profits for the developer. Generally when hosing society/complex want to go in for redevelopment, after completing the initial process as per rules framed for redevelopment, Society appoints a developer, who constructs the buildings, give back the agreed areas back to original occupants, and balance area is sold to new buyers. Additionally the developer gives the rent to original occupants for the alternate accommodation during the period of redevelopment. On paper all this look OK, but in reality there are so many cases where developer leaves the project in between, or project is delayed and developer fails to give rent. In these type of cases the original occupants are left in lurch, as neither they have their original property in hand nor they are getting rent to stay in alternate accommodation. As per the latest news there are more than one lakh families only in Mumbai, who are left in lurch.
To overcome all these hassles with developer, a new trend has initiated in Mumbai, where Housing Society themselves redevelop their complex. They appoint Architect and other consultants, Project Management Consultants (PMC) etc, and take finance from the bank for redevelopment and pay the loan back after selling the additional areas to prospective buyers. There are many salient features of this system of redevelopment, and few of them are listed below
- Original members of the Society are benefited as they will get more area in comparison to what developer offers. now if developer offers say 30% extra area, in this system member may get more than 50% additional area.
- In some larger plots there is no need for shifting to alternate accommodation.
- Some times developer agrees to give the society some ‘Corpus’, in this case it is replaced by ‘Surplus’, which comes from the SALEABLE portion and can be distributed among original members.
- Since members will decide about the amenities, they will be much better than what is being offered by outside developer.
- Society can give discount from the market rates, if the original member wants to have additional area.
- Stamp Duty and Registration after completion of project.
- All property rights remain with the society since no power of attorney needs to be executed in favour of developer.
- In case of bank finance-in self redevelopment 85% of project cost comes as project loan and 15% as project cost, is treated as loan against proposed sale area. The bank is looking at sale area component/market rate of that particular locality, to ensure repayment of loan. However initially sale area in not constructed and hence language used in the mortgage document is ‘Land and Sale area’. When the sale portion is constructed, mortgage shifts.
- No member of society has to mortgage his/her flat to bank. Now if a member takes a home loan to buy extra area ie over and above the free area, then the home loan rule applies.
- Does the Society member have to pay GST on the extra area- GST is only applicable when a service is given to 3rd party. Here the owners are the members and they are give themselves a bigger house. This bigger house in lieu of house earlier occupied by the member. Hence no service is given, so therefore no GST.
The initial procedure is same as with external developer, except here Society here appoints first Project Management Consultant (PMC), Architect. Then based on final drawings of Architect, PMC issues tenders on behalf of Society and builder/contractor is appointed.
Let us wait and watch how this scheme takes off for redevelopment of the housing societies.
Waiting for your views/comments/feed backs on this blog.
Anil Malik
Mumbai, India
26th Dec 2018
R. N. Mungale.
I think that self-redevelopment is a very good idea.. It will save a lot of headache to members of cooperative housing societies.
Bobby
When you give to an outside builder, it all depends on their brand. When you do it yourself it all depends on trust. In our case I would give it to an outside builder!