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Inside The Redevelopment Of Housing Societies

In any housing society, unless a wholehearted co-operation is rendered by each member, the desired results of redevelopment cannot be achieved. It is not a profit making activity nor is it a tool for power politics.

Any activity of redevelopment of housing society should not compromise the rights of members and it is prime duty of members of the Managing Committee to safeguard the corporate interest of the society and its members.

In case few aggrieved members, it must be remembered that the Development Agreement entered into between the society and the developer is not binding on the dissenting minority and in case the dissenting members fail to abide by the resolutions passed at the meetings than the society only will have to take appropriate action against those members.

In most redevelopment projects one world is always missing i.e. “Co-operation” by all members as if it is a commercial call and everyone wants to garner the maximum benefits in any way it suits him.

The Developer Community felt a big relief when a Division Bench of Bombay High Court in case of M/s. Acknur Constructions Pvt. Ltd v/s Fardoon Apartment Co-op. Hsg. Soc. Ltd & others held that redevelopment of a property is the mercantile wisdom of General Body of the society and it is not open to the Court to sit over the said wisdom of the General Body.

Merely because some members in minority disapprove the decision, it cannot be the basis of the decision of the General Body unless it is shown that the decision was the product of fraud or misrepresentation or was opposed to some statutory prohibitions as contained in GR dated 03/01/2009 issued by the Maharashtra State.

It must be noted that the Developer cannot initiate process of evicting the dissenting member with the help of Development Agreement as the agreement never establishes privity of contract with the individual member or a dissenting member and hence for getting peaceful possession of the society’s property, the society has to take appropriate action against the dissenting member. The Government, in its said GR, has not provided any efficient mechanism for peaceful possession of society’s property to Developer in case resolutions are passed in the manner envisaged in the said GR. However, the process of getting possession through cooperative court may be tedious and could be against the interest of project.

Transparency in execution of a Development Agreement is expected from any prudent Managing Committee. In most of redevelopment projects, the society passes resolution in favour of a developer and sets out key commercial terms of Development Agreement.

The Managing Committee thereafter negotiates the expected terms of Development Agreement with the Developer and executes the agreement on behalf of the society. However, there are certain questions on the practice of incorporating the restrictive terms while assigning the rights in the property to the Developer in the so called Development agreement.

The market practice of adding such terms as giving away absolute right and authority to consume FSI in Development Agreement creates rights in the property itself in favour of Developer. Such terms are not contemplated in Development Agreements that the Developer only acts as agent of the society, purchases TDR in society’s name, obtains permissions in society’s name and enters into society’s premises as a licensee for development of property in and lieu of these he gets his consideration by way of selling designated portion in the developed area. The society in such case always remains owner of its property.

Several vital aspects are ignored in the said GR dated 03/01/2009 and the rights of the members are not given serious consideration. The GR does not deal with the aspect of TDR/FSI and other rights attached to the land and how they have to be dealt with. In case the society desires to give rights in the property to the Developer by way of Development Agreement than nature of such rights should be adequately disclosed.

There are deceptive trade tricks of the Developers to create their ownership rights over the property of the Society. The Managing Committee of every Society must ensure to protect the title of property which exclusively belongs to the Society and such wicked and manipulative clauses are not supposed to be entertained or contemplated while approving the draft of Development Agreement.

The GR does not provide for approval of draft Development Agreement at General Meeting and hence in case Managing Committee creates such rights in favour of the Developer than the entire Development Agreement will be vulnerable to such terms.

Apart from transparency in Development Agreement, one of major obstacle in redevelopment process is the allegation of discrimination and underhand dealings by certain members of the Managing Committee that generate negative signals in settling the terms with the Developer. The said GR lacks to address efficient ways of handling these issues.

The key to success of any redevelopment project is the maintenance of transparency and full cooperation of all members is most sought after requisite. Utmost care is required to see that General Meetings are conducted with the maximum clarity and any lacuna in process may drag the entire redevelopment project to the door-steps of the law.

One more issue requires serious concern that as per the GR, if the Developer provides a Bank Guarantee of 20% of the project cost as security, what about the unsecured portion of remaining 80%? In case the Developer abandons the redevelopment project leaving the housing society high and dry, whether cashing of the Bank Guarantee of 20% of the project cost is sufficient to complete the project and re-house the existing members in new premises? There should be a provision in the said GR for providing the Bank Guarantee of 100% of the full construction cost of residential FSI to re-house the existing members.

It is worth to mention here that in the name of redevelopment of old housing societies in Mumbai, the various authorities, in last few years have carpeted free ground to breed rampant corruption to benefit the private builders to sub-serve their illegal and deceitful objectives to garner huge profit. It is most required of the Government to impede the members of Managing Committees to enjoy the sleep with the builders for few greens and thrust redevelopment idea on the innocent and gullible members.

The corrupt members of the Managing Committees also resort to arm twisting, harassment and threatening method to the flat owners into submission as per the builder’s orders. Scared by such hounding tactics, most society members accept and offer their consent towards the redevelopment of their society without any protest and prefer to go along with whatever the members of the whole Managing Committee decides.

It is well known fact that the illegal gratifications and lavish spending by a large cartel of unscrupulous Builders entice the members of the Managing Committees of cooperative housing societies and provoke them to turn against their own members of the society in the matter of obtaining consent and force implementation of redevelopment.

The State Government should propose the formation of high profiled Credit Rating Agency consisting of Industry Experts exclusively under the control of Housing Ministry of State Government for Registration and fixing the grades for the Developers since in redevelopment projects of housing societies and SRA projects, the existence of the society itself is challenged and it may get trapped into the community of substandard category of Developers’ taller claims to bag the projects beyond their means and capacity;

The said GR should provide for mechanism for quick action and appointment of a new Developer in case of non performing Developer as also provide for stern penalty measures including imprisonment and blacklisting of Developer in case he Developer fails to execute the project in time.

Suitable legal action should be immediately initiated and severe action to be taken against unauthorized constructions, selling of car parking basement area as commercial, violation of rules of DCR, MMRDA, MRTP and BMC.

It has been often noticed that during the process of redevelopment, the terms of Development Agreements as agreed upon and the unhealthy attempts with ulterior motives are made by the Developers to twist and grossly violate the rules of MRTP and DCR by unlawful planning and constructing additional/unauthorized areas that are beyond their entitlement (i.e. beyond the plot FSI and the TDR/FSI loaded) for their hidden financial gains. The buyers of such unlawful flats/properties land themselves in deals that lead to litigation at a later date.

The ill-observance of MRTP/MCGM/DCR rules and guidelines are overlooked by the sympathetic officials of the MCGM and the plans so submitted, are sanctioned without verifying the eligibility or its conformity with the Development Agreements.

The projects are completed and the Occupancy Certificates are issued without the proper inspection neither carried out by the MCGM officials nor taking pains to verify whether the actual measurement of the constructed areas tally with the final plans submitted.

It is further noticed that upon the completion of the projects, these additional/unauthorized constructions are silently regularized at the last moment by executing the Supplemental Agreements with the Office Bearers of the Societies with green handshakes/offering them handsome rewards.

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