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SELF-REDEVELOPMENT – A BETTER OPTION FOR

CO-OPERATIVE HOUSING SOCIETIES

 

The redevelopment of old buildings has drastically undergone changes in Mumbai in the last 25 years. The traditional practice in vogue for redevelopment to be done through a Developer where the benefits of the additional Floor Space Index (FSI) accruing to the building, are not passed on to the members of the co-operative housing societies. Moreover, many buildings that went for redevelopment have been abandoned midway by the Developers leaving the original flat owners stranded.

The Developer-led-Redevelopment projects are stalled due to various reasons and have many disadvantages like indefinite delays or stalling of projects, lack of transparency in the process, mismanagement of funds, increased corruption allegations and underhand practices, modification in building plans without prior consent of the co-operative housing society, no rent payment to members after some months, inability to deliver 100% commitments and many more.

Self-Redevelopment is a type of redevelopment in which the co-operative housing society members themselves redevelop their existing building without appointing any Developer and earn profits from the sale of new additional flats. In self-redevelopment the entire redevelopment process is planned, executed and managed by the co-operative housing society members with assistance and guidance from Self Redevelopment Management Consultants.

The Maharashtra State Government has started giving various incentives and concessions in FSI, Taxes, TDR rates etc. for the Self Redevelopment of co-operative housing societies.

The Maharashtra State Government has authorized certain banks like the Mumbai District Central Co-operative Bank Ltd. to provide up to 95% funding for self-redevelopment Projects. The remaining margin amount is to be raised by the co-operative housing society members.

In order to ensure that the flat owners get the benefits of increased FSI and to let them have their participation in the redevelopment of their building, the cabinet of the Government of Maharashtra set up an expert committee on March 8, 2019 to examine the issues and give recommendations for self-redevelopment of old buildings by the co-operative housing societies in the State of Maharashtra. A Government Resolution (GR) dated 13th September, 2019 was issued to implement the suggestions of the High-Level Committee. Only registered cooperative housing societies of Maharashtra, are eligible to avail of the benefits offered under this GR.

The co-operative housing society shall appoint a skilled contractor for carrying out the reconstruction of the building from a panel of contractors approved by the approving authority. For empanelment, the contractors have to submit balance sheets for the last three years. This requirement will ensure that no fly-by-night contractor gets to carry out the work of redevelopment under this scheme. The contractor can be removed if the committee constituted for monitoring the progress of the project reports undue delay by the contractor in execution of the project. In such a situation, the contractor can also be black-listed to make him ineligible for any further projects. This requirement will ensure that the contractors so selected, are sincere in the execution of the projects undertaken.

The English version followed by Marathi version of the GR dated 23th September, 2019 issued by the Government of Maharashtra, Housing Department are appended below:

GOVERNMENT OF MAHARASHTRA

HOUSING DEPARTMENT

GOVERNMENT RESOLUTION NO. MISC. 2019/Case No. 10/Du Va Pu-1

Mantralaya, Mumbai – 400 032.

Date: 13th September, 2019.

Government Resolution, Housing Department No.:  Misc. 2019/Case No.10/Du Va Pu – 1 Date – 08th March, 2019.

INTRODUCTION:

A Developer is appointed by the concerned co-operative housing societies according to the present prevalent procedure for making re-development of the old and dilapidated buildings in the State. The re-development of the of the co-operative housing societies is made according to the provisions in the Development Control Rules prepared by the concerned Planning Authority/Municipal Corporation/Local Self Government.

Since the benefit of increasing FSI is prominently goes to the Developer, the members of the concerned co-operative housing society do not get much benefit. Similarly, since the participation of the members of the co-operative housing societies in the process of re-development is very less, the entire project is implemented at the pleasure of the Developer and consequently, it has come to notice that many projects are lying in incomplete State due to umpteen reasons.

Likewise, since the purchasers who have invested by taking loan for the purchase of a flat in the said project, are facing financial difficulties since not getting possession of the flat within prescribed period. In such situation, if members of the concerned co-operative housing societies by coming together propose self-redevelopment, then entire control of the re-development project shall be of the concerned co-operative society.

Similarly, the benefit of the increased FSI can go to the members of the said co-operative society. Incidental to that, in view of offering incentives for making self-redevelopment of all registered co-operative housing societies on government/semi government/private land in the State, the decision to offer concessions has been taken in the meeting of the State Cabinet held on dated 08/03/2019.

Incidental to the decisions taken in the said meeting, High Power Committee under the Chairmanship of the Additional Chief Secretary (Housing) was formed by the Government Resolution dt. 08/03/2019 of the department for making recommendations to the Government regarding proportion and nature of the concession to be given to the registered co-operative housing societies for giving them incentive for making self-redevelopment of their buildings.

The report of the said committee is received by the Government and the Government has accepted the report of the committee. Incidental to the recommendations in this report, the matter to give concessions to all registered co-operative societies on the government/semi government/private land in the State for making self-redevelopment of their buildings which was under consideration of the government.

Government Resolution नदनांक: 13 सप्टेंबर, 2019

वाचााः - शासनननणणय, गृहननर्माणनवभागक्रर्मांक: संनकणण 2019/प्र.क्र. 10/दुवपु-1 नद. 08 र्माच, 2019:

In view to give incentive to all registered co-operative housing societies on the government/semi government/private land in the State for making self-redevelopment of their buildings, the High-Power Committee formed in this regard has made following recommendations:

1) Eligibility for Making Self-redevelopmentThose buildings in the co-operative housing societies in the State which are 30 years or more old that buildings are eligible for the self-redevelopment.

2) One Window Scheme Various types of permissions are required from government/semi government scheme for the self-redevelopment of the co-operative housing societies in the State. For getting all these permissions, follow up is made separately to the various departments, thereby, more time consumed for the said process. If the said permissions are given in the prescribed period in one office, then, the process of the re-development become fast and the concerned scheme is completed earlier. Therefore, for getting various permissions for the self-redevelopment of the co-operative housing societies in the State at one place, one window scheme should be started.

3) Time limit for giving sanction to the Schame - It should be made binding to complete all permissions through the one window scheme within 6 months from the date of receiving the proposal of the self-redevelopment scheme of the co-operative housing societies.

4) Floor Space Index/incentive space - Those co-operative housing societies more than 30 years old in the State, who adopt the self-redevelopment and to such co-operative housing societies, 10% more floor space than the floor space index/incentive space due for the redevelopment according to the concerned Local Development Control Rules shall be made admissible. Similarly, if the rehab area for the residents in those buildings is more than the admissible F.S.I then in such situation, 10% more F.S.I should be made admissible than the Rehab Area. Similarly, in respect of the buildings on the road having less than 9.00 meters width, these buildings should be given 0.4 FSI without premium instead of the present due 0.2 FSI (with premium).

5) In Respect of the Roads Necessary for the Re-development – Those co-operative housing societies who are wishing to do collective self-redevelopment, for them by relaxing the condition of having two roads, the permission for re-development of the buildings on the 9.00-meter-wide road in the populous area and the buildings on road of 12.00 meter wide in the less populous area should be given. Similarly, the concerned co-operative should be made available the necessary land required for becoming 9.00-meter-wide road and accordingly the concession should be given in that proportion in the front margin of the building.

6) Transferable Development Rights (TDR) – Those Co-operative housing societies in the State who will adopt the self-redevelopment, if such co-operative housing societies want to buy the TDR, the society should buy TDR at the concessional rate of 50% of the Ready Reckoner Rate from the concerned Planning Authority.

7) Concession in the Premium Rate – While making self-redevelopment, various types of the premium are being charged from the concerned Planning Authority. The total expenses are increased due to the said premium rate. Therefore, to encourage the self-redevelopment of the registered co-operative housing societies in the State, it is necessary to give concessions in the rate of the said premium. Incidental to those concessions should be given in the rate of various premium charged by the Planning Authority.

8) To Decide the Stages for Making Payment of the Premium – It is inevitable to make payment of the various premium while sanctioning the plans by the concerned Planning Authority in the redevelopment process. If the amount of the said premium is paid lump-sum then its pressure falls on the project cost simultaneously. Thereby it may cause paucity of fund with the concerned Housing Society. Therefore, to overcome on it, the concerned Planning Authority should stipulate stages for the payment of that amount by not taking lump sum number of various types of taxes/premiums from the concerned necessary for the self-redevelopment.

9) Regarding various taxes/charges to the registered co-operative housing societies adopting self-redevelopment:

A) Land under Construction Assessment Tax (LUC Tax) - If the registered co-operative housing societies going to re-development have completed self-redevelopment in the prescribed period, then such co-operative housing societies should be given exemption from the LUC Tax. However, those co-operative housing societies, who do not complete the self-redevelopment within the prescribed period, from such co-operative housing societies, the LUC Tax should be recovered at present prevailing rate.

B) Stamp Duty – Since there is no third beneficiary other than the existent co-operative housing society in the self-redevelopment project, there is no need of executing any agreement. Thereby since the proposed flats to the existing tenements are available through self-redevelopment, the stamp duty should be charged like the stamp duty of Rs. 1000/- being charged from the beneficiaries in the projects implemented under the Prime Minister Awas Yojna. However, the stamp duty should be charged at the prevailing rate on the agreement of the tenements to be available for sale in the open market other than the flats of the original members in the new building to be ready after self-redevelopment.

C) Goods and Service Tax (GST) – The concession should be given in the Goods and Service Taxes to be paid by the registered co-operative housing societies going for self-redevelopment.

D) Open Space Deficiency Development Charges – The registered co-operative housing societies adopting self-redevelopment should be given concession in the Open Space Deficiency Development Charges.

10) Nodal Agency – It is necessary to have Nodal Agency for providing finance, guidelines to the registered co-operative housing societies adopting self-redevelopment in the State similarly to encourage from time to time for implementing the said scheme etc. In view of that, the State Co-operative Bank, which is Federal Bank in the Co-Operative Sector, shall work as a nodal agency through the District Central Co-operative Bank in the respective District for the self-redevelopment of the registered co-operative housing societies in the State, The said nodal agency through the various publicity media should publish detailed information about entire procedure, process regarding self-redevelopment for giving impetus to the self-redevelopment of the co-operative housing societies.

11) Period for Completion of the Self-redevelopmentscheme – Those registered co-operative housing societies in the State who will adopt the self-redevelopment, that co-operative housing societies after sanctioning of the scheme from the concerned Authority, should have to complete the entire re-development within 3 years which is binding on them.

12) Concession in the Rate of Interest of loan – A subsidy in the rate of interest of bank loan should be given to the registered co-operative housing societies adopting self-redevelopment. Accordingly, the subsidy of 4% in the rate of interest should be given from the Government. In a recent directive, the RBI has given permission to housing finance companies to finance self-redevelopment projects. Earlier, the RBI had restricted the banks from funding such projects as they fall under the ‘Commercial Real Estate’ category.

13) The registered co-operative housing societies have to obtain the written consent of 100% of the members, to proceed with self-redevelopment and for mortgaging the land property of the co-operative housing society to the Bank for the purpose of availing of the loan. The co-operative housing society has to pass a resolution in the Special General Body Meeting and forward the same to the Deputy Registrar of co-operative housing societies. The acknowledgement of the resolution as submitted to the Deputy Registrar has to be attached with the application form prescribed by the bank along with other documents such as;

 * Chain and Triangle Survey (CTS) plan

* 7/12 extract

* Development plan

* Registration certificate

* List of committee members

* List of amenities approved

* Setback area details

* Plot area measurements

* Approved plans for redevelopment

* Occupancy Certificate

* Audited Financial Statements for at least last three years

* Details of all society members, including their unit sizes as per the actual plan

14) The Maharashtra Government has started a Single-Window Clearance System for self-redevelopment projects. There are almost 55-60 clearances required for such projects including NOCs from Coastal Regulation Zone, Traffic, Fire, Defence, Aviation and other authorities. These documents include copies of the registration certificate, updated bye-laws of the housing society, audited financial statements for the last three years, list of committee members, etc. Additionally, the society will have to provide copies of documents evidencing ownership of the land and building which include the conveyance deed in case conveyance has been done, land purchase agreement where land was purchased by the society, copy of property card, 7/12 extract and original plan of the building. The application form should be accompanied with a copy of the project report of the proposed redevelopment along with a detailed budget and break-up of the cost of the project and copies of the approvals received from the authorities authorized to grant such permissions.

15) The housing society will also have to furnish details of all the members, with their business address, address of their native places, Aadhaar card and PAN cards. It will also have to furnish the copies of income tax returns (ITRs) and salary slips in case of the members who are not filing their ITRs. Before approaching the bank for funding, the society has to appoint an architect, legal advisor, project management consultant, chartered accountant etc., and furnish the copies of the agreements executed with them.

16) Authority for Self-redevelopment The Authority giving approval for re-development of co-operative housing societies at present in the State shall work as Planning Authority for the self-redevelopment of the co-operative housing societies.

17) Tripartite Agreement – It shall be binding to execute Tri-partite Agreement with necessary terms and conditions regarding self-redevelopment between the finance providing institution to the co-operative housing societies going for self-redevelopment, concerned co-operative housing society and the contractor appointed by that society.

18) Self-redevelopment of the society under the Pradhan Mantri Awas Yojna – Pursuant to the guidelines in the Pradhan Mantri Awas Yojna, if the concerned registered co-operative housing societies are ready to build 35% flats in the sale unit for the beneficiaries in the Economical Weaker Section/Lower Income Group then like the Prime Minister Awas Yojna, the registered co-operative housing society will get 2.5 F.S.I., subsidy of Rs. 2,50,000/- to the eligible beneficiary and similar incidental benefits will be given.

19) Vigilance Committee It is necessary that the self-redevelopment of the co-operative housing societies is to be completed within prescribed period. Similarly, it is necessary that the standard of the construction should be of good quality. In view of this, the concerned co-operative housing society shall have to formed a vigilance committee for controlling and supervising the self-redevelopment work comprising minimum two representatives from the concerned Society and minimum one representative from the finance institution providing financial assistance for the self-redevelopment. It is binding on the vigilance committee to submit progress report to the concerned co-operative housing society and similarly to the concerned planning authority by giving site visit in every three months at the site of the construction work of new building.

20) Grievance Redressal Committee The possibility of arising varioustypes of difficulties/complaints/objections while making self-redevelopment to the registered co-operative housing societies in the State could not be denied. Incidental to that there shall be one Grievance Redressal Committee on every district level for solving the said difficulties. Following officers/office bearers shall be included in the said Committee:

1) District Dy. Registrar in the concerned district or representative Nominated by him.

2) Officer authorized from the Planning Authority in the concerned District.

Those co-operative housing societies’ complaints regarding the self-redevelopment received by the Committee, the Committee while redressing those complaints it shall be binding to call the members in the vigilance committee formed for controlling the working of the self-redevelopment with a minimum of two representatives from the concerned registered co-operative housing society for hearing.

21) Criterion and Registration of Contractor - The criterion of the contractors to be appointed for the self-redevelopment of the co-operative housing society should be determined by the concerned Planning Authority according to the local situation/necessity. Similarly, it shall be binding to register with the concerned Planning Authority by such contractors.

22) Appointment of Contractor for self-redevelopment – The concerned co-operative housing society shall be appointing the contractor for the self-redevelopment of the co-operative housing society. Therefore, it is necessary to appoint proper and competent contractor after seeing last three years financial balance sheet of the contractor whether he is competent technically/financially.

23) Action against the Contractor appointed for Self-Re-development – The vigilance committee shall put control on the progress of the construction work and similarly on the quality of the construction work after receiving the construction work proposal for the co-operative housing society regarding the stages of construction of the building/plan of the construction of the new building from the contractor for self-redevelopment. Accordingly, if the progress of the work is not satisfactory according to the report submitted to the co-operative housing society by the vigilance committee and if there is delay in completion of the project, then the concerned co-operative housing society can appoint new contractor by removing the guilty contractor. Similarly, the concerned Planning Authority should put the name of such guilty contractor in the black list and new project should not be sanctioned to such guilty contractor.

As the self-redevelopment of a building involves dealing with large sums of money and awarding contracts to various people, it is important for the members of the co-operative housing society to choose persons of integrity to be the members of managing committee. There have been numerous instances of allegations of malpractices by the managing committee members, leading to delays in the completion of the project and cost escalations.

By Order and in the name of the Governor of Maharashtra.

(R. K. Dhanawade)

Dy. Secretary, Government of Maharashta-