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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FUNGIBLE FSI IN NEW DCR (DEVELOPMENT CONTROL RULES)

Let us first understand the concept of DCR. The Development Control Regulations, shortly knows as (DCR) for Greater Mumbai, 1991, apply as a regulatory compulsion on building activities and development work in areas under the jurisdiction of Municipal Corporation of Greater Bombay. The Regulation came into force on March 25, 1991 which replaced the Development Control Rules (DCR) for Greater Bombay framed under Maharashtra Regional and Town Planning Act, 1966.

The DC Regulations state (in simple terms) that every person who wishes to carry out development or redevelopment of a building or alter any building or part of a building is to give a notice to the Commissioner, along with plans and statements. Construction is to be carried out in conformity to the regulations. 

Under the DCR, the Metropolitan Commissioner is the final authority for interpretation of its provisions and his decision would be final. The Metropolitan Commissioner could use his discretion to condone provisions of these Regulations except the provisions related to FSI.

In January 2012, the Government of Maharashtra announced further amendments to the Development Control Rules (DCR) for Mumbai with the primary motive of bringing in transparency and reducing arbitrary and discretionary decision-making at various levels. The new rules would mean pricing based on maximum available FSI, eliminating the ambiguity that was largely prevalent earlier with respect to disproportionate saleable area.

Earlier, the Developers used to build about 30 to 40 per cent more as ‘free-of-FSI’ space which was popularly known as ‘super built-up’ or ‘saleable’ area. However, in both the cases, the Developer used to charge the buyer for every inch of this external space at the same rate as that of the flat.

For example, one such Developer builds 40 per cent additional space over and above the flat size of say 800 sq ft carpet area i.e. 320 sq ft aggregating 1120 sq.ft identified as built up area. If the rate is Rs 20,000 per sq ft, he would earn on entire built up area, an additional Rs 64 lakhs whereas in reality, the buyer get only 800 sq.ft as habitable carpet area. One can easily calculate the profits the Developer stands to make from every other flat.

Under the new DCR, areas for balcony, flower-beds, terraces, voids, niches would be counted in the FSI. These were not earlier considered in FSI calculations. To compensate for this loss in FSI, the Government has allowed Compensatory Fungible FSI of up to 35% for Residential Developments and 20% for Industrial and Commercial Developments. This can be used either for bigger habitatable area or for balcony, flower-beds, terraces, voids, niches etc.

Fungible FSI will be available at 60%, 80% and 100% of the Ready Reckoner Rates for Residential, Industrial and Commercial Developments respectively. Under the new norms the Developers will have an option of 25% more parking over the DCR limit without premium and without being counted in FSI, which would bring some much needed relief to Developers and End-Users alike.

Tenants, Housing Society members and Slum-Dwellers can now demand more space from Builders redeveloping properties. Amended Development Control Rules approved by the State Government in last January, 2012 grant 35% compensatory Floor Space Index (FSI) free to the rehab component of the redevelopment project. But it is not known if the Builder or flat owner will have to pay for the additional space.

Among the beneficiaries could be tenants living in the over 16,000 old and dilapidated cessed buildings in the island city. Tenants are currently entitled to 300-700 square feet houses free when their buildings are redeveloped. But if the flat is larger than 700 sq ft, Builders provide an equivalent area to the tenant in the redeveloped property.

The tenants and Housing Societies will have to bargain hard with Builders for the extra 35% area. "They must insist Developers pay for additional areas,'' they said. Some Developers said they may ask tenants to pay the basic cost of construct-ion for the extra area, depending on the plot's development potential.

The compensatory FSI for the rehab portion is "Free of Premium'', but it is up to the Builder to provide the extra area to the tenant or flat owner. The 35% extra FSI will be on the built-up area of the existing flat

Under the amended rules, areas like balcony, flower beds and niches are counted in the building's FSI; the ratio which determines how much can be built on a plot. In lieu, Builders receive compensatory FSI of 35% for residential buildings for which they are charged a hefty premium based on Ready-Reckoner Rates. Experts said eligible slum-dwellers entitled to 269 sq ft tenement free, can now demand over 300 sq ft as compensatory FSI is available to the rehab slum building too.

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Documents Required at Various Occasions for Redevelopment of Housing Societies

REDEVELOPMENT OF HOUSING SOCIETY - ALL THAT GLITTER IS NOT GOLD

While the open plots in Mumbai no more available to the developers for constructions, the Redevelopment scheme within last few years that has hit Mumbai with great potential. However, it is bitter fact that by and large, when the proposal of redevelopment is taken up for decision in a General Meeting, has culminated in disagreement from Members of the Society time and again.

Every Housing Society need to know that in Redevelopment of Housing Society - all that glitter is not gold. Redevelopment projects have often collapsed due to the growing demands of the Members in majority. There is a high level of diffidence amongst the Members when the idea of Redevelopment is proposed. There is persistent fear of insecurity whether the developer will deliver the redeveloped property or leave it intermediately.

First and foremost, the Housing Society Members must ensure that their Office Bearers and the Members of the Managing Committee are elected as per the provisions of Maharashtra Co-operative Societies Act, Rules and Bye-Laws. In short, please ensure that the entire Managing Committee is lawfully constituted.

There are numerous instances where firstly, the Members of the Managing Committee are hooked and enticed of unlawful gratifications in substantial amount by certain unscrupulous developers and use these Managing Committee Members as their agents to pursue and pass over the rosy dreams and benefits to innocent Members of the Society and criminally ensure that the redevelopment project is bagged by them.

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 developer’s orders. Scared by such hounding tactics, most Members of the Society accept and offer their consent towards the redevelopment without any protest and prefer to go along with whatever the Office Bearers and the Members of the Managing Committee decides.

It is well known fact that the illegal gratifications and lavish spending by a large cartel of unscrupulous developers 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.

It is often observed that the Managing Committees do not have the required knowledge of redevelopment compelling them to be at the mercy of the Professionals who are equally incompetent in the integrated areas and intricacies of Redevelopment of Housing Societies.

Please remember that going in for redevelopment without knowing the precise procedures and processes involved is like walking on the edge of a cliff blindfolded and any single wrong step could send the whole Society tumbling downwards. Essential information is one concept where half knowledge is infinitely more dangerous than ignorance.

If any step taken without following the necessary guidelines, all the efforts would be rendered null and void. Clearly, the need of the hour is that those standing on the threshold of redevelopment receive advice from counsellors who have the experience and expertise to direct the Society in achieving the desired goals.

On the front of redevelopment, in a fair and above-board transaction, the developer should pass on some of that value to residents of the building, either through money paid as a corpus, or additional space in the flats, or both. Here’s where the Managing Committee can be lured into agreeing to a raw deal for their neighbours of decades. Two-crore rupees passed on by the developer is a very small amount for him, while for the Members of the Managing Committee, it’s an amount they’ve never seen before.

There are, of course, guidelines laid down by the Maharashtra government to ensure that all residents of a Housing Society get a fair and market-driven deal. A Housing Society cannot be handed over to a designated developer unless it is agreed to by at least 70% of the Members. The process of selection of a developer has to be preceded by the appointment of a Project Management Consultant (PMC), who is an architect and knows the exact value of the property and how much residents should get as their share of the benefit of redevelopment.

But as is the case with deviant India, this process is almost always subverted by appointing a PMC who gives a doctored report to favour a certain developers. Housing Societies with literate and aware residents will make sure that there is transparency in the selection of the PMC.

This is to be done by asking some PMCs to send in their profiles with track record of work done and the value they brought to residents in Housing Societies that they have previously advised. This must be crosschecked with references from residents of Societies who have availed of their services and can vouch for the veracity of the PMC’s claims. The developers short-listed are also asked for a similar profile and a list of projects successfully delivered.

None of this exercise done in case the Managing Committee wants to cream off some of the money for themselves, in which case they typically end up with a selection of a developer who has little experience, virtually no capital and is hungry to make a break. As we all know, the land is very expensive in Mumbai and a Redevelopment Agreement grants a developer access to that asset of his saleable are for free.

With regard to enforcing the Law & Order against the fraud and cheat builders, the Indian Police has always remained in forefront to protect the cold-blooded builders and milk them as often as needed. Even basic functions like lodging a FIR against the deceptive and dishonest builders is firstly not registered, victims are encouraged and even threatened for not to file an official complaint. If a case somehow gets registered, the police usually do not take any action. The con developers, corrupt politicians and policemen go like hand in glove, often resulting in exploitation of the gullible and naïve Buyers / Members of the Society.

It is not expected of a common man to analyze the hidden risks in a redevelopment scenario. His knowledge is zero to know the judiciary system and its intricacies. The developers on the other hand, have fleet of highly paid advocates and experts to advise and protect them. 

Last, but not the least, the successful execution of any redevelopment project primarily depends on the management by the Members of the Managing Committees with transparent efforts to protect the corporate interest of the Society and 100% co-operation of each and every Member. This, in turn, again depends on the capacity of the Members of the Managing Committees who are entrusted with the management of entire process of the redevelopment with their honesty and integrity.

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