DEVELOPERS TO HANDOVER FLATS 

TO MHADA ON REDEVELOPMENT

UNDER DCR 33(7)

Another blow under the belt to Developers of South Mumbai is that the Developers are required to handover flats to MHADA On redevelopment of cessed buildings under DCR 33(7). The Bombay High Court has upheld a law requiring those Developers who are undertaking redevelopment of old buildings in the island city required to hand over a few flats to MHADA known as the Developers surplus housing stock. The surplus area means additional premium FSI available to them to construct saleable flats.

A Division Bench of Chief Justice Mohit Shah and Justice Girish Kulkarni dismissed petitions of Developers challenging the constitutional validity of certain provisions of the Development Control Regulations i.e. DCR 33(7).

The judges opined that having taken advantage of higher FSI, the Developers cannot be permitted to approbate and reprobate by trying to escape from their obligations voluntarily undertaken by them to surrender part of the surplus area.

The Developers on the other hand, contended that MHADA was paying them a pittance of Rs 235/- per square foot for the flats under handover as against the construction cost of over Rs. 2,500/- per square foot incurred for the saleable flats.

The Court pointed that the additional construction rights that the Developers had received under DCR 33(7) was FSI of 3 as against the basic FSI of 1.

The judges further said that they would have appreciated if the Developers had volunteered to handover flats to MHADA as part of the surplus built-up area in direct proportion to the FSI that they get under DCR 33(7). Unfortunately, the Developers did not derive any delight of giving even after availing FSI of 3 from 2011 onwards as is apparent from filing of the petitions.

The Developers strongly expressed their resentment to the Court that there were 292 plots having old dilapidated buildings in the city which cannot be redeveloped because of road widening or the requirement to keep minimum building margins. 

There are over 19,000 cessed privately-owned buildings in the city constructed before the 1940s. DCR 33 (7) is the rule that is applied for the redevelopment of these buildings under which as against the FSI of 1, the Developers can utilize an FSI of 3. In return, they have to hand over a few flats to MHADA for a specified price. However, the policy of MHADA is not clear that how many flats are to be handed over to them. The Developers questioned that why they should handover flats to MHADA and that it amounted to acquisition of immovable property from the Developers.

The HC rejected the contentions of the Developers pointing to the benefits that they derived from rule under DCR 33(7).

An interesting case is worth mention here that in the year 2013, State Housing Board seized 114 apartments in two plush high-rises in Byculla after the Developer failed to hand over a portion of the surplus area to the State Housing Board on the redevelopment of a cessed building despite their repeated notices.

The apartments located in a 22-storey building with a total area of about 4,600 square metres, a residential housing colony near Byculla police station, were then allotted as permanent accommodation to those who had been living in the transit camps of MHADA for years after being displaced from dilapidated cessed buildings. In terms of the total number of flats as well as their value, this was perhaps the largest housing stock that MHADA could ever manage to recover from a single Developer at least over the past 13 years. 

The estimated market value of these flats worked out was approximately Rs 300 crores constructed around five years ago. The carpet area of these flats range from 225 square feet to 560 square feet and the building is well-equipped with elements such as granite flooring and a modular kitchen. It is learnt that the Developer was to hand over these flats to MHADA originally in 2008. However, the Developer did not comply or pay heed to the notices.

The Developer’s plea was that the company never intended not to hand over the required surplus housing stock to MHADA as per norms and that as per the earlier policy,  they could hand over the housing stock in some other developed area within the same Ward. However, the MHADA later scrapped this policy making it mandatory for the Developers to hand over flats in the same project. Later again the MHADA reverted to the old policy and hence, there was some confusion which led to the delay.

MHADA’s Repair Board is responsible for the maintenance of cessed buildings under DCR 33(7) constructed before 1970 that have been paying repair cess to MHADA for their upkeep. Developers are required to seek consent from the this Housing Board before taking redevelopment of such buildings and are also supposed to surrender a pre-calculated amount out of the total surplus housing stock generated on redevelopment.

During the year 2013, since the large number of Developers defaulted on handing over of this surplus housing stock to MHADA who sent notices to 33 Developers which together owed the Housing Board a total surplus area of about 10 lakhs square feet. Now that the Bombay High Court has upheld a law requiring those Developers who are undertaking redevelopment of old buildings in the island city shall mandatorily hand over the calculated number of flats to MHADA. The Developers today are suffering from cash crunch, mounting of unsold stock, frequent changes in Govt. policies, TDR rates sky rocketing, rising of labour and material cost etc. Kehte hai ki “Kangali main aata gilla.”

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Corruption, Dishonesty and Frauds in Redevelopment

Many countries have beaten India in diverse fields. However, India has out-beaten all the countries in one field and that is widespread corruption for which every Indian is proud about his country being on the pinnacle since ages. One of the areas of this majestic achievement by established interests of the corporate field is redevelopment of old housing societies and commercial joints in metro cities.

Mumbai has become the capital of corruption, especially in the construction business, perhaps, because of the highest property rates in India. Cheating property buyers, flouting the rules, getting the requisite papers and plans approved sometimes in advance, selling refuge and other free of FSI areas and construction and sale of illegal floors are common these days in the financial capital of India.

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 objectives to garner huge money and members of the Managing Committees of Societies to enjoy the sleep with the builders for few greens and thrust redevelopment idea on the innocent members.

The benevolent Officials at MCGM always are in readiness to approve any plan tabled, MMRDA, MHADA, Banks, Politicians and Senior Bureaucrats, Police, Local Goons and all concerned who are the core harvesters in most lucrative money spinning business involving multi crores of rupees in the name of redeveloping our mother land.

The entire lobby of these white collared mafias has strongly built a black economy in our country involving nearly 40% to 50% of unaccounted cash transactions from the small/large/corporate buyers of the properties. The menace of deadly nexus amongst these “BADDIES” have also beleaguered the licensing authorities of administration like MCGM, MMRDA, MHADA, Banks etc. for getting illegitimate approvals or legalize unauthorized constructions.

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 redevelopment projects when completed, 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, whether the use of FSI is legal, whether the basement areas are sold to commercial houses though they are free of FSI meant exclusively for car parking.

It has been often noticed that during the process of redevelopment, the terms of Development Agreements as agreed upon, unhealthy attempts with ulterior motives are made by the builders to twist and grossly violate the rules of MCGM, MRTP and DCR by unlawfully planning and constructing additional/unauthorized areas/floors 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. It is not viable to pull the builder to court and wait for years to get fair justice. Once the buyers sign on the dotted line and pay the cost, he is at the builder’s mercy.

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 and offering them handsome rewards.

The illegal gratifications and lavish spending by a large cartel of unscrupulous Builders entice the members of the Managing Committees of Cooperative Societies and provoke them to turn against their own members in the matter of giving consent and force implementation of redevelopment.

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.

The members of the Cooperative Housing Societies in Mumbai are required to be vigilant while handing over their Societies for redevelopment to such builders who, by rewarding the unreliable members of the Managing Committees and their associates, carry out the unauthorized/additional constructions for their hidden financial gains which they are not entitled to. When unauthorized constructions beyond the laws are the statutory norms of such builders rather than the exception to the rules, the strict laws of the land have always to be upheld by taking stern actions under the laws.

On the front of Banks’ role to proliferate the corruption in recent years, the real estate market has helped increase realty frauds and other phony real estate financing by the Banks. The flourishing business of redevelopment in the present realty scenario invariably has brought in many unscrupulous and unsavory builders who, in connivance with certain corrupt bank executives and dishonest officers, secure bogus loans by allegedly executing spurious documents supported by fudged Balance Sheets, highly inflated/false financial data, fabricated information/statements and try to make some fast money through illegal routes.

Builders, Advocates, Chartered Accountants, Bank Executives, Branch Managers and officers nexus is believed to be the root cause of banks falling prey to realty frauds involving non-viable loans in billions of crores of rupees resulting in many fold increase in non-performing assets of Banks.

Quite a number of times, the approvals come from a single branch of a bank for sanction of loan to a blue-eyed builder of that bank, is the results of lack of thorough scrutiny and site inspection of the project by the bank officials. The recent bulletin published by the Banking Industry states that the builders confronting acute finance crunch, are under pressure and buying money at the rate of 24% or more to repay the bad loans which are estimated to the tune of Rs. 180 thousand crores.

It has also been noticed where a particular bank executive is transferred or posted from one branch to another, such immoral builders follow these bank executives to continue their illicit relations to avail more and more loans in crores of rupees which are sanctioned or got sanctioned from HO by such dishonest bank executives who act as carriers/agents to the top bosses at head office of that bank.

Complaints about mortgage frauds and predatory lending practices in banks have also grown many-fold as the economy has soured and increasing numbers of realtors face financial strains and even foreclosure. Reserve Bank is taking mortgage frauds increasingly seriously with assigning the task of investigations and prosecutions to Central Bureau of Investigation Dept. and Banking Section of Economic Offence Division against the disloyal bank executives and corrupt bank officials for rendering undue favors to the builders and acquiring disproportionate assets to their salaried income.

With regard to Law & Order, 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 fraud and cheat 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 builders, corrupt politicians and policemen go like hand in glove, often resulting in exploitation of the gullible and naïve buyers.

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 builders 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 is 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.

There are several instances of incomplete or misleading information prevailing among the Housing Societies and flat owners as well that are planning for redevelopment. Controversial court judgments add to the confusion and such Housing Societies get stuck at some point due to lack of information, knowledge, contact with right kind of counselors, analysts, advisors etc. Many societies do not have conveyance and hence, the entire process can break down in an instant.

Please educate yourself and caution your friendly neighbors to be vigilant from Irregularities and illegalities in Redevelopment by the Builders, Illegal gratifications showered by Builders on corrupt members of Managing Committees, Rampant Corruption in BMC, Flagrant violation of Rules and Regulations by the Builders, how to beware of Cheat and Fraud Builders and their criminal and felonious acts. 

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REDEVELOPMENT PROJECTS IN MUMBAI ARE PLAGUED WITH DELAY

Developers play fundamental role in redevelopment of housing societies. Currently, the redevelopment mania of residential properties is flourishing in full swing and one finds in Mumbai that compound wall of every third property of a housing society is covered with tins as number of small time Developers and Real Estate Companies has joined the battle in an effort to grab a share of this fast rewarding pastry. However, the saddest part of this transformation from ‘OLD’ to ‘NEW’ is a nightmare as hundreds of redevelopment projects in Mumbai are plagued with delay in its completion with many more are being added to this band-wagon every month.

The delay in completion of redevelopment projects by and large are chased by numerous complaints from the housing societies when redevelopment projects are inordinately delayed and flats are not delivered in time as documented in Development Agreement. What do the developers do when flats are not delivered in time? Some pay liquidated damage as part of a penalty clause in Development Agreement.

It is a non-ending tussle between the Developers and housing societies that due to delayed completion or where such projects are at a grinding halt, leaving behind the member of housing societies to suffer mentally, physically, financially and socially. There are unknown Developers of small means with insufficient funds or have pocketed redevelopment projects more than their financial resources or have diverted their funds to other projects that at a later date have stopped paying rentals to the members of housing societies due to inordinate delay.

When the stoppage of work is evident, the Developer’s team come up with numerous excuses each time the housing societies raise the issue. The common problems faced by the housing societies today are the constructions without proper approvals, difference in measurement in actual carpet area, built-up area and super built-up area and very often, the questionable and defective construction due to completing the project in substandard manner to save overhead expenses.

Unfortunately, most of the Development Agreements signed by the Developers with the housing societies tend to be one-sided i.e. in favour of the Developers with the lack of a proper penalty clause in case of delay in handing over the possessions.

We strongly recommend to add this term in Development Agreement that on account of any delay in completion of the project, it is the members who shall be the victims of distress and hence, if the Developers fail to complete the construction of the said intended new building/s within the stipulated period of completion of the project, save on and except on account of the delay due to force majeure, the Developers shall pay to the each of the members, a liquidated damages equivalent to the sum calculated at the rate of Rs._____/- (Rupees______________ only) per sq. ft. of the existing carpet area of their respective flats.

This amount as liquidated damages shall be paid by the Developers per month or any part thereof in addition to the regular Monthly Displacement Compensation per month that is due to the existing members till the full Occupancy Certificate is received simultaneously the Developers handing over the possession of new flats to the respective members.

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