5 checks for society's redevelopment by a builder

In Mumbai, where prime land is scarce, renovating existing society complexes is a popular strategy to generate additional residential or commercial space. A redevelopment project may be initiated due to either a lack of available land or because the current building is too old to withstand further construction. Homeowners can choose to engage a builder to manage the redevelopment process or undertake the project themselves.

According to an ET Wealth article, most redevelopment initiatives in Mumbai involve the builder handling the redevelopment expenses in exchange for a share of the extra space once the project is finished. Alternatively, the housing society can finance the redevelopment independently and keep the additional area for themselves upon completion.

Before commencing redevelopment with a builder, several key legal considerations should be addressed. The housing society must first determine that redevelopment is both legally and commercially sound, backed by an unbiased technical or structural assessment. The society should conduct an extensive due diligence review to ensure the property title is valid, understand the land ownership status (freehold, leasehold, BMC/MHADA-owned, or privately owned), and identify any potential litigation or encumbrances that could impact the redevelopment process.

Additionally, a technical report should outline the feasible Floor Space Index (FSI)/Transferable Development Rights (TDR), rehabilitation area, and the maximum area the society can secure for its members under the applicable development scheme. The society must also establish clear terms with the builder, including the redevelopment scheme, member area allocations, corpus, rent/transit accommodations, shifting charges, timelines, bank guarantees, delay compensation, approvals, specifications, sale components, and termination/default provisions.

If the society opts for self-redevelopment, a different set of legal factors must be carefully evaluated. This approach may be more appealing to smaller societies with financially robust members, provided the project remains technically and financially viable, and the society's title is unencumbered. An independent feasibility report should be conducted, and member consent should be documented to prevent future disputes.

The Maharashtra government offers institutional financing through the Mumbai District Central Co-operative Bank (MDCC Bank) for eligible self-redevelopment projects. The state also provides a streamlined process for obtaining various redevelopment permissions, which can significantly simplify and expedite the approval procedure.

Before embarking on self-redevelopment, the society must resolve several critical matters, including ensuring a clear title, obtaining a valid financial feasibility report, passing a General Body Resolution approving the self-redevelopment, maintaining transparency in documenting members' contributions and funding, appointing experienced professionals with defined responsibilities, and establishing written agreements for the transition period that include transit accommodation, shifting expenses, and member entitlements, along with a monitoring mechanism for regular audits and progress reports.