Self-Redevelopment of Housing Society Buildings

SELF DEVELOPMENT OF SOCIETY BUILDINGS:

01. Majority of the residential buildings, in Mumbai, are literally above 50 years old.  Some are literally dilapidated and some are in dire need for large scale repairs.  Wherein in both such eventualities, very large sums of money is needed to redevelop such buildings.  Further in such Society's Balance Sheet, there are hardly any funds accumulated over these 50 odd years, for Major repairs, thus forcing the society residents to continue living in such dilapidated and structurally weak buildings.

a) Due to monetary reasons, the residents have to redevelop their buildings either through a Builder /Developer .OR. consider the self-redevelopment of their buildings themselves, with the help of experienced and relevant Professional Consultants of the field, which includes Civil Consultants, Financial Consultants and Institutions, Legal Consultants and so on ....

b) With appropriate guidance, patience, trust and mutual understanding, the Society can consider for "Self Re-Development" of their buildings, which in turn translates into substantial savings and earnings for the Society Members, in terms of permanent "Corpus Fund" in the Balance Sheet, of such Societies, which again in turn translate in lowering down maintenance bills of the members.   

c) Self-Redevelopment of Society buildings can be conducted easily & successfully, with proper planning and strategy, after keeping confidence and by taking help of experienced and relevant Professional Consultants of the field.   

d)  Redevelopment has become further necessary and inevitable, due to BMC directions on Structural  Safety and repairs of 30+ year old buildings and discretionary authority available with BMC, to vacate dilapidated buildings.

RE-DEVELOPMENT THRU BUILDERS /DEVELOPERS:

02. Typically most societies prefer to Redevelop their buildings thru Builders, after weak negotiations and still very weak agreements with the Builders.

a) These leads to mismanagement

b) Allegations of Corrupt practices and underhand dealings

c) Builders take liberty and change Building development Plans, for their vested interests

d) Original members remain at the mercy of Builders for completing their Building.

e) Builders tend to usurp and sell common spaces

BENEFITS OF "SELF-REDEVELOPMENT" PROCEES:

03. The Housing Society’s may consider various benefits that can be derived from "Self Redevelopment" procedures.

a) Building Plans will not be changed, without ALL "individual" members consent

b) Corpus Fund can be accumulated at more than 2 times vis-a-vis builders offers

c) Building will be designed & developed by the members themselves and in their presence, without any hindrances

d) Members may use their discretion to develop their residential buildings into residential cum commercial buildings, which has its own advantages, in terms of money and facilities.

e) With the advent of latest Directions by the Coop. Dept., the members may use their discretion to install Mobile Towers, Advertisement Hoardings, Solar Systems, Wind-Mills, Club House, STP, Swimming Pools and other facilities and amenities, which translates into more in-house amenities.

f) BMC “Occupancy Certificate” will not be a problem, since the members will develop the buildings, ONLY as per approved plans.

g) Building will be developed on time schedule, unlike the builders who usually delays the project for his own vested interests.

h) Free Sale Flats, can be purchased by the original members, on costing basis

i) Free Sale Flats, can be sold and restricted to certain categories

j) Issue of Free Parking spaces can be solved

k) Common Spaces cannot be sold and under-hand dealings can be avoided.

l) Merging (amalgamation) of Two flats is possible, at Building Planning stage.

m) Buildings can be completed before schedule, thus saving Rent for members

SOME DISADVANTAGES OF "SELF-REDEVELOPMENT" PROCEES:

04. Like all other difficulties in life, Self-Redevelopment also has some lacunas:

a) Needs Time, Inclination, Money & Energy (T.I.M.E.)

b) Needs “24 x 7 x 365” Professional Back-up. However this is not a major issue due to the availability of Professional Consultants, atleast in Mumbai.

c) Issue of Finance, for Construction Cost for Self-Redevelopment.

d) Since Self-Redevelopment is not practiced widely, Society members are highly apprehensive in terms of loss of self-confidence, trust and mutual understanding.

CORPUS FUND:

05.  Typically in Redevelopment thru Builders, the Society members are paid some money in terms of "displacement fund alias Corpus Fund"

a) Sometimes this Corpus Fund is given to the Society, which the Society may secure it in its Balance Sheet, for appropriate investment, for purposes of earning Interest.

b) Sometimes this Corpus Fund is given to individual members.

c) In terms of SELF-Redevelopment, the criteria of Corpus Fund can be generated from Sale of the Free-Saleable Flats,  which would be constructed over and above the number of flats for its original members /residents.

d)  With prior & appropriate mutual understanding and trust, the original members may mutually decide to appropriate such Corpus Fund, generated thru Self-Redevelopment process, for mutual benefit of the Society.

RENT CHARGES:

06. Typically in Redevelopment process thru Builders, the Society members are paid "Rent" money for alternate accommodation till the Redeveloped flats are duly taken over by the original members.

a) In terms of SELF-Redevelopment, the criteria of "Rent" money for alternate accommodation till the Redeveloped flats are duly taken over, is a major issue, which needs to be decided with appropriate mutual understanding and trust.

b) However this Rent Charges, can be adjusted subsequently from the accumulated Corpus Funds, generated from Free-Sale Flats

EXTRA AREA:

07.  Members may mutually decide to avail the percentage of extra area and the area of Free-Sale Flats,  since this can be turned into Society's advantage, in terms of Corpus Funds generated from Free-Sale Flats.

SHIFTING /LOGISTIC CHARGES:

08. Typically in Redevelopment thru Builders, the Society members are paid "Shifting /Transportation" money to the alternate accommodation till the Redeveloped flats are duly taken over by the original members.

a)  In terms of SELF-Redevelopment, the criteria of "Shifting /Transportation" money for alternate accommodation till the Redeveloped flats are duly taken over, is a major issue, which needs to be decided with appropriate mutual understanding and trust.

b) However this Shifting /Transportation  Charges, can be adjusted subsequently from the accumulated Corpus Funds, from Free-Sale Flats

STAMP DUTY & REGISTRATION FEES:

09.  Typically in Redevelopment process thru Builders, the builders pay the Stamp Duty and Registration Fees, for the new Flat Agreement of the original members, subject to various parameters.

a)  In terms of SELF-Redevelopment, the criteria of "Stamp Duty and Registration Fees" money for the new Flat Agreement of the original members, is a major issue, which needs to be decided with appropriate mutual understanding and trust.

b)  However this Stamp Duty and Registration Fees, can be adjusted subsequently from the accumulated Corpus Funds, from Free-Sale Flats.

OCCUPANCY CERTIFICATE (OC):

10.  Typically in Redevelopment thru Builders, the builder takes adequate liberties to conduct several lapses (illegalities), consequent to which the BMC does not grant "Occupation Certificate (OC) ", which in turn means double the rate of water-charges for all residents of the building.

a) These lapses (illegalities), can be easily avoided and stopped, when the building is developed on "Self Re-Development" basis.

b) An "Occupation Certificate (OC) " also means higher Sale-Value of the Flats and easy Bank-Loans for buildings granted with Occupancy Certificate.

COSTING OF REDEVELOPING BUILDINGS:

11.  The typical cost of construction is approximately between 1200/- to 2200/- per CARPET square feet (depending on location and luxuries being provided).  This “includes” charges for Development permission from BMC, all Professional Consultants fees and other incidentals.

a) The "Free-Saleable Area" is sold by the builder,  approx. between 10,000/- to 25,000 per CARPET square feet (depending on location and luxuries being provided). 

b) The tentative earning the Builder earns out of each Carpet square feet is approximately 7000/- to 20,000/- per CARPET square feet (depending on location and luxuries being provided). 

c) This also means that to construct ONE Flat of approximately 1000 square feet (carpet area), the all-inclusive construction cost is approximately Twenty (20 Lakh rupees) in Mumbai Suburban area, which includes all costing’s. This is possible if the Conveyance of the plot of Land, is in the name of the Society.

d) The above translates into Construction Cost of approx. Twenty (20 Crore rupees) in Mumbai Suburban area, for constructing 100 flats of approx. 1000 square feet each (carpet area).

e) Presuming that out of 100 Flats, 50 flats are to be given to original members, there remains 50 Flats for "Free Sale" (Free-Saleable Area), which can easily be sold for Two Crore each, thus translating to 100 Crores in terms of Sale-Price.

f) Presuming further that cost of construction of 20 Crores is reduced from the 100 Crores received from "Free Sale" by the Society, there still remains approx. 80 Crores of Gross Profit.

g) The above in turn translates into huge Corpus Fund to the Society, when in terms of Self-Redevelopment of their own buildings.

h) The above also means that if the Redevelopment is conducted by Builders, the Society would not earn /save the huge potential of Corpus Fund and translating the interest received on such Corpus Fund, into reducing their own Society maintenance charges.

GOVERNMENT POLICY:

12.   As a Public spirited legislature, AND in the larger interest of the residents of old /dilapidated buildings, the Maharashtra State Govt., would do well to consider to grant "Conveyance" of the Society plot in the name of the Society, by legal default, via a special ordinance, atleast to those Residential Societies which are over Forty years old.

This may be specially considered in view of the vast amount of Stamp Duty and Registration fees that will be accumulated by the Govt., due to registration of the new redeveloped flats.

CONCLUSION:

IF THERE IS A WILL, THERE IS A SURE WAY: MEANS YOUR WAY.

AUTHOR:  Hemant Agarwal

Email:  ha21@rediffmail.com