Why Redevelopment Projects of housing societies are being delayed

It is a long ending tussle between the Developers and Societies that never seem to end delivering Redevelopment Projects on time as documented in the Redevelopment Agreement. There are umpteen cases where Developers abandoned or delayed the redevelopment projects due to paucity of inflow or diversion of funds from the assigned projects in order to acquire more and more ventures beyond their financial means or are simply not capable to execute the projects due to lack of competency leaving the buyers suffer mentally and financially.

It has also been noticed that certain Developers, due to sudden liquidity crunch or improper planning, drop the project half way or the project is badly staggered and the paucity is worst affected to the Members of the Society for long, may be years. Such Developers stop the further payment of rent for the alternate accommodation hired by the Members or do not offer any monitory compensation for the delayed period.

Once the new buyers in such projects under redevelopment, sign on the dotted line and pay the cost, he is at the Developer’s mercy. It is not expected of a common man to analyze the hidden risks in a redevelopment scenario. His knowledge is zero to when it comes know the Indian judiciary system and its intricacies. The Developers on the other hands have fleet of highly paid advocates and experts to advise and protect them.

The Developer selected to assign the project, should be of unshakable reputation for quality, efficiency, trust, meticulous planning, top quality amenities, superlative designs, timely completion, guaranteed possessions and handing over of property of the Society for rehabilitation of its Members.

Never ever select a Developer simply on the basis of his financial offers and exorbitant increase in carpet area and promises to provide amazing and astonishing amenities etc. His selection should be exclusively based on his merit, reputation, technical capability, experience, financial status, quality of construction and successful completion of his earlier projects etc.

Numerous cases are on record of Press where the dreams of innocent middle class families are crashed when the redevelopment assignments undertaken by them are neither accomplished in given time by Developers of III tier chosen by Housing Societies nor are the promised facilities are made available or never provided.

There are types of greedy Developers of III tire who have delayed the redevelopment projects due to paucity of inflow or diversion of funds from the assigned projects in order to acquire more and more projects beyond their financial means or are simply not capable to execute the projects due to lack of competency.

The another reason for the stagnation stage or a halt in Redevelopment project is that during the process of Redevelopment, the unhealthy attempts with ulterior motives are made by the Developers to twist and grossly violate the terms of Development Agreements as agreed upon, blatant violation of 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 impelling the Society for litigation at a later date.

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

The Bombay High Court recently declined to grant relief to Mana Developers who failed to take any steps for more than two years to get the construction plans for redevelopment of Firdous Park Cooperative Housing Society approved and obtain Intimation of Disapproval from MCGM.

Justice SJ Kathawalla noted that the Development Agreement had been executed by the Housing Society in favour of the Developer in March 2008, but the Developer did not take any further step despite the Society extending every co-operation to the Developer.

Mana Developers had approached the High Court in April 2011 seeking Specific Performance of the Development Agreement. They also filed a plea for interim orders restraining the Housing Society from appointing some other Developer. Mana Developers had contended that the delay was a result of the Housing Society failing to obtain Individual Agreements from each of its Members.

The judge, however, found that during the initial stage, the Developer himself had informed the Society that he had entered Individual Agreements with its Members and each of the Members had consented for the redevelopment work. Justice Kathawalla, therefore, concluded that the Housing Society was not under any obligation to get Individual Agreements executed by each of its Members.

The judge further noted that at a particular stage prior to filing of the suit, the Developer was not ready and willing to perform its obligations as agreed under the Development Agreement, and therefore, the Developer was not entitled to any relief. The Housing Society, which has 138 Members and a plot admeasuring 5,335 square meters, had decided to go for redevelopment as its building was dilapidated, and the BMC had issued notices for its demolition.

Continuing its crackdown on sloppy work, the BMC has now outlined a policy limiting the maximum time of completion of any redevelopment project within four years and slapping penalties on Developers unable to meet deadlines. 

The Estate Department in their circular have listed out seven steps to be taken against Developers if they slip up, including cancellation of proposals for delays in the planning stage and fines if construction is not completed on time. However, it is a question giving rise to billions of doubts whether the policy shall be implemented with its stringent steps or shall remain on paper gathering the dust in course of time.

Among the steps listed, the MCGM has revised its charges for a Developer from Rs 1,000 to Rs 5 lakh every year for revalidation of the Letter of Intent (LOI) if he fails to get a Commencement Certificate (CC) within a year. For further delay, a show cause notice will be issued for cancellation of the project. It will be implemented with retrospective effect from 2010. 

The MCGM has taken a lenient view on delays resulting from litigation, but ordered a stiff 18% interest levy on the remaining capitalized value (the amount the Developer has to pay for the sale component in a redevelopment project) and an additional Rs 1.00 lakh per month for any extension a Developer might seek in a smoothly progressing project. 

The new policy also links a project's deadline to the plot area. Redevelopment on a plot up to 4,000 Square Meters has to be completed within three years and those that must in four years. 

It is realized that the delay in completion of projects embarrasses the BMC as rehabilitation of tenants cannot be done on time. Moreover, as time passes, the value of the flats in the sale component of the project increases for the Developer, but leads to delay in paying up the capitalized value that he owes to the MCGM. This policy will ensure that the capitalized value is paid on time and as per schedule. 

It is for the benefit of the Members that they educate themselves and remain vigilant from irregularities and illegalities in execution of redevelopment projects by the Developers, illegal gratifications showered by them on corrupt Members of Managing Committees, be aware of rampant corruption in MCGM, flagrant violation of Rules and Regulations and how to beware of Cheat and Fraud Developers and their criminal and felonious acts.

Dilip Shah

Senior Counselor and Analyst for Redevelopment of Housing Societies and Society Laws

www.redevelopmentofhousingsocieties.com

www.redevelopmentofhousingsociety.com