ALLOTMENT OF FLATS IN REDEVELOPED BUILDING – by CA PRAKASH VALECHA. M 9821045102
The allotment of Flats is a tricky issue. On the face of it appears a small issue but here many disputes and problems arise. Old Buildings that need to be demolished in redevelopment were constructed sometimes 30 years ago and having FSI of 1.
There are narrow passages with 4 to 6 flats at times on the same floor. As the newly constructed building uses TDR and hence the FSI is 2 and now from 6th January add Fungible FSI of 35 % on the Total Plot area we have total FSI of 2.70. Therefore now the new Building is designed taller and having a sophisticated design which is relevant today. At times there are two storey parking floors.
Many members staying on lower floor want a upper floor while some members are old and do not wish to stay at higher floors as they fear that in case of lift problem or in the eventuality of a light cut they don’t want a particular floor. Some are having a Road facing flat but don’t want the same as it creates noise while some members want a road facing flat. Some Flats are in front side while others art back side. In the new building they wish the same status.
The problem arises is that new building has limited choice which all the old building members want. Therefore for a Fair process of allotment we need to have a policy that is fair and equitable.
Any action is malafide and void ab- initio, if it’s prejudicial, carried out with a narrow objective of favouring a select few while ignoring the majority. Therefore it is essential that certain guidelines and policy decisions are followed that are fair just and equitable..
The Government Guidelines dated 3rd January 2009 throw light on the way to move forward on the allotment of Flats. In point 11 of the guidelines it is stated as follows:
Flats in the redeveloped building should as far as possible be allotted as per present conditions floor-wise and if it becomes necessary to allot flats by drawing lots, on
completion of construction, Developer should make arrangement drawing lots, and at that time flats should be allotted in the presence of Registrar’s representative and this process be recorded by video shooting.
What is suggested in simple terms is:
1. Allot Flats as per present conditions floor-wise.
2. IF that is not possible allot flats by drawing lots.
3. It is the Developers responsibility to make the arrangements.
4. All the interested Members must be present when the Draw of Lots is conducted
5. Registrars representative to be present.
6. Process,be recorded by video shooting
Based on this guideline the Managing Committee and the Builder should follow the above Process as sincerely and diligently so as to make a Fair and just allocation of the New Flats.
Courtesy : MSWA’s Housing Societies Review 16 November 2012
An increase in Floor Space Index (FSI) and the ratio of permissible built up are to plot area and the ever increasing property prices are making developers approach residents asking for permission to demolish their old structure and put up a new building with more apartments for a big house and more money
There are some facts you definitely need to check before you put your society for Redevelopment with a developer
Documents Required by the society :
- Conveyance deed
- Society Registration Certificate
- General Body Resolution to go for redevelopment
- List of member with their respective carpet areas
- C.T.S. plan & property card for the plot.
- D.P. remarks, If the property is under TPS scheme then T.P. remarks
- Copy of municipal approval plans
Click Here for more Redevelopment Rules, Redevelopment Steps, Procedures & Guidelines
Maharashtra Regional & Town Planning Act, 1966.
Sanction to modification to the Development Control Regulation for Greater Mumbai 1991 Under Section 37(lAA)(C) of the said Act.
Click Here for the full text of the notification
The Government of Maharashtra is now coming up with a new master plan for revamp of old, dilapidated cessed buildings in the Housing Societies in the Island City. The State Government will form a cluster of such buildings and prepare the master plan. Though the directives issued by the Government for redevelopment of buildings in Housing Societies are in place (“Directives”), there have been complications and controversies and consequently, the Government is preparing a master plan to be followed by the Developers. As the master plan is yet to come in force, its success is yet to be tested. The process of redevelopment is to begin only once the existing members of the Society resolve in favour of the redevelopment of the housing society.
Click Here for the full story and a detailed analysis
The court gave no relief to persons who were in minority and were opposed to the redevelopment. The court dismissed an appeal filed by Mahesh Nandani and others against Sahara CHS to challenge an order of a single judge of the Bombay HC passed last August. The single judge had dismissed a writ filed by Nandani which challenged the order of the Maharashtra Co-operative Appellate Court in the proceedings arising from a dispute under Section 91 of the Maharashtra Co-operative Societies Act, 1960.
The dispute was raised by the housing society which had sought directions to have the residents opposed to the redevelopment project comply with the society’s resolution of September 2006. The society had entered into an agreement with a builder called Raja Builders to redevelop the building which they said was dilapidated.
Click Here for the story
Directive under Section 79(A) of Maharashtra Co-operative Societies Act 1960 to all the Co-operative Housing Societies in the State of Maharashtra.
Regarding Redevelopment of Buildings of Co-operative Housing Societies
The following directive be termed as “Directive for Redevelopment of Building of Co-operative Housing Society”
Salient Features :
1. Requisition for convening Special General Body Meeting for Redevelopment of Society’s Building
2. Convening Special General Body Meeting
Click Here for a detailed analysis and current updates
Rent received from developer is taxable - ANISH B MEHTA Member, ICAI, He can be reached at anish.mehta at haribhaktigroup,com
Hindustan Times Mumbai – September 27, 2007
Swadesh Sachdev: My co-operative housing society plans to go for redevelopment as the building is old and needs to be repaired often. The developer is offering an extra bedroom, about 200 square feet, a corpus fund to the residents and two years rent as they will be staying on rent till the building is ready for occupation. The query is whether we need to pay income tax on,the corpus money we receive and the rent given for staying till the building is redeveloped? Will we be required to pay income tax/capital gain tax if it arises on account of the building providing addition room and if yes, how it is to be worked out? How can the taxes be avoided? Are there any schemes or provisions on this in the income-Tax Act?
Our reply is based on the understanding of the limited available facts. Generally, the corpus fund is paid for a specific purpose. The corpus fund is being paid by the developer for the inconvenience caused to you. Hence, on the basis of the decision of the Bombay Tribunal in the case of Lohtse Co-operative Housing Society Ltd vs Seventh Income-tax Officer reported at 51-ITD-608, you can contend that the said corpus fund received by you is in the nature of capital receipt. The two years rent receivable-from the developer will be taxable under the head “income from other sources”. Against the said rent receipt, you can claim deduction for actual rent paid under the provisions of Section 57(iii) of the Income-Tax Act, as an expenditure incurred wholly and exclusively for earning the said income. Under the redevelopment scheme, you would be handing over the possession of the existing flat to the developer for the limited purpose of redevelopment. Thus, there is no transfer of any asset. The date on which the new flat is registered in your name, you would be the owner of the extra 200 square feet area allotted to you, for which the cost would be nil. Capital gain will arise on the sale of new flat. The difference between the amount of sale consideration received by you and the indexed cost of acquisition of the original flat as reduced by expenditure, if any, incurred for transfer of new flat will be your capital gain. If you invest the capital gain on sale of the new flat by purchasing another residential house, then the entire capital gain will not be charged to income tax.
What will be the Income Tax treatment of the rent, corpus fund (hardship compensation) and shifting charges paid to a society member by the builder during redevelopment? -K G Kutty – DNA – 21 May 2011
As per the many latest judgments given by the Income Tax Tribunal, Mumbai, the corpus fund/ Hardship compensation is not taxable as there is no cost of acquisition. In case of rent received during the temporary accommodation, if the entire rent compensation received is for alternative accommodation, the same is not taxable. In case, no rent is paid or if any amount is saved from the rental part, the same is taxable under income from other sources. Shifting charges will not be taxable as the same will be naturally spent by the member to shift the belongings to the new place.
- Ramesh S Prabhu - Chairman, Maharashtra Societies Welfare Association.
Redevelopment of properties of existing Co-operative Housing Societies has been a subject of great interest in recent years, both to the Societies and to the Builders. With the real estate prices touching a new high, residents in old buildings are now discovering that they have an opportunity to unlock immense value from their property by offering it to a Builder/Developer for redevelopment.
Redevelopment has become quite popular in Co-operative Housing Societies since it is a most practical, economical and long term solution in a scenario where old structures are proving uneconomical or obsolete; whereas for the Builder it is a cost effective way to construct residential/commercial premises by utilizing the unused potential i.e. the Floor Space Index — Transferable Development Rights with gradual capital investment, in times of heavy land prices and in a situation of unavailability of land in good locations.
However, there are many factors/questions that arise during the ongoing process of redevelopment and they are to be taken care of diligently while opting for Redevelopment. These factors by and large are the prompt implementation of Govt. Guidelines, Delay in possession of flats in redevelopment of Housing Society, Delivery of flats in time, Bumps, Bash and Bouncers from Builders, Busting of redevelopment projects of Housing Societies, Corrupt Members of Managing Committee, Faults, Facts and Fundamentals about redevelopment, Drafting of Development Agreement, Responsibility of Members of the Managing Committee in redevelopment, Letter of Consent to be furnished by a Member of the Housing Society, Corruption in redevelopment , Redevelopment and sand shortage, Recovery of dues from defaulting members, Selection of a good Builder, Unauthorized constructions by Builders and many more.
Click Here for all the resources you may need for redevelopment including Judgements, Frauds and Scams, Government Policies / Notifications and much more. One of the best resources available online, with latest updates, built by Dilip Shah, Senior Counsel and Analyst for Redevelopment of Housing Societies.
What is Fungible FSI and how is it calculated ? Click Here for a quick overview and analysis including benefits for the existing members of the Society, by Dilip Shah who is a Senior Counsel and Analyst for Redevelopment of Housing Societies.
Advocate and property expert Mr Vinod C Sampat while speaking at a seminar organised by Moneylife Foundation in Mumbai on 12 November 2011.
Tips on selecting builder for redevelopment projects. He insisted that the process should be transparent, and advised that housing society members should have legal and technical consultants to interact with the builder. Also, it is important to check the builder’s credentials and financial conditions, he said.
Landmark judgments related to cooperative societies and explained new rules which have been framed and laws which have been struck down. He also talked about several laws by virtue of which officers concerned can be made accountable for delays and even be penalized.
He said not many people are familiar with the workings of the cooperative housing societies, and are left confused while dealing with a variety of civic and legal compliances. He pointed out that most cooperative housing society members do not check the several financial aspects related to cooperative housing societies; and end up paying extra charges for several things, and at times, defaulting on necessary payments.