Flat owners in a fix in Mumbai’s co-op housing societies

In land-starved Mumbai, managing committees of cooperative housing societies tango with builders to beat the law and browbeat flat owners by opting to redevelop buildings

According to legal and realty experts, while the laws are generally good, society MCs take advantage of sundry shortcomings to connive with builders at the time of executing redevelopment contracts. As a result, tens of redevelopment cases end up in courts. While cases between housing societies and their members land in cooperative courts, a feud among a society, its members and a third party goes to the high court.

At the ward/department level, there are lakhs of cases of such disputes.

The government’s taciturn approach does not help either – legal experts say the departments concerned turn a blind eye to the “dictatorial manner” in which MCs function by flouting laws and disregarding rules.

 

Many experts are of the view that the Redevelopment Directives of January 2009 U/S 79 are broad guidelines, and are one-sided – they are meant only for members to follow and lack any provision for penalty or punishment for the errant builders. Despite many projects being delayed, no builder has so far been put behind bars, prompting Dilip Shah, senior counsel, redevelopment, to quip, “This is a major lacuna. And builders know that a common man cannot afford to get into a long-drawn legal battle.”

 

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Dilip Shah – Interview with Economic Times

Legal intricacies are the most common reasons for any redevelopment project’s trailing completion. Very few lawyers are aware about drafting an immaculate development agreement which provides basis for successful completion of a project. As Andheri, Chandivali, Sakinaka and nearby regions take up redevelopment projects of co-operative housing societies (CHS) aggressively, Dilip Shah, Andheri-based senior counselor tells ET about the guiding regulations and prevalent policy paralysis.

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Redevelopment – Are Govt. Guidelines really persuasive and convincing ?

ARE GOVT. GUIDELINES REALLY PERSUASIVE AND CONVINCING?

 With a view to ensure transparency in Societies seeking to undertake redevelopment projects, the Government of Maharashtra had issued a Circular bearing No. CHS 2007/CR554/14-C, Co-operation, Marketing and Textiles Department Date: 3rd January 2009 this contains a Directive under Section 79 (A) of Maharashtra Co-operative Societies Act 1960 for all the Co-operative Housing Societies in the State of Maharashtra regarding the Redevelopment of Buildings of Co-operative Housing Societies. These guidelines are applicable wherever the buildings of Co-operative Housing Societies in the State of Maharashtra are being redeveloped on a large scale. Continue reading Redevelopment – Are Govt. Guidelines really persuasive and convincing ?

Redevelopment of Housing Societies

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.

Vinod Sampat on Redevelopment Projects, Landmark Judgements and Common Mistakes

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.

 

Redevelopment of MHADA Colonies

Redevelopment of old dilapidated buildings belonging to various societies in various MHADA layouts

Ref: Government notification vide no. TPB/4308/74/CR-11/2008/110-11 MHADA decided to Dtd. 6/12/2008, amending the clause 33(5) of DCR.1991.

Currently majority of the real estate housing second projects are the projects involving what is popularly known as “redevelopment” projects which are carried out by demolishing old structures and reconstructing new ones by availing incentives FSI/TDR benefits as available under provisions of various DC regulations.

There are various options available for redevelopment of old and dilapidated buildings in Mumbai city and suburban areas under various provisions of DC regulations. The subject of redevelopment has assumed great significance because in Mumbai, majority of buildings owned by the co-operative housing societies are quite old and in a dilapidated condition and thus inhabitable. Amongst these buildings there are MHADA’s 56 colonies in Mumbai compromise 3701 buildings having 1,11,659 tenements. Out of these 3701 buildings some of buildings i.e. only 10% have already undertaken redevelopment through developers and majority of buildings are in the process of going in for redevelopment.

To augment the process of redevelopment in MHADA layouts, Govt. modified provisions of DC regulation no 33(5) in Dec’2009 thereby enhancing the available FSI to 2.5 for all MHADA layouts vide Govt. GR no. TPB/4308/74/CR-11/2008/UD-11 Dtd. 6/12/2008 with certain terms and conditions. Two options were made available to avail of the benefits of additional FSI.

1. One involved payment of premium to MHADA in lieu of the additional built-up area and

2. The second option involved sharing of balance built-up area after deducting the existing built-up area along with incentive from total built-up area in the ratio 2:1 in suburb and in city for Mumbai.

For the first one and a half year MHADA decided to allow the societies in the suburbs to choose the option and approved several schemes of redevelopment. However on or about 19th Sept. 2010 MHADA decided to opt for the second option of sharing of built up area in the ratio 2:1.

MHADA decided to go in for second option apparently to increase its housing stock. Unfortunately the option of sharing of built up area is not an option which is commercially viable for the society’s and developers considering high cost of construction, development, approvals, interest as also requirement of tenants in terms of higher carpet area for which the whole exercise of amending the clause 33 (5) have been done in the past.

We appreciate that Govt. /MHADA aims to overcome its shortage of housing stock and thus has changed its policy. Government has brought this policy to create affordable housing stock. But it has been observed and checked in MHADA office that no proposals are being put up by societies and developers since September 2010 proposals under this changed policy are not at all commercial viable due to the reasons stated above. It is evident that this policy is not workable and has resulted in huge losses of revenue to MHADA.

Moreover the aim with which the policy is being implemented is not serving the purpose as no society is willing to opt for the sharing formula being commercially unviable. Therefore, the redevelopment projects in all MHADA layouts have come to a grinding halt after this policy is introduced bythe government.

In view of the above, the Government/MHADA is facing following losses on account of not workable and unfunctionable policy introduced by them.
1. They put the lakhs of lives of tenants in danger condition as most of MHADA buildings are in dilapidated condition as declared by the Corporation,

2. They have also lost the opportunity to generate about 1 lakh housing stock as Developers /Builders were in a position to construct and sale houses in the market.

3. They have lost revenue of Rs. about 1000/- crores towards selling of additional FSI on premium basis to the developers as per D.C. Regulation 33(5)2-C-(ii). The detail calculation of this amount is as follows :-

 

4. There is no time bound’ programme for redevelopment of said buildings. So that the progress of redevelopment projects are very slow. As such it is affecting on revenue for the government as well as development works.

In spite of this failure on their part, there is no check on department of V.P. of MHADA, Housing Secretary and Housing Minister of Maharashtra Government. Considering the facts, it is required to change this stand of 2:1 and adopt premium basis policy as per provisions of DC regulation 33 (5)2 -c-(ii) for redevelopment of M HADA housing colonies and generate finance for creating more affordable housing stock as required.

The task of taking up & completing redevelopment projects for old and dilapidated buildings and giving houses to the poor and needy people of existing MHADA layouts and to generate revenue for the MHADA is not difficult provided the practicable and workable policies are adopted by MHADA/Govt.

It is required to clear the deadlock in redevelopment of MHADA buildings in the interest of redevelopment of said properties.

MSWA’s Housing Societies Review 28 April 2012