You must have heard so-and-so co-operative housing society going for a redevelopment. So, what exactly is the meaning of redevelopment? And, should your society go for a redevelopment? Well, all your queries have been answered in this article, so I would suggest you to read it till the end!
What Is Redevelopment In Real Estate?
Redevelopment basically means redeveloping or reconstructing existing real estate properties by demolishing it completely. It is done by appointing a reputed builder whose task is to construct new buildings and give the flats to each member of the society for free of cost. Moreover, the builder will also give additional benefits to the members in form of bigger flats, amenities, etc, which has been mutually decided prior to the commencement of redevelopment process.
What Is The Redevelopment Procedure?
The redevelopment procedure is a lengthy one and it all begins with the consent of society members to give their home for the reconstruction process. Only when a minimum of 70% of existing members of the society agrees for redevelopment, the procedure can begin. An appropriate builder is hired and all decisions are made between the two parties legally. The entire procedure of redevelopment has to be presented to the BMC for its approval.
Each member of the society is been provided accommodation in some other area. The demolition process begins and then starts the construction. Finally, the newly constructed houses are handed over to the members of the society. Additional flats are sold off for a profit to home buyers and investors.
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Why Is The Need For Redevelopment?
There are several old and dilapidated buildings that cannot be rehabilitated. Some of the reasons for a structure getting old are atmospheric wear and tear, age of the building, etc. These structures are in such a bad state that even if you perform structural repairs, it will not enhance its service life. Moreover, it won’t be economical to do repairs in such dilapidated buildings.
Redevelopment is an inexpensive and long term solution for making obsolete structures turn into new. Some of the structures are in such a bad condition that they may collapse anytime. So, redevelopment becomes necessary for saving lives of those staying in such buildings.
What Are The Main Advantages Of Redevelopment To Members Of The Society?
The members of the society are provided rent compensation by the builder for the entire time period till the newly constructed building is ready for possession. Once the redevelopment process is done, the members will get extra carpet area, enhanced value of flats, better standard of living, and some more benefits that have been discussed mutually with the builder. Most of the builders provide amenities like open parking space, recreational facilities, beautiful entrance lobby, lifts, gym, and much more.
The rate of newly constructed flats is much higher in comparison to the older flats. Moreover, the carpet area is higher and there are innumerable amenities provided, which increases the total flat value. In most of the cases, each member is provided with an additional flat as well as monetary compensation.
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What Are The Main Advantages Of Redevelopment To Builders?
The builder agrees to redevelop all those old buildings that have unused FSI (Floor Space Index) so that it can make earnings out of it. Moreover, the builder also looks out for real estate properties that have unused development rights. This can make them earn lot of profits as they can build new structures with several floors and sell the additional houses.
When a builder opts to purchase land and constructs a building, they are supposed to pay a huge amount of stamp duty for transfer of land. A huge chunk of this amount is saved for them if they go for redevelopment process as they need to pay lower stamp duty charges. Moreover, the co-operative housing societies are always with clear title, so lesser stress for the builder.
Directive under Section 79(A) of Maharashtra Co-operative Societies Act 1960 to All Co-operative Housing Societies in the State of Maharashtra:
There were a number of complaints received from the members against the redevelopment process of Co-operative societies. Some of these complaints were lack of transparency, violating provisions of Co-operative Act, disputes with developers, etc. To solve these problems, a Study Group had been appointed under the Chairmanship of Joint Registrar, Co-operative Societies (CIDCO). In accordance to the opinions provided by the Study Group, the Government issued a directive under Section 79(A) of Maharashtra Co-operative Societies Act, 1960.
Some of the vital agreements that had to be entered with the developer are:
- The redevelopment project of the Society should be completed within two years. In exceptional cases, it can be completed within three years.
- An amount equal to 20% of the project cost has to be given as Bank Guarantee by developer.
- The developer has to provide alternative accommodation to each member for the entire period of redevelopment. Mostly, the alternative accommodation should be in the same area. Or, the developer has to pay monthly rent as well as deposit for the rented apartment.
- Carpet area that will be allotted should be mentioned in the agreement. Moreover, the agreement should be registered under the Registration Act, 1908.
- Only when the legal approvals are received for redevelopment, the members need to vacate it.
- As per provisions of Section 91 of the Act, provision should be made in the agreement to solve a dispute, when it arises.
The entire deed can be read here: Directive for Redevelopment of Building of Co-operative Housing Society.
In A Nutshell:
Redevelopment in real estate has been a topic of great interest as it provides benefits to the members of the society as well as the builders. As there is a sharp rise in the real estate prices and lack of land in prime locations, most of the co-operative housing societies prefer giving their old and dilapidated buildings for redevelopment as they get higher value for their properties.
There is a lot of scope of redevelopment in a city like Mumbai as the demand for flats is growing considerably. Moreover, it is dangerous to live in decrepit buildings with terrible living conditions. If you too are staying in such a bad state then your society should certainly go for a redevelopment!
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