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The CW Property TODAY Housing Societies Redevelopment Conference held recently in Mumbai lured the attention of the many concerned people from across the industry. A lot of interesting queries on redevelopment were raised by the participants during the event. Ramesh S Prabhu, Chairman, MSWA, provides the answers.
What is FSI and how much FSI is available in different areas of Mumbai?
FSI or Floor Space Index is the area of construction allowed on a particular land as per the Development Control Rules. In Mumbai, the permitted FSI varies depending upon the location of the land, type of existing residence and the project to be developed. For example, the FSI allowed in South Mumbai (Mumbai City) is 1.33 for all types of construction. However, if the same is cess building, the FSI can vary between 2.5 to four, and it can go beyond four depending on the present consumption of FSI. Cess building is one, where the tenanted buildings have been taken over by the Mumbai Repair and Reconstruction Board for maintenance by charging a nominal amount as repair cess. When the same is redeveloped, the builder will get incentive FSI of 50 or 60 per cent of the FSI consumed to re-house the existing tenants. In such cases, FSI goes beyond six or seven. There is no limit. For MHADA layout, the FSI is 2.5. In the case of projects approved by MMRDA in Mumbai Metropolitian Region (other than Mumbai) under Rental Housing scheme, the FSI allowed is four. In suburbs, the provision has been made for 1.33 FSI and TDR to the extent of 0.67. Thus total consumption of FSI/ TDR comes to two. Therefore, redevelopment is taking place in a big way.
What is the FSI for slum related projects?
Slum Rehabilitation Authority (SRA) has declared certain areas occupied by slums as the land on which SRA scheme can be developed in which the existing slum residents get 269 sq ft of carpet area free of charge, provided they were settled in the place before 1995. The same may be extended further. Necessary notification to this effect is awaited. The FSI allowed on such slum land is four. Besides the FSI of four, additional construction is allowed to the developer, where the additional allowable construction can be loaded as TDR on other land.
When does a builder get the Completion Certificate for the building?
When the building is ready to receive the Occupation Certificate (OC), the builder provides water connection, gets the plumber certificate and the architect’s certificate that the building is complete and all the conditions of Intimation of Disapproval (IOD) are fulfilled. The BMC will verify the certificate of completion given by architect and then provide a certificate stating that the architect’s report regarding the completion of building has been accepted. Completion is the last certificate issued by the BMC. Many a times, the builders provide the OC, and nobody bothers to receive the Completion Certificate.
The government recently announced that the FSI for cess building will be increased from 2.5 to three. How it is beneficial to the tenants and the developer, and in turn, affect the process of redevelopment?
According to Development Control Rules 33(7) of Mumbai, in the case of cess buildings, every tenant having less than 300 sq ft carpet area has to be given ownership flat measuring 300 sq ft, and for tenants with 300 to 753 sq ft area, the existing area and any area above 753 sq ft will not be granted to the tenants. Of course, the maximum cap was 2.5 FSI. Many of the old buildings were not viable under the above rules therefore the government decided to increase the same to three FSI. This will now encourage landowners and developers to come forward and redevelop the building. It is a win-win situation for all.
Our society falls under CRZ 2. Can we go for redevelopment by way of TDR? Does CRZ notification 2011 give any relief to us?
On January 6, 2011, Environment Ministry of Central Government issued relaxation for redevelopment of old and dilapidated buildings in coastal areas. Once necessary amendments are made in the Development Control Rules by the State Government, your society will be able to go for redevelopment by availing the benefit of increase in FSI or loading of TDR which is otherwise available in other parts of Mumbai. Therefore, you have to wait until the same is properly implemented in the Development Control Rules.
Legally, to what extent, do co-operativehousing societies have to follow the Government of Maharashtra’s GR/Notification dated January 3, 2009 on ‘Redevelopment of Co-operative Housing Societies Building/Property? Even after following the guidelines specified in GR, if a society is being taken for a ride/being cheated by the developer and/or architect who has prepared feasibility report, will the Dy Registrar/co-operative housing societies/ government take initiative to ensure that ultimately the concerned society gets justice?
Government Order dated January 3, 2009 on redevelopment is issued under the powers given to the Government u/s 79A of the Maharashtra Co-operative Societies Act, 1960 and therefore it is very much legal and binding on all the societies who are going for redevelopment. These procedures are prescribed to provide transparency, proper procedure and system to select the developer. This ensures a level of confidence to the members and a fair play in selection of the Project Management Consultants (PMC) and developers to be engaged in redevelopment.
Despite following the procedures and systems, if you have selected the wrong developer or PMC and they are not fulfilling their commitments, you have the right to take legal action through competent court against them. The committee members who otherwise will be held responsible to make good the loss u/s 73(1AB) of the MCS Act, 1960 as they have signed the Indemnity Bond, may not be held personally liable as they have followed the prescribed procedures and systems.
One has to follow not only just the procedures and system laid down as per the above Govt order but also verify the background of the developer, the financial capacity, experience and the delivery for other projects undertaken by the developer before granting them the development rights or short-listing their name. It is necessary to invest that time in the beginning than to repent later for not taking proper care before awarding the work.
The notification gives the minimum level of transparency required in the redevelopment process. It is is recommended that the society should improve upon the same and conduct more general meetings to discuss every aspect of the work. This notification is issued to have a standard process. Despite following all the process, if any member does not agree to the redevelopment, the above process will help the committee to defend their side and proceed with redevelopment.
In our tenanted building, nearly 85 per cent of the tenants have given the consent letter for redevelopment. The developer has agreed to give us an area of 400 sq ft breakup of which 300 sq ft carpet area and 100 sq ft including nitch and elevation. He has committed in the agreement that the inner wall-to-wall measurement of our house would be 400 sq ft. Is it possible, and should we believe what has been stated by the developer and go ahead with redevelopment?
Under DCR 33(7), tenants are eligible only for 300 sq ft area. In case your builder/landowner has agreed to give 400 sq ft carpet area, it would be from the sale portion or in the form of nitch and elevation which may be used and included in the flat after obtaining the Occupation Certificate from BMC. The government has defined the minimum area to be allotted, but there is no restriction on the developer to give you more area.
We have an open terrace of 300 sq ft area and our building is going in for redevelopment. What is the possible compensation we can expect?
At the time of redevelopment, you may insist the developer or the society to provide you a similar terrace area in the new building. You have to verify whether the terrace was taken into account in the approved plan and what was the FSI consumption to provide 300 sq ft area. In case the FSI used for the terrace as per the approved plan is only 100 sq ft, you may demand 100 sq ft area within your flat and also additional area over and above which is given to all the other members based on their FSI consumed area. In case, the same is free of FSI in the old approved plan, you will not have any right for additional area because of balcony.
After the registration of Redevelopment Agreement, is it necessary to enter into individual agreements with existing members for the new flat allotted to them by the builder in the new building after the redevelopment? If yes, when is the individual agreement to be executed, before vacating the old flat or at the time of receiving the possession of new flat? According to the developer, they will hand over the flats to the society and the society will issue allotment letters. Is an allotment letter issued by the society sufficient or do they need to be stamped and registered?
Development agreement is executed between the society and the builder to construct the new building on the land owned by the society by using available FSI, TDR, etc, and provide new flats with additional area to the existing members free of cost, as also pay rent, corpus, shifting charges, as a consideration for allowing the redevelopment on the plot of land owned by the society. This is an instrument/document to record the transaction between the society and the developer, through which the benefit of transfer of development rights has moved from the society to the builder. In turn, the builder pays the consideration in the form of cheques for rent, corpus and in kind as a free flat of additional area to the members. When the cheque is given, being a movable item, it does not require any additional document or registration.
However, when immovable property in terms of new houses in the new building is provided by the builder to the existing member as per the Development Agreement, a separate agreement known as ‘Permanent Alternative Agreement’ needs to be executed, stamp duty as per Bombay Stamp Act, 1958 has to be paid and also registered. This is inevitable since the new flat will have a new number, new area and different floor details, which is provided by the developer. Here the flat constructed by the developer as per the development agreement is being transferred and handed over to the existing member. In order to establish the title of the new flat, a separate agreement in respect of the new flat has to be provided by the builder. As per the Transfer of Property Act, 1882, any transaction of immovable property exceeding Rs 100 needs to be in writing and has to be registered as required under Registration Act, 1908. In case the agreement for Permanent Alternative Accommodation is not executed between the builder and the existing members, the members will not have title document, they will not be able to sell the flats in future nor can they mortgage and raise the loan. As per the amendment in Article 25(d) of the Schedule I to the Bombay Stamp Act 1958, even if the society gives an allotment letter in respect of the new flat in the new building, the same will be treated as an agreement and applicable stamp duty will have to be paid. Therefore, it is compulsory that you should get the agreement executed for the new flat with the builder.
This agreement should be executed immediately on receipt of IOD (Intimation of Disapproval) issued by the society along with the approved plan and before vacating the existing old flat. This gives an assurance to the flat purchaser that the new flat number, area etc is identified. In case the builder fails to fulfill his commitment, necessary legal actions by the respective flat purchaser against the builder can be initiated under Maharashtra Ownership Flats Act, 1963.
Is 100 per cent consent necessary for redevelopment or 75 per cent consent is applicable for housing society redevelopment?
The Government of Maharashtra has issued an Order u/s 79A of the Maharashtra Co-operative Societies Act, 1960 on January 3, 2009 regarding the redevelopment of the building by the Co-operative Housing Societies. As per this Order, the special general body meeting in which builder has to be appointed has to be attended by 75 per cent members and a minimum of 75 per cent of the members present should agree to the selection of a particular developer. Thus, for the redevelopment and appointment of the developer, it is possible with 56 per cent of the total members will be sufficient (75 per cent of 75 per cent). However, at the time of vacating the premises, all the members have to give consent and vacate the premises as per the resolution passed in the general body meeting. In case, a member does not give the consent or vacate the premises, the society or the developer may move before the competent court/authority and get the dissenting member vacated from his premises to implement the decision of the majority. There are many court rulings which holds that the minority cannot stall or create hurdle in the process of redevelopment. Therefore, it is advisable for the societies to compulsorily follow the guidelines, procedure and the system to facilitate the smooth redevelopment process.
Who appoints the Project Management Consultants (PMCs)? If the PMC is appointed by the society but their fees are paid by builder, whom the PMCs are loyal to? Does a developer appoint the architect in the PMC? The PMC fees are too high to be paid by the issuing members when the builder is making the profit!
PMCs are appointed by the society much before the selection of the builder and the developer. The terms and conditions of the appointment letter to the PMC should mention that the amount will be paid by the society. The society should collect the amount from the developer in its name and then pay it to the PMC. The society should not allow the PMC to receive the payment directly from the builder. If the PMC receives the payment directly from the builder, they may not be loyal to the society. The builder may ask PMC to relax certain conditions/norms before releasing the payment. Therefore, the PMC cost should be recovered by the society in advance from the developer and paid to the PMC in stages, in case the PMC does the work according to the satisfaction of the society and as per the terms and conditions agreed upon. In such cases, PMC will be under direct control of the society.
I recommend that the PMC should have an architect appointed by the society to submit the plan and his name will be recorded in the BMC record as the society architect. The builder should be given a free hand to conceive the idea, let his architect give the inputs, prepare the plan but the same will be approved and signed by the architect appointed by the society. This gives a good control on the modification of the plan. Once the architect is appointed by the society, before the plan is modified, he will have to take the approval from the society. This also acts as a good control on unscrupulous builders who influence the architects and construct illegal structures.
One has to understand the scope of the PMC. PMC service is not like a standard product like TV or electronic goods of certain brand which is available in the market with MRP. This is tailor made. The skill, experience and the quality of the services and the scope of the work offered as PMC varies. Therefore, it is advisable to see what is the requirement of the society. Some PMCs charge on a lump sum basis, some charge on project cost, while some others charge on a square foot basis. The fees, based on the services availed, range from four to eight per cent of the cost of construction of the entire project. Some charge on the basis of different services and in stages such as preparing feasibility report, obtaining the documents like Property Card, City Survey Plan, Development Plan Remark, Aviation NOC, Survey Report, Measurement, preparing the tender, tax planning, supervision, structural verification, approved plan verification, vetting of various documents, and preparing documents. Therefore, the society should prepare a list of services required from the PMC and call for the quotations from different well-known PMCs.
Can we go for redevelopment without taking conveyance and agreement?
As per the Government Notification dated January 3, 2009, appointment of the developer or builder can be done only after obtaining the conveyance of land and building in favour of the society. However, you can appoint a PMC to procure the conveyance of land and building, and thereafter the same PMC can proceed to prepare a feasibility report and invite the tenders. Appointing a developer before procuring the conveyance is not advisable. Due to scarcity of funds to pay professionals, old developers, land owners, stamp duty and registration, many societies take the decision to engage the services of a developer to obtain the conveyance by negotiating with the old developer, landowner or approach the competent court to obtain the conveyance in favour of the society. In such cases, the society should enter into an MoU with the developer with mutually agreed terms and conditions. However, redevelopment will proceed only after getting the conveyance in the name of the society.