How to evaluate developer for redevelopment in Mumbai?

One of the most expensive real estate places in the world is Mumbai. One of the reasons for this is the demand here and the evolving skylines of the city. There are many old buildings that are present in the heart of the city but these are standalones which may not fit in with what today’s people want- gated community, security, green cover, host of amenities etc. Land saturation is a big problem here and redevelopment is the best solution considering the presence of many old and dilapidated buildings present here. There are many builders who bid for redevelopment of existing projects but choosing the right builder is important so that your project is successful. In this guide, we throw light on how residential societies can choose the right developer for redevelopment of its project in Mumbai.

What is redevelopment of a property?

The process of demolishing an existing building that may be old, dilapidated or cess and constructing a new building in its place with extra FSI – new dimensions and space is known as redevelopment.

Why choosing right developer is important?

Redevelopment of a building is a huge project that requires careful thinking and approach by the housing society so that it doesn’t run into any trouble such as a stalled project.

The developer you choose should be known for quality construction and adhering to compliance and deadlines. In case of choosing the wrong developer, you may end up with substandard construction, delayed or no possession that will lead to mental stress and financial losses.

Things to remember while selecting a builder for redevelopment

When you are evaluating a builder for redevelopment, you should consider the following factors.

Brand reputation of developer

Choosing a developer with a high brand reputation in the real estate market helps as these brands are synonymous for quality construction, timely deadlines and compliance cooperation. A home buyer should have access to transparent home buying/ redevelopment options. Check for the quality of construction of the developer’s previous projects- the materials used, are there any seepage, leakage issues, the designs, the overall finish, the safety standards followed etc.

Transparency of developer

Choose a developer who is known for transparent dealings such as having clear contracts, a detailed plan of the project that has to be executed, is RERA registered and updates people of the status of the project regularly. Ensure that the developer has not defaulted on his responsibilities with respect to dealing with the home owners when it comes to redevelopment.

Financial stability of a developer

A redevelopment project is financially consuming for a developer until it is complete. A developer who is to take this project should have financial stability such that the project doesn’t suffer mid-way (which many redevelopment projects in Mumbai have faced). Financial stability builds consumer confidence and also ensures that the developer invests in quality construction and doesn’t compromise on the redeveloped structure.

Redevelopment experience

The developer you are choosing should have a good amount of experience when it comes to redevelopment as there are challenges such as getting majority from the people, existing legal issues with the project, dealing with existing tenants etc. getting approvals from the government organisations etc.  A developer who is well-versed with the regulations in Mumbai with respect to redevelopment will always have an upper hand in such projects.

Also, ensure that the developer has a team of excellent architects and engineers who ensure that the redevelopment process is smooth.

The developer should also know the approvals and permits that are required to execute a redevelopment project and should get them on time so that the project is delivered on time.

Which developer is not fit for redevelopment projects?

Mentioned below are points that you should check before awarding a redevelopment project to the developer. If these exist, you know that the developer isn’t the best choice for your redevelopment project.

Unrealistic deadlines

If the developer promises to finish the project within a stipulated time period by offering amenities that may be beyond budget, you should know that ethical practices of building may not be possible. Study the market and compare with the offerings of the developer and if these seem far-fetched, don’t select the developer.

Zero transparency

If the developer doesn’t share important details such as cost of the project, deadlines, design plans, engineers to be working, architect of the project, permissions that have to be taken, breakdown of all project related expenses such as cost of construction, cost of the materials, maintenance charges etc. do not choose the developer. Hiding information especially in a redevelopment project would mean that the developer may/may not make some money in the absence of knowledge of the home owner. There is also a possibility that the developer may cheat and stall the project leaving home owners in a problematic situation.

Ambiguous contract terms

If the contract that you as a housing society have to sign with the developer is ambiguously drafted by the developer, then it will pose a big problem for the housing society.  When a contract is drafted, one should clearly specify the project scope, costs, timelines to be followed, penalty clauses that can be levied etc.  In case these and many more issues are not mentioned on a microscopic level, then there is every chance that you will face issues with redevelopment going forward.

Bad track record

If the developer who is contesting to be chosen for redevelopment doesn’t have a good track record, then it is in the best interest that he is not chosen. You can find out the track record of a developer by his past projects, reviews of projects etc. Check if the developer is RERA registered and has proper license to work on redevelopment projects. If you work with unlicensed developers, it may lead to financial complications.

Putting pressure for choosing

If a developer puts in high-pressure sales tactics forcing you to make a decision then and there, don’t rush into the decision. so that you can make a decision, to rush you into making a decision. Reputable builders will give you the time needed to make an informed choice. The best redevelopment builders in Mumbai will never rush you into a decision.

How to evaluate developer proposals?

Once you have all proposals from developers, you would have to identify one from them who will be the right fit.

Get a detailed scope of the redevelopment project

that will include:

1)   Demolition plan: How the developer plans to demolish the existing building

2)   Plan of construction: What is the blueprint for the redevelopment project?

3)   Construction material: Get a detailed list of materials that will be used for construction.

4)   Time: Get a proper timeline on when the project will be completed.

Estimate the project cost

The redevelopment proposal should have proper cost estimate of:

1)   Construction Costs: Construction cost for each phase.

2)   Legal costs: Fees that will be needed for getting all the clearances.

3)   Emergency fund: A contingency fund that is kept for emergency expenses.

Negotiate terms

Don’t be afraid to negotiate terms that are most favourable for your society. This could include payment schedules, material specifications, or additional amenities offered by the builder.

Post-construction support

Check in detail the post-construction support offered by the developer after the redevelopment project. This should include:

•       Warranty and guarantee
•       Plan with respect to maintenance

What are the points for a successful redevelopment?

According to a government circular on redevelopment in Maharashtra, following points should be followed for a successful redevelopment.

• The offer received from the developer should include potential of the plot taken for redevelopment according to the architect’s report.
• Never choose the builder on the basis of the highest offer received. Choose a builder based on his track record and financial capacity.
• An architect who has been unanimously appointed by the society should evaluate the tender that the developers give and choose the best one from them.
• For a successful redevelopment, consents should be gained from maximum people of the society.
• A redevelopment committee should be formed from amongst the other members of the society to oversee the entire redevelopment process.
• Any agreement from the developer should be checked by a lawyer appointed by the society and it has to be ensured that the document has all points included.
• It is important to get a bank guarantee for the total cost of the redevelopment project from the developer. This should cover the full period of construction.
• A redevelopment agreement should include a penalty clause so that the developer completed the project on time.
• Regular monitoring of the project should be done so that construction is according to the plan and there is no deviation from it.

Housing.com POV

Choosing the right developer in Mumbai is an important decision. You should evaluate at each and every step so that you don’t get involved in any problematic situation. The completion period of redevelopment should not be more than two years and can exceed three years in special cases. Anything beyond this is a cause of concern.

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