Q: What is self-redevelopment? How has self-redevelopment been a crucial aspect for societies, especially in aggressive real estate markets such as Mumbai?
A: Under self-redevelopment, the entire redevelopment process is planned, executed and managed by the society members, instead of handing over the process to a builder. Typically, most societies preferred to redevelop their buildings through real estate builders, as they are not aware of all the requirements that come along with this process. Redevelopment through real estate builders is a tug of war where both the parties strive to get maximum benefits for themselves. This tussle, many a times, leads to situations and consequences which are not in favour of the society members.
As per media reports, there are more than 5,800 projects in Mumbai, which are stuck in redevelopment today, affecting more than 1,25,000 families. The reasons for all these projects getting stuck, range from lack of funds to delays in permissions to miscalculations in carpet area allotment. While the reasons are aplenty, most of the times, they are directly related to the builder’s handling of the redevelopment project. For society members, taking up self-redevelopment of their housing society keeps the members safe from any problems arising from the builder and the society is assured of more benefits and profit from the project.
Q: How is self-redevelopment different from traditional redevelopment? What benefits does self-redevelopment offer to a society that opts for it?
A: In the case of self-redevelopment, the overall control of the project is always in the hands of the society. There are multiple advantages for a society opting for self-redevelopment over builder-led redevelopment. Listed below are crucial benefits:
1. Extra area
Society members get higher carpet area as compared to what is offered by builders. Society members can further buy extra area on cost basis for themselves.
The entire surplus generated by the project gets distributed amongst existing society members, which otherwise would go to the builder.
In the case of self-redevelopment, the entire control remains in the hands of the society. This includes appointment of agencies/resources, cash flow decisions, sales decisions, design decisions and all critical decisions throughout the project. With complete control, the project moves according to the requirements of the society and they have a complete view of the possibilities of the end results, based on their decisions.
4. Risk mitigation
The society has complete control on every decision and this authoritative position helps them in minimising risks. The society can take immediate decisions on cost-benefit ratio and get the operation moving ahead faster. Also, the society can take all the permissions before vacating, thus, securing the project from getting impacted due to any change in norms later.
5. Society as promoter
The NOCs, designs and documents are directly in the name of the society. These clear assets, which even after the members start residing, are otherwise not available today with societies. In self-redevelopment, this becomes a big advantage as all these are in the name of the society.
Q: What are the initiatives that the government of Maharashtra has come up with, to encourage self-redevelopment?
A: The government has already launched the self-redevelopment scheme, with MHADA promoting a single-window system for the prompt processing of self-redevelopment proposals, while the MDCC Bank has sanctioned loans to provide financial support to housing societies undertaking self-redevelopment, thus, giving a boost to the popularity of this approach. Also, in September 2019, the government issued a Government Resolution (GR) that caters specifically to self-redevelopment. The government has doled out a number of concessions for registered housing societies that opt for self-redevelopment. This includes a one-window system, extra FSI and incentives like a time frame for approvals from the planning authorities, for carrying out the construction of the project.
Q: A society may have concerns that it may not be able to go in for self-redevelopment since they don’t have enough knowledge about the process. What is the way forward for such societies? How can they ensure that their interests are safeguarded?
A: We believe in first educating the society, to help them in taking an informed decision. Once we take them through all the nuances of self-redevelopment and see their readiness, we engage with the society, to check the feasibility of the project. When the society understands the different aspects of the project, such as the feasibility, the costs involved, the amount to be budgeted and the possible benefits, the society becomes much more aware of what lies ahead in the project and is in a position to take a thorough decision, considering all perspectives. This is the stage at which we get enrolled by the society as a development manager, to plan and manage the execution of their self-redevelopment journey.
Q: Is it easier or more difficult to get banks’ financing for self-redevelopment projects? Why?
A: Currently, the Mumbai District Central Co-operative Bank lends to self-redevelopment societies. Loans are available, once the society gets the ‘Intimation of Disapproval’ or IOD for the project. The bank currently funds up to 95% of the project cost, at 12.5% p.a. rate of simple interest and a small processing fee of 1%. The society can later repay the loan and the interest, through the revenue generated from the saleable area. For banks, funding self-redevelopment projects is the next big untapped opportunity. With the Maharashtra Housing and Area Development Authority (MHADA) and the state government promoting this path-breaking concept, many other banks have started taking a keen interest in understanding and lending to such projects.
(The writer is editor-in-chief, Housing.com News)