Self-Redevelopment of Housing Society

- Ar. Kirti Jain M.Arch (Project Management)

ABSTRACT • About 60% of all buildings in Mumbai are 50-60 years old and are in a dilapidated state. Redevelopment becomes necessary for such societies and sometimes inevitable due to BMC directions on Structural Safety and repairs of old buildings.

• Over the last decade, it has been seen that redevelopment projects often face problems; out of approximately 6,000 society buildings where redevelopment is feasible, more than 70 per cent are stuck because of some unscrupulous builders.

• To avoid such problem, one solution is Self-redevelopment, where the society members take charge of the project, with the help of a project management consultant.

REDEVELOPED DILAPIDATED STRUCTURE DEMOLITION

PROBLEM STATEMENT • Most societies prefer to redevelop their buildings through the Builders so that they can get temporary accommodation, corpus and peaceful and timely possession. But the time has shown that said route possesses the following problems : 1 2

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• Builder selection and negotiation is time consuming.

• The best offer providing developers will not necessarily be a well financed and timely executor.

• Allegations of Corrupt practices and underhand dealings.

• Builders take liberty and change Building Plans, for their vested interests.

• Original members remain at the mercy of Builders for completing their Building and possession only stays a dream.

• Builders tend to usurp and sell common spaces like parking, terrace, etc.

• Sometimes the builders also stop paying rents to the tenants and quality of construction is often substandard.

PROBLEM STATEMENT • There were no Laid

down guidelines and /or Firm procedures

declared.

• Builders took advantage of the situation offering

unrealistic schemes.

• Many have lost precious life time savings.

• Being Penny Wise and Pound Foolish.

WHAT IS SELF – REDEVELOPMENT? • Self Redevelopment is a redevelopment done by society itself. In opting for self-redevelopment, housing societies can apply for loans from banks to finance the redevelopment of their homes and then, they can appoint an independent contractor to carry out the work to their specifications.

• This effectively cuts out developers from the process, thereby ensuring that the profits remain within the society and they are able to track the pace and quality of construction closely.

• Self-Redevelopment of Society buildings can be conducted easily & successfully, with proper planning and strategy, after keeping confidence and by taking help of experienced and relevant Professional Consultants of the field.

ADVANTAGES OF SELF - REDEVELOPMENT 1

• Permanent "Corpus Fund" in the Balance Sheet of a Society.

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• Extra corpus also lowers down maintenance bills of the society members.

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• Surplus sale area can be generated for sale in open market.

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• Free Sale Flats can be purchased by the original members on actual cost.

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• Merging of flats is possible if members want so.

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• The building Plans will be as per members requirement and will not be changed.

• Issue of Free Parking spaces can be solved.

• Members may use their discretion to install in house facilities & amenities.

• Common Spaces cannot be sold and under-hand dealings can be avoided.

CHALLENGES OF SELF - REDEVELOPMENT 1

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• Issue of Finance, for Construction Cost for Self-Redevelopment.

• Society need to deal with many departments.

• Needs Time, Inclination, Money & Energy (T.I.M.E.)

• Needs “24 x 7 x 365” Professional Back-up.

• Not all society members have the necessary expertise or the adequate time to go and approach various agencies and appoint various consultants.

ROLE OF A PMC • As a CHS initiates the process of redevelopment of its property, the first legal requirement it needs to fulfill in terms of the relevant circular of the department of co-operation (circular 79(a)) is the appointment of a PMC. 1 2 3

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• Carrying out structural audit

• Preparation of financial feasibility report.

• Preparation of tender to invite offers from contractors.

• Preparation of comparative chart of contractors.

• Finalization of contractor on the basis evaluation of bids with the help of society members • Preparation of development agreement

ROLE OF A PMC 7

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• Finalization of building plans as per members requirement • Arranging for the funds from the Bank/ NBFC’S

• Vacating the building after the contractor obtains the necessary permission.

• Supervision of demolition and reconstruction of the new building.

• Possession and occupation of the new building.

• Obtain as built drawings & original documents and hand it over to the society • Project closure and repayment of funds

SCHEME OF SELF REDEVELOPMENT IN MAHARASHTRA • Mumbai District Central CO-OP Bank will provide funds and required deposit amount to the flat owners.

• Loan sanctioned by Mumbai bank is 85% of the total project cost or maximum 50 CR or as per techno economic viability.

• The financial participation of the society shall be necessary up to 15% of the project cost.

• The project cost = cost of TDR, construction cost, architect, BMC, PMC fees, rent payable, rent relocation charges, cost of fungible FSI, and reimbursement of expenses required for various permissions from the government authorities, interest amount of project loan calculated on the basis of cash flow, expenses towards rainwater harvesting, installation of solar system, CCTV camera and other costs related to the project.

• Interest rate of the loan is minimum 12.5% per annum further decided after carrying out the risk assessment of the project.

• It shall be necessary for the society to execute English mortgage of all the assets/properties, building, premises and the expenditure require for the same shall be incurred by the society.

• For this reason, MHADA and BMC officials will form a single-window system which will speed up the process of getting permissions & approvals.

• The flat owners can choose any architect, consultant & contractors as per their choice.

• After doing compliance of documents regarding the loan after loan approval as well as after mortgaging society property in the name of bank through registered documents the Mumbai bank shall release the loan.

• The total tenure of the loan that the society takes from Mumbai bank shall be for 7 years out of which 2 years shall be moratorium period.

• It is not mandatory to pay interest during the moratorium period.

PROCESS OF SELF REDEVELOPMENT Society’s need for redevelopment Appoint PMC and request for project study Conceptual configurations and alternatives for technical feasibility.

Development of cost and schedule for each alternative Review by society, Economic analysis for rate of return, Payback period, capital recovery

Society’s request for further study of project

Society authorizes project, selects project delivery method and appoints various consultants

Final design of project. Detailed drawing, written specifications and preparation of contract document Approvals, premiums and deposits.

Obtain IOD, C.C and register the project under RERA

Society abandons project

Approvals, premiums and deposits.

Obtain IOD, C.C and register the project under RERA Obtaining finances for Self-redevelopment Procurement of bulk materials, special equipment, construction contracts Construction contractors administration of contracts for physical work in place Project closeout, quality testing, inspection, as built drawings Assisting society in encashment of sale flats Repayment of funds borrowed

THANK YOU Ar. Kirti Jain, M.Arch (Project Management) Email Id. ar.kirtijain@gmail.com / kirtijain3010@gmail.com