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Karmayogi

 

 

Basic concepts of property re-development in Mumbai
By Gaurang Damani (September 2010)

Many buildings are so old and un-repairable, that the only solution is to reconstruct them. If you wish to make re-development profitable for everybody, knowledge of the rules is important.

Landlord or Society can re-develop the property themselves, but as it is complicated, most generally appoint a developer. The occupants must take care of the following factors, while signing the agreement (no interim document must be signed):

  • Precise details on carpet area (because developer may mention super built up area, including flower bed, niche area etc., rather than carpet area.)
  • Temporary accommodation details (including who will pay for flat deposit)
  • Stringent penalty clauses for delayed delivery

  • Provision for corpus fund - this can take care of maintenance and the increased property tax after re-development and re-assessment. Corpus fund must be deposited when property is vacated, so its interest can start immediately.
  • Payment of higher tariff electricity bill/ water charges during part OC
  • Amenities clearly specified, like parking; Mahanagar gas connection; pest control during construction; branded electrical, kitchen, furniture and plumbing fittings; window grills; type of paint/ tiles etc. to be used.

  • Other amenities can be asked for, like stand-by generator; solar water heater; separate water lines for flushing and kitchen; Rain water harvesting etc.
  • Forming resident's society within specified period of 12 months or as agreed in the agreement terms
  • Arbitration details, in case of a dispute.
  • Sharing of gains due to extra FSI, if policy changes
  • Construction quality. Hence constant watch on quality of construction must be done. If there is any discrepancy, MHADA must be notified immediately.
  • Helpline number, once property is handed over to the society.
  • Checking of agreement by occupant's advocate, because once signed, there is nothing in the occupant's hands.

Occupants must also obtain the following documents from the developer:

  • Performance guarantee from the developer, This may include the "Defect liability period" of 24 months, which will start after OC

  • Water proofing guarantee for atleast 10 years after OC.

  • Bank guarantee from the developer, upto 20% of the price of the re-development project, including corpus fund, rent amount etc.

  • Financial statements including latest IT returns and PAN number

  • Bank solvency certificate from developer

  • All relevant insurances like project insurance/ 3rd party/ labour insurance etc.

  • Undertaking to submit regular progress reports, which must match original work schedule till BCC (Building completion certificate)

  • Bio-data of key personnel who would be handling the project.

  • Copy of license from government agencies

  • Work contract sales tax number

  • ESIC and PF registration details
  • Occupants have to give a 'Power of Attorney' to the developer, for various co-ordination with the government agencies. After BCC, this PoA must be cancelled.

The developer would directly submit the proposal to the board with the following documents:

  • BMC's latest cess category certificate

  • Repair cess and Property tax bills

  • BMC certificate showing upto date payment of cess.

  • Conveyance deed

  • Lease agreements

  • Latest property card

  • Index II

  • Society registration certificate

  • Latest true extract from cadestral survey sheet

  • List of occupants as duly certified by the Executive Engineer of the local BMC ward office.

  • Latest DP remarks (CRZ/ NA order etc.)

  • Irrevocable written consent by individual occupants, undertaking to shift to temporary accommodation, etc.

  • Plan of proposed building

  • Affidavit cum Undertaking and Indemnity bond by developer, as per above rules

  • And other documents as applicable to the scheme

Stages of development:

  • NOC issued by MHADA (work has to start within 12 months from date of issue of NOC)

  • Rehab of old occupants has to be completed within 30 months from issue of NOC

  • Part OC (Occupation certificate) for housing old occupants

  • Full OC, only after all the old occupants have been housed in reconstructed building

(Mumbai Building Repairs and Reconstruction Board) MBRRB's has issued guidelines for Landlords, Developers and Tenants/ Occupants for re-development under DCR 33(7):

  • Any property on which cess (tax) is charged for its repairs and maintenance by MBRRB, is called a cess property, and is eligible for re-development.
  • Consent of atleast 70% occupants required for re-development
  • Proposed minimum carpet area to be given to tenant is 300 sq ft and maximum is 753 sq ft. So for eg., if a tenant has 500 sq ft, then he can get the same area that he currently has.
  • Non-residential occupants would get same area as before.
  • New tenancy created after 13/6/1996, is not considered for redevelopment benefits.
  • PITFALLS of re-development: The new members may have to bear an increased maintenance cost and also increased  property taxes. Also, till the Occupation certificate (OC) is not procured, they end up paying higher BMC and water/ sewage charges.

Other relevant information:

  • Categories of cess buildings are as: {Category 'A' - construction prior to 1/9/1940; 'B' - between 1940-1951; 'C' - after 1/1/1951}
  • For category 'A', applicable FSI is 2.5 or 50% incentive over rehab FSI, whichever is greater. So developer is assured of atleast 50% FSI for free sale.
  • 20% of incentive FSI can be used for non-residential purposes.
  • Under DCR 33(9), Cluster development is possible for mix of structures with minimum plot area of 4,000 sq mt. Applicable FSI is 4 (or) required FSI plus incentive FSI of 50-75%, depending on size of the plot.
  • If the developer cannot use the FSI on the same plot, then he can use the balance as TDR (Transferable Development Rights), in the suburbs

This document is to be used as a guideline only, and is not a replacement for legal opinion.

Thanks and Regards,
Gaurang Damani
damanig@diehardindian.com

 

 

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