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REDEVELOPMENT: ILLS, EVILS & EPIDEMICS

It has been observed in recent past that numerous redevelopment projects either have been stalled or delayed beyond the documented period of its completion. Developers play vital role in redevelopment of housing societies. Currently, the redevelopment mania of residential properties is booming in full swing and one finds in Mumbai that compound wall of every third property of a housing society is covered with tins as number of small time Developers and Real Estate Companies have joined the battle in an effort to grab a share of this fast rewarding pastry.

Redevelopment of dilapidated buildings in overcrowded Mumbai is a ‘need’ for occupants than a mere dream of better lifestyle. Although the State Government has come up with various regulations to facilitate the redevelopment process, there are still large numbers of stalled or delayed projects due to various causes responsible for delaying and stalling of redevelopment projects.

A journey from congested and dilapidated chawls and old buildings to high rise towers in the heart of the city is enthralling for many middle class city families in Mumbai. Staying in these decaying buildings is not only unpleasant but also hazardous. The old localities in Mumbai have thousands of buildings and lakhs of people staying in worst living conditions in such buildings.

With a view to facilitate redevelopment of these buildings, the Maharashtra Government provided Floor Space Index (FSI) of 2 for redevelopment of cessed buildings in the year 1984. However, to encourage more redevelopment projects, the Government announced increase in the FSI for redevelopment projects in February 2009.

In recent past, the Maharashtra Regional and Town Planning Act, 1966 has accorded its sanction towards the modification in the Regulation No. 33 (7) of Development Control Regulation (DCR), 1991 for Greater Mumbai followed by Notification No: TPB 4312/CR-512012/UD-11 Dated 14th August 2013 issued by Government of Maharashtra, Urban Development Department, Mantralaya, Mumbai 400 032 which specifies that for reconstruction/redevelopment to be undertaken by cooperative housing societies of existing tenants or by co-op. housing societies of landlords and/or occupiers of cessed buildings existing prior to 30/9/1969 in Island City for reconstruction/redevelopment of the buildings of Corporation, the Floor Space Index (FSI) shall be 3.00 an the Gross Plot Area or the FSI required for rehabilitation of existing tenants plus incentive FSI as specified herein under whichever is more.

Cessed buildings, which are those built before 1960, are given an FSI of 4 under Cluster Development i.e. of more than one acre plot. Presently, around 1,365 redevelopment projects have received NOC from MHADA in Mumbai. Some of the projects have been completed successfully; some others are under construction, while some projects have remained stalled since years!

When a layman reads or hears about delayed or stalled projects, he assumes that the Developer is fraudulent and starts grumbling about how the Developer keeps the tenants wandering for their own houses. But there are reasons aplenty which are responsible for stalling or delays in the redevelopment project.

Some of the major reasons are the amendments to Development Control Regulations (DCR), delayed approvals of permissions or plans from Government or BMC, erroneous selection of Developer by Society, escalation in cost of material or labour, force majeure, frequent changes in government policies, imperfect planning and execution, lack of transparency in Society and Developer’s relations, liquidity crunch, litigation, unauthorized construction, violation of terms and conditions of Redevelopment Agreement or simply the Developer venturing into redevelopment projects beyond his capacity.

Besides the above, there are many more causes for delays such as late government approvals, getting the completion certificate after a long wait, raw material delays, cement and steel procurement, manpower delay etc. Getting local approvals is a harrowing task and the new Environmental Impact Assessment Clearance that is now mandatory can even take up to nine months. At any point in time, there is a 50 to 60% shortfall in unskilled manpower in the market. Civil Contractors executing projects have so much on their plate that managing different projects is becoming more and more difficult.

According to industry watchers, most of the Developers are facing project delays. About 85-90% projects are delayed in some way or the other and the reasons for such delays are not in the Developer’s control. The delays on account of various reasons do affect the overall budget of a Developer, increases the construction and storage cost and hit the brand image and future of the company. Also, it has a direct impact on end-users as well.

There are major projects like D. N. Nagar Residential Enclave (MHADA) in Andheri (west), Chirag Co-operative housing society in Khira Nagar, Santa Cruz (West) and many unlisted projects which are stalled due to many reasons. The largest slum of Asia i.e. Dharavi Redevelopment Project, is in an indeterminate state even today.

It is learnt that the Maharashtra Government has lost more than Rs 15,000 crore of revenue over the past two years due to stalled redevelopment projects of old MHADA buildings in Mumbai. There are nearly 17,000 Cessed Buildings in South Mumbai under progress and nearly 20,000 Housing Societies, 3,000 MHADA Buildings, 2,000 Collector Land Buildings waiting for redevelopment in Western and Eastern Suburbs.

In Mumbai, about 60% of the people stay in slums. Government is serious about the redevelopment of slums but hardly have any solution to initiate speedy process. Thus, at least 70% to 75% of the properties in Mumbai are potentially available for redevelopment. Out of these, nearly 25% have signed the Redevelopment Agreements with the Developers but the redevelopment has not started for various reasons.

Nearly 18 months were lost by the Government Authorities between a period of July 2010 to January 2012 regarding the policy decision on Fungible FSI and changes in the Development Control Rules and CRZ notification though issued by the Central Government, the State Government is yet to carry out the marking of CRZ and come out with the detailed regulations.

The environment and High Rise Committee Clearances are also now mandatorily required in case of high rise projects. The gap between executing the Development Agreement and the actual execution of the project leads to change in the market situation. This creates greed in the minds of the members of the society or the tenants in the building and they start renegotiation to extract enhanced benefits.

The Developers’ plea is that while 35% as Fungible FSI is granted to the tenants in Island City but it is not possible to give entire 35% as Fungible FSI since many common amenities like fire fighting ducts, electrical ducts, common passages to the tenants’ new flats, meter room are included in FSI. We need to deduct all these areas proportionately from the tenants on that floor. So the maximum that a Developer can propose from Fungible FSI is 25% which in turn becomes difficult to convince the housing society members when they ask for additional area over and above full 35% of Fungible FSI.

The common problem faced by Developers during redevelopment projects is non-cooperation by the original tenants. Many times, the adamant attitude of tenants does not benefit either of the parties. Obtaining majority for any decision is always a serious concern, getting plans approved by the whole Society and getting rebellious members to vacate the premises as per the agreed terms has been troublesome.

There are certain projects in which the housing societies do not have the plot conveyed in their name and getting the whole procedure in place takes six months to a year which eventually does eat up into the profits causing prices to go higher.

A Society in Juhu had signed the redevelopment project seven years back. The project is yet to start as the members are hiking their demands every now and then. Also, another reason a project may get delayed is when the property to be redeveloped goes under the jurisdiction of the court. This can happen when some members refuse to give their consent for redevelopment and opt for a legal recourse.

There are numerous judgments of Mumbai High Court where it is upheld that members of a co-operative housing society who are in minority cannot obstruct a redevelopment project and must abide by the majority decision of the society unless they illustrate and prove that there is some prejudice caused to them or there are elements of fraud in the entire process of redevelopment.

Industrial enmity in Developers is another important reason which causes delay in project completion. Some of the Developers try to disturb their rival bidders by giving different offers or by instigating few members of the society by offering something extra. This type of snatching away of redevelopment assignment is not a healthy practice redevelopment projects.

To avert the delay in projects delay and lawsuits thereof, the Developers must follow the laid down norms as formulated in Acts, Laws, Rules and Regulations by the State Government and Local Authorities in respect of redevelopment. On the other hand, if the Civic Bodies grant all the necessary permissions/approvals within a specified schedule, ease the norms of redevelopment and facilitate faster clearances, the Developers would cut down around 20% to 25% of the project cost ascribed to such delay.

The members, on the other hand, should support and co-operate with the Developers in corporate interest of the society. Developers too should emphasize the efforts to turn the dream of redevelopment into reality with due diligence.

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