By Dr Sanjay Chaturvedi, LLB, PhD
Builders are not finding viable projects offered by housing societies in Maharashtra, are going in for self redevelopment. Due to slow down in market and new DCR where the redevelopment is not viable in Mumbai, housing societies in Maharashtra are going in for self redevelopment.
Developing a residential project is not a joke. It requires 56 NOCs from local self government but also having jurisdiction of Maharashtra Co-operative Societies Act 1960 and further amendments. There are many other NOCs required besides BMC. Like for example CRZ clearance, Environment clearance, Traffic, Fire, Civil Aviation, defense and railway NOC if you fall under their jurisdictions.
First step: Society must know its potential FSI, fungible FSI and total FSI consumed till date. This is first step because society first should determine that they want redevelopment and reconstruction for themselves or there is sale elements in it. If society wants to redevelop its premises then there is no question of RERA registration. But if society wants to sell some of new flats in its redeveloped project and it is more than 8 units or 500 sq mtrs or more then it has to register it in Maha RERA.
The society must have conveyance its name. While applying for new plan, IOA and CC to BMC, society must be owner of the land on which redevelopment is proposed. If the land belongs to MHADA, Collector, any statutory authority, Pugree, or any ostensible ownership like trust etc then NOC from such owner is must for redevelopment.
Second Step: Society must convene extra ordinary meeting under section 79A of Maharashtra Co-operative Society Act 1960 and notify the Registrar office who will send his representative to conduct the EAGM of the society. Due and clear notice of the meeting must be given to all members and associate members. For procedure under 79A, please read my article on the subject.
The question arises that should society appoint a Project Management Consultant (PMC) compulsory? There is no such statutory compulsion to appoint PMC for redevelopment. Neither for self redevelopment nor for builder redeveloping it. PMC, in my opinion is nothing but cordinator between legal aid, architect and structural engineer. PMC, eat away profit of builder as it ask from builder huge compensation besides a hefty fees from society.
Society should appoint its own advocate and architect who gives honest and fair opinion to society on various aspects of redevelopment. It requires huge documentation and agreements hence vetting from a good advocate is always desirable. Any extra area which is not included in the development agreement will attract stamp duty, income tax later on so it is advisable to first vet the legal documents.
Third Step: Get the approval of 50% of the members of the society who have attended the meeting. The meeting should have proper quorum and 50% of them must approve the redevelopment. Mind you, society is the owner of your premises and since you hold a share in it hence you are eligible to occupy one of its units/ flats.
It is advisable to register the all documents which are executed by the society. An Advocate shall give advise to the society on various aspects including when society wants to sell its flats in the open market to fund the redevelopment.
Fourth Step: Find the proper team. Society must appoint own advocate, chartered accountant and Architect to help the process of redevelopment. Role of Chartered accountant will be to find the financier, if society wants to take loan for redevelopment, if self funded then maintaining accounts for redevelopment process and certifying for statutory needs like RERA , income tax and GST.
Fifth Step: Finding contractors under tender system. Many builders are also lending their names to society for Development Model (DM). The builder manage entire process, take loan on society’s behalf, construct it for society and sell for society while just keeping 20% profit margin on entire sale. In this process, the entire statutory requirements, procuring NOC and permissions, observing contractors and sale depends on builder. Builder work like PMC for society. But when society don’t want builder and want to do it self, then society’s architect will prepare tender and scrutinize for society and finalize contractor. Supervise the construction work and vet the contractor’s bills to be cleared time to time.
Sixth Step: While construction work is going on and before that, architect shall get the new building plan approved from BMC/ Municipal Corporation, fulfill all the compliance and make society pay premiums/ permission fees if any. Advocate shall register the project at RERA if there is any sale portion. Chartered Accountant shall keep and record all financial transaction and certify as and when required under GST, RERA and Income Tax.
Seventh Step: Getting Occupation Certificate and Building completion certificate from Authorities, NOCs from various authorities, handing over new premises to members and new purchasers, inducting them into society as members and issue them new share certificates, closing accounts, filing Form 4 to RERA, filimng forms with registrar for co-operative societies.
Eight Step: Update in income tax, file GST returns, Audit accounts and pass in AGM.
There are still some areas left which I have to cover it in my next article on pre-requisites of high rise in Mumbai. Keep in touch.