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You are here: Home > Collections > Redevelopment

Redevelopment in Mumbai:
Guidelines for housing societies

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Sep 1, 2012, 11.55AM IST

Tags: redevelopment

real estate market

Jones Lang LaSalle India

Ramesh Nair

Jones Lang LaSalle

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| Mumbai |
| carpet area

Mumbai real estate

housing societies

developer

Ramesh Nair, Managing Director - West India, Jones Lang

LaSalle India
In Mumbai, rising costs and lack of space make it unfeasible
for residents to move out of aging and often sadly
dilapidated housing societies. Not surprisingly,
redevelopment has become a central concept and the
subject of heated debate. Many of Mumbai's older housing
societies are showing signs of serious neglect. There are
distinct safety and security issues and a complete absence
of modern amenities. In this scenario, redevelopment is a
sensible, viable, long-term solution in fact, often the only
solution.

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However, while many developers sell the dream of redevelopment to housing societies, there have been
several cases where the dream has turned into a nightmare for the families who reside in these societies.
Though I will not name them, there are some rather prominent names among the developers who have
defaulted on their redevelopment promises. It is quite evident that selecting a dependable and trustworthy
builder who is familiar with and knowledgeable about the processes involved is fundamental to ensuring
successful redevelopment. A redevelopment project going wrong can have disastrous consequences for all
stakeholders, and it is invariably the housing society's managing committee that becomes the scapegoat.
In a redevelopment project, prevention is most definitely better than the cure. A failed redevelopment can be
avoided by adhering to a proper process while selecting a developer to partner with. Once the developer is
finalised, it is important to incorporate all of the standard 27 clauses that safeguard the society and its
members into the development agreement.

IN-DEPTH COVERAGE
Redevelopment

This can eliminate the possibility of disputes at a later date to a significant extent. The cure for a botched
redevelopment would be legal proceedings against the developer. However, as per law, a redevelopment
project has to be completed within two years - a period that can be extended to three years in exceptional
cases. Legal proceedings against the developer could take several years, making this an unviable route and
often not an option at all.
THE RIGHT 'RE-DEVELOPER'?
While selecting a developer, both financial and quality aspects need to be considered. Most societies focus
on only quantitative financial terms, which include:
> The carpet area offered to each society member

> The corpus amount offered

> The FSI consumed
> Alternative accommodation
> Shifting charges
> Penalties
> Specification
What gets ignored with such a blinkered focus are the qualitative aspects of the developer, which would
include past experience and track record. Extensive research needs to be done on the developer's
construction, marketing and legal track record. Some of the questions that need to be asked are:
> Brand of the developer?
> Can the rest of the redevelopment scheme be on par with the quality and brand of the developer's portion?
> Is the developer known for violations, or does he have a clear track record on aspects such as title?
> What are the systems, structure and strategy of the developer?
> Does he have strong in-house construction and marketing teams?
> Record of cost and time overruns?
> Level of implementation expertise?
> How well-connected is he, and how adept at obtaining the necessary approvals on time?
> Is he knowledgeable about and comfortable with the local environment? He may have to handle unforseen
hurdles that are always potentially a part of redevelopment projects.

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> What are the developer's abilities in terms of raising equity and debt funding?
> Does he use a transparent and consistent financial accounting policy? What is his current fund availability
and funding pattern?
The society should do a reference check of at least two or three others societies where the developer has
constructed and delivered projects. It is essential to establish whether he adheres to promises on quality and
timelines made in the agreement, whether he treats the development agreement like a contract rather than a
piece of paper and if he provides sound structures with good infrastructure and finishes. A developer with good
credentials would not only command a premium over competition in pricing but also have easy access to
low-cost capital.
THE SEARCH

Given the complexities involved in the Mumbai real estate market, there is no single, standard solution in
redevelopment. There are therefore no one-size-fits-all choices among 're-developers'. The process involved in
a developer search should be customized, flexible, transparent and in line with the redevelopment rules. It
should also be equitable and time-bound to increase interest levels among prospective top developers, and
advisory-driven so that the final selection garners the highest value for the society.

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