A Legal Intro To Redevelopment In Mumbai

Mumbai, India's financial capital and most populous city, faces a monumental challenge in accommodating its ever-growing population within its limited geographical area. The scarcity of land and the high population density have made redevelopment an essential tool for urban planning and growth management. Redevelopment involves the reconstruction of old, dilapidated buildings to optimize land use, improve living conditions, and create additional housing stock.

However, the redevelopment process in Mumbai is not without its challenges. The legal framework governing redevelopment is complex, with multiple laws, regulations, and authorities involved. Stakeholders, including developers, housing societies, and flat owners, often face legal hurdles and disputes during the redevelopment process. It is crucial for all parties to understand the legal aspects of redevelopment to navigate the process effectively and protect their interests.

Legal Framework for Redevelopment in Mumbai

A. Development Control and Promotion Regulations (DCPR) 2034

The Development Control and Promotion Regulations (DCPR) 2034, sanctioned under Section 31(1) of the Maharashtra Regional and Town Planning Act, 1966, serves as the primary legal framework for redevelopment in Mumbai. The DCPR 2034 sets out the rules and regulations governing land use, building height, floor space index (FSI), and other development norms in the city.

Several key provisions of the DCPR 2034 directly relate to redevelopment projects:

1. Regulation 33(5) pertains to the redevelopment of cessed buildings under the jurisdiction of the Mumbai Housing and Area Development Authority (MHADA). It provides incentives, such as increased FSI, for the redevelopment of these buildings.
2. Regulation 33(7) deals with the redevelopment of cessed buildings in the island city of Mumbai. It allows for an FSI of 3.0 or the FSI required for the rehabilitation of existing tenants plus 50-70% incentive FSI, whichever is higher.
3. Regulation 33(9) introduces the cluster redevelopment scheme, which encourages the redevelopment of old, dilapidated buildings in a cluster or precinct. This scheme provides higher FSI and other incentives to make redevelopment more attractive for developers.
4. Regulation 33(10) focuses on the redevelopment of slums and the Slum Rehabilitation Scheme (SRS). It lays down the guidelines for the rehabilitation of slum dwellers and the incentives available for developers undertaking such projects.

In addition to these specific regulations, the DCPR 2034 also introduces the concept of fungible FSI. Fungible FSI allows developers to purchase additional FSI over and above the base FSI, subject to certain conditions. This provision has significant implications for redevelopment projects, as it enables developers to maximize the development potential of a plot.

Understanding the provisions of the DCPR 2034 is crucial for any stakeholder involved in redevelopment projects in Mumbai. The regulations determine the scope, feasibility, and incentives available for redevelopment, and non-compliance can lead to legal complications and project delays.

B. Maharashtra Regional and Town Planning Act, 1966

The Maharashtra Regional and Town Planning Act, 1966 (MRTP Act) is the overarching legislation that governs urban planning and development in the state of Maharashtra, including Mumbai. The MRTP Act empowers local authorities, such as the Municipal Corporation of Greater Mumbai (MCGM), to prepare development plans and regulate development activities within their jurisdiction.

The MRTP Act plays a crucial role in redevelopment projects in Mumbai:

1. Development Plans: Under the MRTP Act, the MCGM is required to prepare and implement development plans for the city. These plans define the land use patterns, zoning regulations, and development control norms. Redevelopment projects must align with the provisions of the applicable development plan.
2. Permissions and Approvals: The MRTP Act stipulates that any development or redevelopment project requires prior approval from the concerned local authority. Developers must obtain necessary permissions, such as building plan approval, commencement certificate, and occupation certificate, as per the provisions of the MRTP Act and the DCPR 2034.
3. Enforcement and Penalties: The MRTP Act empowers local authorities to take action against unauthorized constructions and violations of development control norms. Redevelopment projects that do not comply with the approved plans or violate the MRTP Act provisions may face legal action, including demolition, fines, or criminal prosecution.
4. Appeals and Disputes: The MRTP Act provides for an appeal mechanism for aggrieved parties to challenge the decisions of local authorities regarding development permissions or enforcement actions. Disputes related to redevelopment projects may be adjudicated by the designated appellate authorities under the MRTP Act.

The MRTP Act, along with the DCPR 2034, forms the backbone of the legal framework for redevelopment in Mumbai. It ensures that redevelopment projects are carried out in a planned and regulated manner, in consonance with the larger development goals of the city.

C. Maharashtra Housing and Area Development Authority (MHADA)

The Maharashtra Housing and Area Development Authority (MHADA) is a statutory body established under the Maharashtra Housing and Area Development Act, 1976. MHADA plays a significant role in the redevelopment of old, dilapidated buildings in Mumbai, particularly cessed buildings.

1. Cessed Buildings: Cessed buildings are multi-story residential buildings constructed before 1969 in Mumbai, where the residents pay a cess (tax) to MHADA for the maintenance and repair of the building. Many of these buildings are in a dilapidated condition and require redevelopment.
2. Redevelopment of Cessed Buildings: Under DCPR Regulation 33(5), MHADA is authorized to undertake the redevelopment of cessed buildings. MHADA can either carry out the redevelopment itself or appoint private developers through a tender process. The regulation provides incentives, such as increased FSI, to make the redevelopment of cessed buildings viable.
3. Tenant Rehabilitation: In the redevelopment of cessed buildings, MHADA is responsible for the rehabilitation of existing tenants. Each eligible tenant is entitled to a new apartment of a minimum specified carpet area in the redeveloped building. MHADA ensures that the rehabilitation component is completed before the free sale component in the redevelopment project.
4. Affordable Housing: Apart from tenant rehabilitation, MHADA also uses a portion of the incentive FSI to create affordable housing stock for the economically weaker sections (EWS) and low-income groups (LIG). This helps in addressing the housing shortage in Mumbai.
5. Approvals and Supervision: MHADA acts as the nodal agency for the redevelopment of cessed buildings. It grants necessary approvals, monitors the progress of redevelopment projects, and ensures that the developers adhere to the conditions stipulated in the development agreement.

The involvement of MHADA in the redevelopment of cessed buildings is crucial to protect the interests of tenants and create affordable housing stock. However, the redevelopment of cessed buildings often faces challenges, such as disputes between tenants and developers, delays in project completion, and issues related to the quality of construction. MHADA's effectiveness in addressing these challenges is key to the success of redevelopment projects under its purview.

D. Maharashtra Co-operative Societies Act, 1960

The Maharashtra Co-operative Societies Act, 1960 (MCS Act) governs the formation, management, and dissolution of co-operative societies in the state of Maharashtra, including co-operative housing societies (CHS) in Mumbai. The MCS Act plays a vital role in the redevelopment of CHS buildings.

1. Consent for Redevelopment: Under the MCS Act, a CHS requires the consent of a majority of its members to undertake redevelopment. The
   2019 amendment to the MCS Act reduced the consent requirement from 75% to 51% for the redevelopment of CHS buildings. This change aims to facilitate the redevelopment process and overcome the challenges posed by non-consenting members.
2. Appointment of Developer: The MCS Act and the 2019 Model Bye-laws issued by the state government provide guidelines for the appointment of a developer for redevelopment projects. The CHS must invite tenders, evaluate the bids based on technical and financial criteria, and select the developer through a transparent process. The general body of the CHS must approve the appointment of the developer and the terms of the development agreement.
3. Safeguarding Members' Interests: The MCS Act and the Model Bye-laws mandate that the development agreement between the CHS and the developer must include provisions to safeguard the interests of the members. These include clauses related to the carpet area of the new apartments, temporary accommodation during redevelopment, timely completion of the project, and compensation for delays.
4. Dispute Resolution
   : The MCS Act provides for a grievance redressal mechanism for disputes between the CHS and its members or the developer. Disputes can be resolved through the co-operative court system or referred to arbitration as per the provisions of the development agreement.

E. Government Resolutions (GRs) enabling and regulating redevelopment

The Government of Maharashtra issues Government Resolutions (GRs) from time to time to enable, regulate, and streamline the redevelopment process in the state. These GRs address various aspects of redevelopment and provide guidelines for specific types of redevelopment projects.

1. GR for Self-Redevelopment: In 2019, the state government issued a GR enabling self-redevelopment of CHS buildings. Under this scheme, the CHS can undertake redevelopment on its own, without appointing a developer. The GR provides financial assistance and tax concessions to encourage self-redevelopment.
2. GR for Redevelopment of MHADA Buildings: The state government has issued GRs specific to the redevelopment of MHADA buildings. These GRs provide guidelines for the selection of developers, the rehabilitation of tenants, and the sharing of the sale component between MHADA and the developer.
3. GR for Redevelopment of Slums: The state government has issued GRs related to the Slum Rehabilitation Scheme (SRS) and the redevelopment of slums in Mumbai. These GRs provide guidelines for the eligibility of slum dwellers, the consent required for redevelopment, and the incentives available for developers undertaking SRS projects.

GRs are an essential part of the legal framework for redevelopment in Mumbai. They provide clarity, address specific issues, and streamline the redevelopment process for various types of projects.

Key Components of Redevelopment Agreements

Redevelopment agreements are complex legal documents that outline the rights, obligations, and entitlements of the parties involved in a redevelopment project. These agreements are crucial for the smooth execution of the project and for minimizing disputes between the stakeholders. Let's discuss the key components of redevelopment agreements in detail.

A. Transfer of Development Rights (TDR)

Transfer of Development Rights (TDR) is a crucial component of redevelopment agreements in Mumbai. TDR allows developers to construct additional built-up area over and above the permissible FSI by utilizing the development rights of other plots. In redevelopment projects, TDR is often generated when a portion of the plot is surrendered for public amenities or when the developer rehabilitates slum dwellers or tenants. The redevelopment agreement must clearly specify the quantum of TDR generated, its utilization, and the sharing of TDR benefits between the parties.

B. Floor Space Index (FSI)

Floor Space Index (FSI) is the ratio of the total built-up area to the plot area. It determines the maximum development potential of a plot. In redevelopment projects, the FSI plays a crucial role in determining the viability and profitability of the project. The redevelopment agreement must specify the base FSI, the incentive FSI (if applicable), and the permissible TDR that can be utilized. The agreement should also outline the sharing of the FSI between the rehabilitated tenants/members and the developer's free sale component.

C. Consent Clause

The consent clause in a redevelopment agreement specifies the minimum percentage of tenants or society members required to approve the redevelopment project. As per the amended Maharashtra Co-operative Societies Act, 1960, the consent requirement for redevelopment of CHS buildings has been reduced to 51%. However, for other types of redevelopment projects, such as those involving cessed buildings or slums, the consent requirement may vary. The redevelopment agreement must clearly state the applicable consent requirement and the process for obtaining and verifying the consent.

D. Permanent and Temporary Alternate Accommodation

Redevelopment agreements must provide for the rehabilitation of existing tenants or society members in the redeveloped building. The agreement should specify the details of the permanent alternate accommodation (PAA), including the carpet area, amenities, and the timeline for possession. Additionally, the agreement must also provide for temporary alternate accommodation (TAA) for the tenants/members during the construction period. The TAA clause should cover aspects such as the location, size, rent, and duration of the temporary accommodation.

E. Conveyance and Deemed Conveyance

Conveyance is the legal process of transferring the ownership rights of the land and building from the developer to the society or the tenants. In many cases, developers fail to execute the conveyance deed, leading to disputes and legal complications. To address this issue, the concept of deemed conveyance has been introduced under the Maharashtra Ownership Flats Act (MOFA), 1963. The redevelopment agreement must include a clause for the timely execution of the conveyance deed and the procedure for obtaining deemed conveyance if required.

F. Termination and Exit Clauses

Redevelopment agreements must provide for the termination of the contract in case of default or breach by either party. The termination clause should specify the grounds for termination, the notice period, and the consequences of termination. Additionally, the agreement should also include exit clauses for the society or the tenants in case the developer fails to fulfill their obligations or if there are significant delays in the project. The exit clauses should outline the compensation or refund mechanism in such scenarios.

Apart from these key components, redevelopment agreements may also include clauses related to the project timeline, quality specifications, dispute resolution, and force majeure events. It is essential for all parties to carefully review and negotiate the terms of the redevelopment agreement before signing it.

Bargaining Power Dynamics in Redevelopment

Redevelopment projects in Mumbai involve multiple stakeholders with varying levels of bargaining power. The dynamics between developers and housing societies or tenants often play a significant role in shaping the terms of the redevelopment agreement. Let's delve deeper into the factors contributing to the bargaining power imbalance and its impact on redevelopment agreements.

A. Factors contributing to developers' strong negotiating position

1. Land scarcity: Mumbai faces an acute shortage of land for new development. This scarcity puts developers in a strong bargaining position when negotiating with housing societies or tenants, as they have limited alternative options for redevelopment.
2. Financial resources: Redevelopment projects require substantial financial investments. Developers with strong financial backing and the ability to mobilize resources have an advantage in negotiations. They can offer better terms, such as higher compensation or larger area for rehabilitation, to secure the consent of the society or tenants.
3. Technical expertise: Developers often have an in-house team of experts, including architects, engineers, and legal professionals, who can navigate the complex redevelopment process. This technical expertise gives them an edge in negotiations, as they can better assess the feasibility and profitability of the project.
4. Political connections: In some cases, developers may have political connections or influence that can help them secure approvals or resolve bureaucratic hurdles. This perceived or actual political clout can further strengthen their bargaining position vis-à-vis housing societies or tenants.

B. Impact on redevelopment agreements

1. Unequal bargaining power: The imbalance in bargaining power between developers and housing societies or tenants can result in redevelopment agreements that disproportionately favor the interests of the developer. The weaker party may have to settle for less favorable terms, such as smaller apartment sizes, lower compensation, or longer construction timelines.
2. One-sided clauses: Developers may insist on including clauses in the agreement that limit their liability, provide them with unilateral decision-making powers, or impose stringent conditions on the society or tenants. For instance, some agreements may allow the developer to change the layout or reduce amenities without the consent of the other parties.
3. Inadequate safeguards: Redevelopment agreements may lack adequate safeguards to protect the interests of the society or tenants. Clauses related to project timelines, quality control, and compensation for delays or defects may be weak or absent. This leaves the weaker party vulnerable to potential exploitation or losses.
4. Lack of transparency: The negotiation process for redevelopment agreements often lacks transparency. Developers may not disclose all the relevant information, such as the actual cost of construction or the expected profits from the free sale component. This asymmetry of information further tilts the balance in favor of the developer.

To address the bargaining power imbalance, housing societies and tenants must take proactive steps:

1. Collective bargaining: Housing societies should present a united front and engage in collective bargaining with the developer. This can help them secure better terms and safeguards in the redevelopment agreement.
2. Transparency and due diligence: Housing societies and tenants should insist on transparency from the developer regarding the project details, costs, and timelines. Conducting thorough due diligence on the developer's track record, financial capacity, and legal compliance can help mitigate risks.
3. Regulatory oversight: Strengthening regulatory oversight and enforcement can help curb unfair practices by developers. Authorities such as RERA (Real Estate Regulatory Authority) and the co-operative courts should actively intervene to protect the interests of the weaker parties in redevelopment projects.

Addressing the bargaining power imbalance is crucial for ensuring fair and equitable redevelopment agreements. It requires a multi-pronged approach involving collective action, legal safeguards, transparency, and robust regulatory frameworks.

Incentives for Developers

Redevelopment projects in Mumbai offer various incentives to developers to encourage them to take up the challenge of rehabilitating old, dilapidated buildings. These incentives are designed to make redevelopment projects financially viable and attractive for developers. Let's examine the key incentives available to developers and their impact on redevelopment.

A. Utilization of Incentive FSI under DCR 33

The Development Control Regulations (DCR) 33 of the Mumbai Municipal Corporation Act, 1888, provides for incentive Floor Space Index (FSI) to developers undertaking redevelopment projects. FSI is the ratio of the total built-up area to the plot area. The incentive FSI allows developers to construct additional built-up area over and above the base FSI. The extent of incentive FSI varies depending on the type of redevelopment project:

1. DCR 33(7): For redevelopment of cessed buildings in the Island City, developers are granted an incentive FSI of 50% of the rehabilitation area. This means that for every 100 square meters of rehabilitation area constructed, the developer gets an additional 50 square meters of FSI for free sale.
2. DCR 33(9): Under the cluster redevelopment scheme, developers get an incentive FSI of 55% of the rehabilitation area. This scheme aims to incentivize the redevelopment of multiple old, dilapidated buildings in a contiguous area.
3. DCR 33(10): For redevelopment of slums under the Slum Rehabilitation Scheme (SRS), developers are entitled to an incentive FSI of 50% to 75% of the rehabilitation area, depending on the location and size of the slum.

B. Profit Potential from the Sale of Additional Units

The incentive FSI allows developers to construct additional units for free sale in the open market. The revenue generated from the sale of these additional units is the primary source of profit for developers in redevelopment projects. The profit potential depends on various factors, such as the location of the project, the prevailing market prices, and the construction costs.

Developers often cross-subsidize the cost of rehabilitating the existing tenants or slum dwellers through the profits earned from the sale of the free sale component. The higher the incentive FSI, the more additional units the developer can construct and sell, thereby increasing their profit margins.

C. Challenges in Utilizing Incentive FSI

While the incentive FSI is a lucrative benefit for developers, its utilization is not without challenges:

1. Consent and negotiations: Developers need to secure the consent of the existing tenants or slum dwellers for the redevelopment project. Negotiating the terms of rehabilitation, such as the size of the new units, temporary accommodation, and maintenance charges, can be a time-consuming and complex process.
2. Regulatory approvals: Redevelopment projects require various approvals from multiple authorities, such as the Municipal Corporation of Greater Mumbai (MCGM), MHADA, and the Slum Rehabilitation Authority (SRA). Obtaining these approvals can be a lengthy and cumbersome process, leading to delays and cost overruns.
3. Market risks: The profitability of redevelopment projects is subject to market risks. Fluctuations in property prices, changes in demand, and competition from other projects can impact the sale of the free sale component and affect the developer's returns.
4. Construction challenges: Redevelopment projects often involve working in congested urban areas with limited access and infrastructure. Construction activities can face logistical challenges, labor shortages, and delays due to unforeseen circumstances.

Despite these challenges, the incentive FSI remains a powerful tool to attract developers to undertake redevelopment projects in Mumbai. The profit potential from the sale of additional units, coupled with the opportunity to unlock the value of prime land in the city, makes redevelopment an attractive proposition for developers. However, developers must carefully navigate the legal, regulatory, and market challenges to successfully utilize the incentive FSI and realize the intended benefits of redevelopment.

Problems Faced by Flat Owners during Redevelopment

Flat owners in Mumbai face numerous challenges and legal hurdles during the redevelopment process. These issues can lead to significant hardships and financial losses for the flat owners. Let's examine the key problems faced by flat owners in light of the given context.

A. Delays and Contractual Disputes

One of the most common problems faced by flat owners is the delay in the completion of the redevelopment project. Developers often fail to adhere to the timelines specified in the redevelopment agreement, leaving flat owners in a state of uncertainty and financial strain. These delays can be attributed to various factors, such as financial constraints, regulatory hurdles, or contractual disputes between the developer and the housing society.

Flat owners can seek legal recourse in case of delays and contractual breaches by the developer. They can approach the appropriate legal authorities or file cases in consumer courts to seek compensation for the losses incurred due to the delay. In the landmark case of Sandeep Grover v. Sai Siddhi Developers, the National Consumer Disputes Redressal Commission delved into the intricacies of delays, contractual breaches, and compensation claims by flat owners against their housing society and developer.

B. Conveyance and Deemed Conveyance Issues

Another significant issue faced by flat owners is the delay or denial of conveyance by the developer. Conveyance is the legal process of transferring the ownership rights of the land and building from the developer to the housing society or the flat owners. Many old housing societies struggle to obtain conveyance before initiating the redevelopment process, which can lead to legal complications and delays.

Experts recommend that housing societies file a case against the developer in the consumer court for delaying the conveyance. The court may consider granting conveyance along with other important formalities before permitting redevelopment. The concept of deemed conveyance, introduced under the Maharashtra Ownership Flats Act (MOFA), 1963, provides an alternative remedy for flat owners facing conveyance issues.

C. Irregularities by Developers

Flat owners may also encounter various irregularities and malpractices by developers during the redevelopment process. These issues can range from deviations from approved plans, substandard construction quality, misuse of funds, and violations of legal norms. Such irregularities can have severe consequences for flat owners, affecting the safety, quality, and value of their properties.

To address these issues, flat owners must be vigilant and proactive in monitoring the redevelopment process. They should thoroughly review the redevelopment agreement, seek legal advice, and report any irregularities to the relevant authorities. Housing societies should also conduct due diligence on the developer's track record and financial capacity before entering into a redevelopment agreement.

D. Lack of Knowledge and Oversight

Many flat owners and housing society members lack the technical and legal expertise required to navigate the complex redevelopment process. This lack of knowledge makes them vulnerable to exploitation by unscrupulous developers. It is crucial for housing societies to educate themselves about the various laws and regulations governing redevelopment in Mumbai.

Flat owners should actively participate in the decision-making process and exercise oversight over the redevelopment project. They should demand transparency from the developer and seek regular updates on the project's progress. Engaging the services of legal experts and experienced professionals can help flat owners protect their rights and interests during the redevelopment process.

20% Bank Guarantee Mandate for Developers

The Government Resolution (GR) dated July 4, 2019, introduced a crucial safeguard for housing societies undergoing redevelopment in Maharashtra. As per the GR, developers undertaking redevelopment projects are required to provide a bank guarantee of 20% of the project cost to the housing society. This mandate aims to protect the interests of the flat owners and ensure the timely completion of the redevelopment project.

A. Purpose and Importance of the Bank Guarantee

The 20% bank guarantee serves as a financial security for the housing society and its members against potential defaults, delays, or irregularities by the developer during the redevelopment process. The bank guarantee ensures that the developer has sufficient financial capacity to complete the project and fulfills their contractual obligations towards the flat owners.

In the case of Swashray Co-op. Housing Society Ltd. & Ors. v. Shanti Enterprises, the development agreement required the developer to furnish a bank guarantee.^[1] The developer failed to provide the bank guarantee and sought relaxations from the society. The society agreed to a supplementary agreement where a charge on a specific flat was created instead of the bank guarantee. However, the developer failed to create the registered lien or charge, breaching the supplementary agreement as well.

This case highlights the importance of the bank guarantee in protecting the interests of the society and its members. The bank guarantee acts as a deterrent against developer misconduct and provides a safety net for the flat owners in case of breaches or defaults by the developer.

B. Tactics Employed by Developers to Bypass or Dilute the Mandate

Despite the legal mandate, some developers resort to various tactics to bypass or dilute the requirement of providing a 20% bank guarantee. These tactics include:

1. Submitting proposals without the bank guarantee: Some developers submit redevelopment proposals to housing societies without including the mandatory 20% bank guarantee. They may try to convince the society to accept alternative securities or assurances, as seen in the Swashray case, where the developer sought relaxation from providing the bank guarantee.
2. Seeking relaxations or exemptions: Developers may approach the housing society or the authorities seeking relaxations or exemptions from providing the bank guarantee. They may cite reasons such as financial constraints or project feasibility to persuade the society to waive the requirement.
3. Dilution of bank guarantee terms: In some cases, developers may negotiate with the housing society to dilute the terms of the bank guarantee. They may seek to reduce the guarantee amount, shorten its validity period, or insert clauses that make it difficult for the society to invoke the guarantee when needed.
4. Premature release of bank guarantee: Developers may pressure the housing society to release the bank guarantee prematurely, even before completing the project or fulfilling all contractual obligations. They may use their influence or offer incentives to the society's office-bearers to obtain an early release of the guarantee.

C. Importance of Vigilance and Firm Stance by Housing Societies

To safeguard their interests and ensure the effectiveness of the 20% bank guarantee mandate, housing societies must adopt a vigilant and firm stance when dealing with developers. Some key measures include:

1. Insisting on the bank guarantee: Housing societies should unequivocally insist on the submission of the 20% bank guarantee by the developer as a prerequisite for approving the redevelopment project. They should not yield to any pressure tactics or accept alternative arrangements, as highlighted in the Swashray case, where the society's decision to accept a lien on a flat instead of the bank guarantee proved detrimental.
2. Scrutinizing the bank guarantee terms: The society should thoroughly scrutinize the terms and conditions of the bank guarantee submitted by the developer. They should ensure that the guarantee amount is adequate, the validity period covers the entire project duration, and the invocation process is clearly defined.
3. Resisting premature release: Housing societies should resist any attempts by the developer to seek premature release of the bank guarantee. They should strictly adhere to the terms of the redevelopment agreement and release the guarantee only after the developer has fulfilled all their contractual obligations.
4. Reporting violations: If a developer fails to provide the mandatory bank guarantee or violates any other provisions of the redevelopment agreement, the housing society should promptly report the matter to the relevant authorities, such as the Maharashtra Real Estate Regulatory Authority (MahaRERA) or the consumer courts.

The judgment in the Swashray case serves as a reminder of the importance of the 20% bank guarantee in redevelopment projects. It emphasizes the need for housing societies to be vigilant, insist on the bank guarantee, and take a firm stance against developers who attempt to bypass or dilute this crucial safeguard. By doing so, housing societies can protect their interests and ensure a fair and successful redevelopment process.

MahaRERA & Redevelopment

The primary legislation governing real estate regulation in Maharashtra is the Real Estate (Regulation and Development) Act, 2016 (MahaRERA). However, redevelopment projects involve additional layers of regulation, including:

1. Maharashtra Cooperative Societies Act, 1960
2. DCPR
3. Various Government Resolutions on redevelopment

While MAHARERA has authority over real estate projects in general, its jurisdiction over redevelopment projects is limited:

1. Sale Component Only: MahaRERA's authority primarily extends to the sale component of redevelopment projects, not the redevelopment component itself.
2. Existing Agreements: Redevelopment often involves pre-existing agreements between societies and developers, which may predate RERA and fall under different regulatory frameworks.
3. MahaRERA Precedents: MahaRERA, in multiple rulings, clarified that it has no jurisdiction over the redevelopment component of projects.

The Maharashtra government has issued several directives under Section 79A of the Maharashtra Cooperative Societies Act, 1960, specifically addressing redevelopment:

1. Government Resolution dated 3rd January 2009: Provided initial guidelines for redevelopment of cooperative housing societies.
2. Government Resolution dated 4th July 2019 (GR No. SaGruYo 2018/Pra. Kra. 85/14-S): Superseded the 2009 resolution and provided updated guidelines for redevelopment.

These directives outline procedures for:

• Convening Special General Body Meetings
• Selecting architects and project management consultants
• Inviting bids from developers
• Executing development agreements

Finally, key observations with respect to MahaRERA's involvement in redevelopment are as follows:

1. Dual Regulatory Regime: Redevelopment projects operate under a dual regulatory regime - MAHARERA for the sale component and other authorities (e.g., Cooperative Department) for the redevelopment component.
2. Limited RERA Registration: While developers must register redevelopment projects with MAHARERA if they plan to sell additional units, this registration does not grant MAHARERA full jurisdiction over the entire project.
3. Dispute Resolution: MAHARERA's power to resolve disputes in redevelopment projects is limited. Many issues fall under the purview of other authorities or arbitration as per existing agreements.
4. Consumer Protection: Despite limited jurisdiction, RERA provisions still offer some protections to homebuyers involved in the sale component of redevelopment projects.

While MAHARERA plays a crucial role in regulating real estate projects, its jurisdiction over redevelopment projects is significantly limited. The redevelopment component primarily falls under other regulatory frameworks, particularly those governed by cooperative laws and specific government resolutions.

Recommendations for a Successful Redevelopment Project

A redevelopment project can be a complex and daunting task for housing societies in Mumbai. To ensure a smooth and successful process, it is crucial to keep several key factors in mind.

First and foremost, societies must arm themselves with a thorough understanding of the legal landscape surrounding redevelopment. The Development Control and Promotion Regulations (DCPR) 2034, Maharashtra Apartment Ownership Act, 1970, and Maharashtra Co-operative Societies Act, 1960 form the backbone of this framework. Seeking the guidance of seasoned legal experts to tackle these intricacies and scrutinize all agreements is not just prudent, but imperative.

Next, conducting an exhaustive background check on potential developers is an absolute must. Societies should meticulously examine their track record, financial health, and compliance history before green-lighting any partnership. Transparency should be the watchword during the selection process, and the development agreement should be watertight, encompassing essential safeguards like the 20% bank guarantee requirement, clearly defined project timelines, and robust dispute resolution protocols.

The agreement should also meticulously outline the rights and responsibilities of both parties, leaving no room for ambiguity. Key aspects such as FSI sharing, temporary and permanent rehousing arrangements, penalties for delays, and quality assurance mechanisms must be addressed in no uncertain terms.

Moreover, societies must be unwavering in their insistence on the timely execution of the conveyance deed. This critical step ensures a clear and unencumbered title to the property before the redevelopment works commence, averting potential legal quagmires down the line.

To keep a close eye on the project's progress and nip any issues in the bud, the society should establish a dedicated redevelopment committee. This watchdog body should ensure strict adherence to the agreement, maintain open lines of communication with all stakeholders, and provide regular updates to keep everyone in the loop.

If, despite all efforts, the developer persistently fails to hold up their end of the bargain, societies should not shy away from taking legal recourse. Swift action, such as terminating the agreement or knocking on the doors of MahaRERA or consumer courts, can stem further losses and open up alternative redevelopment avenues.

Finally, for societies with the requisite financial and technical wherewithal, self-redevelopment is a worthy avenue to explore. This approach offers greater autonomy over the process and could potentially yield higher returns for the members, however, it carries its own risks.

Final Thoughts

Redevelopment has emerged as a transformative tool for Mumbai's housing ecosystem, offering a glimmer of hope to residents grappling with the city's mounting challenges of dilapidated structures, land scarcity, and the ever-growing demand for modern, safe homes. Yet, the path to successful redevelopment is fraught with legal complexities, power imbalances, and the ever-present risk of unscrupulous developers exploiting vulnerable societies. As we have seen, the legal framework governing redevelopment, while robust, is not without its intricacies and pitfalls. The onus, therefore, lies on housing societies to educate themselves, seek expert guidance, and remain vigilant at every stage of the process. By understanding their rights, insisting on ironclad agreements, and holding developers accountable, societies can safeguard their interests and ensure a fair and successful redevelopment outcome. However, the road ahead is not just about individual societies fighting their own battles. It is also about fostering a culture of transparency, accountability, and ethical practices in the redevelopment sector as a whole. This requires the concerted efforts of all stakeholders – the government, regulatory bodies, developers, and society members – to work towards a more equitable and sustainable redevelopment paradigm. Only by addressing the systemic challenges and power asymmetries can we unlock the true potential of redevelopment in Mumbai – a potential that lies in creating not just new buildings, but vibrant, inclusive communities that uplift the lives of all their residents. As we stand at this critical juncture, it is imperative that we seize this opportunity to reshape Mumbai's housing scene for the better, one redevelopment project at a time.

The author is a Barrister & Advocate, views are personal.

References

• Swashray Co-op. Housing Society Ltd. & Ors. v. Shanti Enterprises, 2023:BHC-OS:13075
• Maharashtra Real Estate Regulatory Authority, 2021. Order No. 28/2021: Guidelines for Registration of Redevelopment Projects. Mumbai: MahaRERA.
• Municipal Corporation of Greater Mumbai, 2018. Development Control and Promotion Regulations (DCPR) 2034 for Greater Mumbai. Mumbai: MCGM.
• Urban Development Department, Government of Maharashtra, 2020. Unified Development Control and Promotion Regulations (UDCPR) for Maharashtra. Mumbai: Government of Maharashtra.
• Maharashtra Housing and Area Development Authority. Guidelines for Redevelopment under DCR 33(5). Mumbai: MHADA.
• Government of India, 2016. Real Estate (Regulation and Development) Act, 2016. New Delhi: Ministry of Housing and Urban Affairs.
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1. Commercial Arbitration Petition (L) No. 10432 of 2023 and Commercial Arbitration Petition (L) No. 15203 of 2023 ↑