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The Registered Housing Society under Maharashtra Co-Operative Societies Act wishes to go for redevelopment of their Old building more than 30 years. A Project Management Consultant appointed for this purpose. What are the Techno-legal and financial points to be looked into and taken care? When a Registered Housing Society in Maharashtra decides to undergo redevelopment, there are several techno-legal and financial aspects to be considered. A well-thought-out plan is crucial to ensure that the project runs smoothly. Below are the key points to take into account:
Techno-Legal Considerations
1. Appointment of Project Management Consultant (PMC)
- The appointment should follow a transparent and competitive bidding process.
- Ensure that the consultant has experience in handling redevelopment projects, specifically in the cooperative housing sector.
- Legal agreements with the PMC should clearly define the scope of work, timelines, and responsibilities.
2. Conformity with the Maharashtra Co-Operative Societies Act & By-laws
- The process of redevelopment must follow the provisions of the Maharashtra Co-Operative Societies Act, 1960 and the model by-laws of the society.
- Obtain approval from a minimum of 70% of the society members before proceeding with the redevelopment plan as per the Government of Maharashtra’s guidelines.
- Ensure proper legal vetting of all agreements related to the redevelopment.
3. Development Control Rules (DCR) and Building Regulations
- The project should adhere to the Development Control Regulations applicable in the local jurisdiction.
- Ensure compliance with FSI (Floor Space Index) norms, Transfer of Development Rights (TDR), and other regulations governing redevelopment projects.
4. Land Title and Ownership
- Verify the title of the land to ensure that there are no legal disputes or encumbrances.
- Check whether the land is freehold or leasehold, as this will impact permissions and procedures for redevelopment.
5. Agreement with the Developer
- Draft a legally vetted Development Agreement with clear terms and conditions, including responsibilities, timelines, and deliverables.
- The agreement should include clauses for penalty in case of delays or deviations from the plan.
- Ensure that the developer is financially sound and has a track record of delivering successful projects.
6. Building Permissions and NOCs
- Obtain necessary permissions from various authorities such as the municipal corporation, environmental clearances, fire safety, and other statutory bodies.
- NOCs from members and other stakeholders like banks (if mortgages are involved) should also be taken.
7. Grievance Redressal Mechanism
- Establish a formal grievance redressal mechanism to address any concerns or disputes that may arise during the redevelopment process.
8. RERA Compliance
- If the project is being sold to outsiders, ensure that the developer registers the project under the Real Estate Regulatory Authority (RERA) and complies with RERA guidelines.
Financial Considerations
1. Cost and Financial Planning
- Ensure a detailed financial analysis, including the cost of construction, fees for PMC, and other incidental expenses.
- Set aside a contingency fund for unforeseen costs or delays.
2. Valuation of Property
- Conduct an independent valuation of the property, including the land and existing building.
- Evaluate the proposed benefits offered by the developer, such as increased area, modern amenities, and compensation for temporary accommodation.
3. Member Contributions & Compensation
- Determine if members will need to contribute towards redevelopment or if it will be fully funded by the developer.
- Ensure clarity on the compensation offered to members, such as rental payments or alternate accommodation during the construction period.
4. Profit Sharing
- In case of excess FSI or saleable area, ensure that the society has a clear understanding of how the profits will be shared between the society and the developer.
- Evaluate if members can receive additional benefits like increased space or monetary compensation from the sale of extra units.
5. Taxation
- Consider the tax implications for the society and individual members, such as capital gains tax, GST on services provided, and other relevant taxes.
- Obtain expert advice on how to minimize tax liabilities.
6. Funding and Loans
- Evaluate if any loans or funding options are required for the redevelopment.
- Understand the terms of repayment and impact on the society’s finances.
7. Escrow Account
- Ensure that all financial transactions are handled through an escrow account to safeguard the society’s interests and ensure transparency in fund usage.
8. Insurance
- Take adequate insurance for the construction period, covering risks like damage to property, third-party liability, and personal accident coverage for workers.
9. Sinking Fund for Future Maintenance
- Post redevelopment, establish or augment the sinking fund to cover future maintenance and repair costs of the new building.
10. Additional Points
Sustainability and Green Building Norms: Ensure that the new building complies with green building norms and includes sustainable features such as rainwater harvesting, energy-efficient lighting, and waste management systems.
Communication with Members: Regular communication with society members is essential. Keep them informed about the project’s progress and ensure their concerns are addressed.
By addressing these techno-legal and financial aspects, the society can ensure a smoother redevelopment process and secure its interests.