Friday, October 05, 2007

Exercise caution before redevelopment

This article from TOI applies to all major cities in Maharashtra.

Pune is on the brink of major redevelopment projects in several housing societies facing arterial roads. A recent Bombay High Court judgement has allowed the use of force as a last recourse against dissenting members of a cooperative society refusing to vacate.
The verdict makes the decision of the majority binding on the minority, in the belief that a miniscule minority should not hold the majority to ransom and stall redevelopment plans.
Even as the verdict seeks to facilitate faster redevelopment, the fact remains that many housing societies are ignorant of proper procedures to be adopted while going in for redevelopment and it is time societies get their act together and follow a systematic plan towards this.
Hemant Naiknavre, Director, Naiknavre & Associates, says the government should frame model guidelines to be followed by housing societies which will help bring in transparency.
He further explains, "The decision of the majority is binding on the minority as per the cooperative law, until and unless it is proved that the resolution on redevelopment or selection of the developer was unreasonable and unfair. The facts and circumstances of each case may differ, and there may be cases where a minority may be fighting for genuine reasons due to non-transparency in the whole procedure."
Legal experts say the first and the foremost step before going in for redevelopment would be a structural audit of the building. The structural audit report will determine whether the building should go in for redevelopment or for major repairs. In the absence of the technical report it would not be legally permissible to pass a resolution in the general body meeting. However, it is a fact that many co-operative societies suddenly call for General Body meetings, and decide to go in for redevelopment in the absence of a structural audit report. There are also instances of redevelopment being undertaken without proper negotiations with the builder.
Advocate Chandan Parwani elaborates that in any scheme of redevelopment, the primary objective is to ensure guarantee of performance. Performance is principally in the area of timely construction, quality control and adherence to rules, and regulations. A bank guarantee ensuring timely performance, besides necessary funds being available so that a project would not be left midway are essential requisities. A promoter and builder should be entrusted with the cost and expense of the temporary rehousing of members of the society during redevelopment so as to ensure that the members are not bearing the brunt of any delays on the part of the builder. A substantial contribution to the Corpus Fund by the builder will take care that the society can meet its cost of maintenance and upkeep after redevelopment. Experts also advise the formation of a reconstruction committee (consisting of knowledgeable members in the society), who can directly report to the managing committee. Such a committee can cross-check the builder's credibility before appointment as also report any discrepancies in the reconstruction work, they say. "A feasibility report of the society architect is a must before negotiating with the builder," maintains advocate P Narayan. The report will reflect the potential floor space index including the TDR of the housing society. The best way to select the builder is to invite tenders through a public notice and such tenders should have the basic eligibility criteria mentioned. This will bring in more transparency in selecting the developer. The society architect can help zero in on the best tenders in terms of price, quality and lucrative offers.
"The fact that most societies do not appoint professionals like architects, structural engineers and competent advocates is the reason that proper negotiations do not happen," feels V S Kulkarni, resident of Bhandarkar Road, Deccan. The appointment of a competent advocate is crucial as he can act as an ombudsman and prevent unnecessary litigations.
It is also a fact that ignorance of members is taken advantage of by committee members with vested interests, who take hasty decisions ignoring genuine objections of a small section. The minority is not always in the wrong, maintains advocate P Narayan.
"In Pune, for instance, there are row houses and flats in cooperative housing societies that have different carpet areas. If the majority holds a smaller area then they successfully bargain for a bigger area from the developer and sign on the dotted lines. However, in the same society, members having larger area, and not getting a proper offer in terms of area or monetary compensation, will quite naturally fight against the majority and challenge the resolution," says Narayan.
Enumerating the benefits of redevelopment, Rajesh Choudhari, Director, Prestige Developments, says your new flat is twice the resale value of the old house. This valuation could help you leverage a better loan for business purposes while also becoming a stepping stone for a much bigger asset later. Hence, any co-operative housing society should plan for redevelopment in a systematic and precise manner. If some members fight for trivial reasons then the overall objective gets defeated.
"Needless to say, if the dissenting members obstruct the redevelopment work, then not only will the builder suffer irreparable loss but the entire society, which involves a majority, would not be able to get a new premise easily," Choudhari says.