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Self redevelopment
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  Redevelopment types

 Builder-led redevelopment

 Self redevelopment

 Advantages of Self redevelopment vis-à-vis Builder-led redevelopment

 Comparison of profits

 Major issues in Self redevelopment

CONTENTS  Govt Incentives as per GR of September 13, 2019

 Real-world examples

 Sample Feasibility of our Society

 Conclusion

 Way forward

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 Redevelopment Types

Redevelopment

Traditional Modern

Builder-led Self
redevelopment redevelopment

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 Builder-led redevelopment

Let’s have a look at the scenario of a builder-led redevelopment…

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 Society PMC

Builder

Financer Contractor Consultants Liaison Agent

KDMC
Stakeholders in a Builder-led redevelopment

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 Builder-led redevelopment

 In a nutshell, the Society appoints a Builder, enters into a development agreement with him and gives him a irrevocable
POA to execute the project on Society’s land. The Builder arranges for the required finance for the project and appoints a
contractor to construct the new building. He shares the profit earned from the project with the Society in the form of extra
free area and/or corpus for every member of the Society. In other words, the Builder becomes more or less an equal partner
in the project.

 This system of redevelopment has the potentiality of causing serious inconveniences to the members of the Society. By the
very nature of the system, the Society entrusts entire control and management over the project to the Builder who are prone
to abuse their position. The members of the Society who vacate and surrender their flats are left at the mercy of the Builder.
The unscrupulous Builders delay the completion of the project beyond the agreed time or default in carrying out
construction as per agreed specification or at times, abandon the project mid-stream leaving the members without any
accommodation. The Society in all such cases is left with no alternative except to take recourse to legal proceedings with all
attendant cost and inconveniences. There are instances where the Developers fail to comply with the conditions subject to
which the approval was granted, resulting in denial or delay of the OC. The building is not constructed as per the sanctioned
plan, sanctioned FSI is exceeded and sub-standard material is used. In short, the members remain unprotected against the
unhealthy practices of the Developers who take full advantage of their dominant position in the development of the project.

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 Self redevelopment

 Let’s have a look at the scenario of self redevelopment…

 In self-redevelopment, all the players in the ecosystem are same as in traditional redevelopment, only the
Builder is out.

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 Society PMC

Builder

Financer Contractor Consultants Liaison Agent

KDMC
Stakeholders in Self redevelopment

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 Financer Society PMC

Contractor KDMC

Stakeholders in Self redevelopment

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 Self redevelopment

 In Self redevelopment, there is not profit centre like Developer. The Developer is a businessman who wants to
make profit from the venture. In Self redevelopment, motto is to have better quality houses than to make
maximum profit. The Society eliminates the middleman (Developer) involved in the process of redevelopment.
The entire profit of the Developer may be distributed among the members in the form of extra carpet area free of
cost or in the form of corpus.

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 Advantages of Self vis-à-vis Builder

 Control throughout with Society, no need to give irrevocable POA to outsiders, hence minimal risk, no
uncertainty, less conflicts, and greater transparency as compared to Builder-led redevelopment. The Society
members decide on their plans, designs and amenities which they desire to have.

 The quality of construction given by Builders is minus C grade. In some constructions, the quality is so bad that
within 15 years the buildings have come up again for redevelopment again. In many of the buildings, the lift and
infrastructure is so bad, the drainage lines are not good and they are bursting in their seams, the electricity load
is not as per required capacity. The lifts are facing regular shutdowns and in most cases in 8-10 story buildings,
the lift is non-functional, and the senior citizens have to climb so many stairs. In self-redevelopment, you can
ensure good quality construction. Builder does not give guarantee but we can get guarantee from reputed
contractor for waterproofing (20 years) and structure (40-60 years).

 What a builder does in a plan is to accommodate as much floor space as possible within given constraints, with
profit in his mind. Most of the time this does not emerge as good planning from the point of good circulation,
good cross ventilation considering the residents into account. The planning aspect is seldom taken seriously
and, in many cases, it is bad planning. In self-redevelopment, you can get proper planning from your architect.

 More free area, builder offers 15-20% extra area, in self it is minimum 40-50%.

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 Advantages of Self vis-à-vis Builder
 Opportunity to own additional area at discounted price.

 More corpus - Profit from project is shared by Society members rather than taken away by Builder.

 Out of 100 projects, 97 projects the Builder never builds on time or in twice the time. In Mumbai, there are 5800
buildings which are stuck due to some reason or the other and 1.25 lakh families are on the streets because they
trusted the Builder and the Builder has given up upon them. In Self redevelopment, you complete the building in
maximum 3 years.

 In a Builder-led redevelopment, you have no control over who your new neighbours will be. In Self redevelopment,
like minded persons, such as friends and relatives of existing members, can be invited to become new members.
Thus, the disputes and differences between the old members and new members can be minimized.

 Since the general body decides on all issues, there is a satisfaction in redeveloping the CHS ourselves; the
difference between doing the work ourselves and getting it done by others.

Thus, the risk-benefit analysis shows that risk-benefit ratio is favourably low in Self redevelopment than in
Builder-led redevelopment.

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 Comparison of profits
Builder Self

Society's Profit
19%
Society's Profit
38%
Project Cost
Builder's Profit 56% Project Cost
25% 62%

PMC cost = 4% Double the profits!!! PMC cost = 10%

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 Major issues in Self redevelopment

 Initial Finance: Normally banks lend 95% of project cost @ 12.5% p.a. with a moratorium period of 3 years. The
Society needs to mortgage the land and the saleable area to the financial institution. The banks will release the
loan only on obtaining proper approval from the planning authority. For the purpose of getting necessary initial
approvals like IOD, various NOC etc, Society needs to incur about Rs. 50 lakhs. The Society can explore the
option of raising loan from NBFC or investors, to pay the initial contribution of 5% of the cost of the project. Such
contribution also may be raised from selling additional area to the existing members at discounted price. Note
that before releasing the loan, banks insist for 100% member consent.

 Experience: The MC members (and also other members) are not experienced to handle the entire process of
redevelopment. Many are new to this field of building construction. Hence, it requires some courage on the part
of members to venture into a new project and do the construction on their own. The fears are largely allayed by
employing the best professionals to do the work and the task of MC is only to coordinate with them. Thus, the
entire experience can be a rewarding one considering the satisfaction of redeveloping our own property by
ourselves.

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 Major issues in Self redevelopment

 Time: Its not that the MC members have to execute the project by themselves. The PMC will do all the project
monitoring work and the MC members have only to coordinate with them and the Contractor and attend
meetings to receive feedback, take collective decisions etc. On an average the MC member will have to spend
one hour per day of the week. That will be enough.
 Diversity: One issue is the lack of decision making, given that Society has to take all decisions in Self
redevelopment. Decision making can be challenging with the diversity of views of all members. Different
members can have their diverse viewpoints but at the end of the meeting every point in the agenda has to be
sorted out. If necessary, you can take a vote for every issue. You just cannot sit on your decisions and go on
dilly-dallying.

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 Govt Incentives as per GR of September 13, 2019

 Single window clearance, interact only with one IAS officer

 Proposal clearance in 3 months
 Additional 10% FSI
 Interest subsidy of 4% in bank loan, thus the interest reduces from 12.5% to 8.5%
 Premium amount at 50% of normal rate, given that most of the project cost is eaten up in paying premiums
 Purchase of TDR at 50% of normal rate
 Concession in certain taxes (only in SGST, not in CGST)
 LUC tax abolished
 Deemed conveyance clearance in 1 month

Note, the GR is still not implemented in its entirety. The concessions offered, as and when implemented, will be
substantive and make a significant difference to the overall project feasibility. Also, there is a rider that if you want
to avail of these incentives, then you have to complete the project in 3 years.

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 Real-world examples

Society Location Initial area B. Area B. Corpus S. Area S. corpus Notes

Purvarang Mulund 389 sqft 525 sqft 2 lakhs 960 sqft 35 lakhs Maintenance free for life + pension
of Rs. 15,000-20,000 per month
Chitra Chembur 390 sqft 525 sqft 2.5 lakhs 1150 sqft 25 lakhs Didn’t take loan from bank
Sai Dham Ghatkopar 225 sqft 400 sqft - 860 sqft 12 lakhs
Ajitkumar Goregaon - 0 sqft 0 lakhs 30% 3 lakhs
Suma Sam - - 22% 0 lakhs 41% 5 lakhs
Jaya Kunj - - 22% - 44% -
Nandadeep Vile Parle - 30% 15 lakh 251% 37 lakhs

So far, 20 projects in Mumbai have been completed, 40 are in various construction stages, 70 projects have received IOD
and are in the process of getting finances, 790 societies have resolved to go for self-redevelopment. In KDMC alone, 20
societies have resolved to go for self-redevelopment.

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 Sample Feasibility for our Society

Approximate profit per

member, combined area &
corpus = 50 lakhs

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 Conclusion

Rather than divesting control of the redevelopment project to the Builder, why not take the matter securely in our hands? Of
course, it takes more courage, effort, and involvement from the members than in traditional redevelopment. But given the
benefits, it is worth the effort.
Come let us together plan, design and build our new residence exactly as we want it, nay DREAM it.


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 Way forward
 Brain storming about this issue among members of our Society.
 Invite housing activist Chandrashekhar Prabhu and others for a free
seminar in our building.
 Watch informative videos on Youtube channel. Prabhu Sir’s channel is
“Chandrashekhar Prabhu Official”.
 Can meet office bearers of societies who have successfully carried out
Self redevelopment.

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 Thanks for your time and patience in
watching this presentation.

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