Prevent Financial Losses In Redevelopment Of Housing Society
It has been observed that several cooperative housing societies and their members undergo financial losses during the process of redevelopment of the housing society. Herein, it is important to take important safeguards in advance for the prevention of financial losses to the housing society, and its members.
Here is a checklist for the said important safeguards:
Monthly Transit Rent:
Normally, the developers provide the transit rent which is equivalent to the existing rent of the locality of the housing society, to be calculated in per sq. ft.
Here it has been observed that the Developers and housing societies enter in to Development Agreement (DA) and then take a few years for completing the other formalities, wherein a few years pass away and the transit rent of the locality has increased, In such scenarios the society members have to pay the extra amount of rent from their own personal pockets for a couple of years, leading to the financial losses of the society members.
Increment in Monthly Transit Rent:
It has been observed that society members have to bear the increment of their transit rent accommodations, while their housing society is under redevelopment. This happens because their housing society had not made provisions with the developer for an annual increment in the transit rent to be provided to the society members during the redevelopment of the housing society.
Solution: Housing Society members should ensure beforehand that a substantial annual increment is mentioned in the housing society's Development Agreement with the developer.
Default In Payment Transit Rent:
It has been observed that several housing society members suffer financial losses due to the default by the developer in payment of transit rent and/or it's annual increment or both.
Solution: The society members should calculate the amount that totals to a minimum of three years of Transit Rent including the annual increments, and procure a Bank Guarantee of double the calculated amount, which will ensure that the developer does not default in the payment of the transit rent and the annual increments in the transit rent to housing society members. All these facts should mandatorily appear in the Development Agreement (DA) between the housing society and the developer.
Possession of Redeveloped Flat:
It has been observed that several society members within the first five years of taking possession of their redeveloped flats suffer financial losses due to construction defects, causing leakages, seepages etc.
Solution: The development agreement (DA) should contain the conditions that:
1. In case any construction defects are found within the first five years of the Occupation Certificate (OC), then the developer shall get the same fully repaired immediately within a period of 15 days,
2. The Earnest Money Deposit (received by the housing society at the time of bid submission) of the Developer will be returned to the Developer by the housing society only after a period of one year from the issue of the Occupation Certificate.
Financial Losses Due To Disputes & Litigations:
It has come to light that many times, the housing societies and the society members incur financial losses due to various disputes & litigations arising out of/due to the redevelopment of the housing society.
Solution: The development agreement (DA) should contain the condition that:
1. The developer indemnifies the housing society for any and all expenses arising due to / out of the redevelopment of the housing society.
2. The developer agrees to incur and pay all the expenses to be paid/incurred for all the legal processes arising out of/due to the redevelopment of the housing society, jointly as well as severally, for and on behalf of and for all the housing society members.
Conclusion:
In this ever-evolving world of housing redevelopment, it is very necessary for the housing society and it's society members to prevent financial losses arising out of/due to the redevelopment of the housing society. So please keep yourself regularly updated on the subjects of housing society, housing society redevelopment & real estate redevelopment.
FAQs On The Redevelopment Of Society Answered Here:
What is the process of the redevelopment of society?
A Step-by-Step Guide to the Housing Society Redevelopment Process
Navigating the redevelopment of a Cooperative Housing
Society (CHS) can be a complex journey involving legal, financial, and
technical milestones. Under Section 79A of the Maharashtra Co-operative
Societies Act, the process has been streamlined to ensure
transparency and protect the interests of every member.
If your society is considering a transformation, here is
the unique roadmap to follow in 2026.
1. Establishing the Foundation (Initiation)
The journey begins with a collective desire for change.
This phase focuses on formalizing the intent of the members.
The
Requisition: At least 20% of
the society members must submit a formal request to the Managing
Committee to discuss redevelopment.
The
First Special General Body Meeting (SGM):
Within 30 days of the request, an SGM is convened. Here, a preliminary resolution
is passed to move forward.
Appointing
the PMC: A government-approved Project
Management Consultant (PMC) or Architect is appointed. Their role is
to act as the society's technical and legal guardian throughout the project.
2. Technical Feasibility & Competitive Bidding
Before choosing a partner, the society must understand
its own potential and market value.
Feasibility Assessment: The PMC prepares a detailed report analyzing the plot's FSI
(Floor Space Index), available TDR,
and the construction potential. This tells members exactly how much "extra
area" and "corpus fund" they can realistically demand.
The Tender Process: The society invites bids from reputable developers. To
ensure a fair market price, it is standard practice to invite at least five competitive
tenders.
Comparative Analysis: The PMC evaluates these bids not just on money, but on
the developer's track record, financial liquidity, and previous project
quality.
3. The Power of Consent (Developer Selection)
Legally, a project cannot proceed without a clear mandate
from the residents.
The 51% Rule: In 2026, the legal threshold for selection is 51%
written consent from the total members.
Official Selection SGM: A second SGM is held to finalize the developer. To
maintain total transparency, these meetings are often video-recorded and
conducted under the observation of a representative from the Cooperative
Department.
4. Legal Safeguards & Documentation
This is the most critical phase for risk mitigation.
Every promise made by the developer must be etched in legal stone.
Development Agreement (DA): This master contract outlines the timelines, the Bank
Guarantee (usually 20% of the project cost), and penalty clauses for
delays.
PAAA (Permanent Alternate
Accommodation Agreement): Each member
signs an individual contract specifying their new flat's floor, unit number,
and precise carpet area.
MahaRERA Compliance: The project must be registered under RERA
before any sales or significant construction activity begins, providing a
secondary layer of government protection.
5. Construction and Handover
The final phase moves from paperwork to brick and mortar.
Vacating the Premises: Members move to temporary housing once the Intimation
of Disapproval (IOD) and Commencement
Certificate (CC) are obtained. The developer begins paying the
agreed Transit
Rent.
Milestone Monitoring: The PMC regularly audits the construction quality and
ensures the developer adheres to the timeline.
The Occupation Certificate
(OC): No member should take possession until
the local municipal authority issues the OC. This document confirms the
building is fit for habitation and built according to approved plans.
Essential Redevelopment Terminology
|
Term |
Importance |
|
Section 79A |
The legal framework governing
the entire process. |
|
Corpus Fund |
A lump sum paid to the
society to offset future maintenance costs. |
|
Bank Guarantee |
Financial security provided
by the developer to ensure project completion. |
|
Transit Rent |
Monthly compensation for
members while they stay in rented homes. |
|
FSI & TDR |
The technical metrics that
determine the size and height of the new building. |