Govt tweaks circulars regarding rehabilitation of tenants in redevelopment projects

Following complaints regarding irregularities in determining the eligibility of tenants in redevelopment of cessed buildings in Mumbai, the Congress-NCP government had issued the two circulars— one in 2010, another in 2013—stipulating universal guidelines for eligibility and entitlement of tenants. The Maharashtra Housing and Area Development Authority (Mhada) was directed to adhere to these for plot wise or cluster redevelopment of cessed buildings.

The first circular came out on August 16, 2010. The guidelines issued also recognised the right of rehabilitation in multiple units for tenants holding multiple tenancies in a building. At that time the benefit was extended only in cases where the tenancies occupied were on different floors. Subsequently, on February 22, 2013, the Housing department, which was led by then Chief Minister Prithviraj Chavan, extended the same perk for those holding multiple tenancies on the same floor. Until then, the practice in the case of such tenants was to allocate them a single apartment on ownership in the redeveloped building which would be equivalent to or more than the collective floor areas of the previous occupied tenancies.

In simple terms, say if a tenant was occupying three adjoining rooms, each 150 square feet in size, he was previously entitled to one free rehabilitation home of 450 square feet (plus the applicable compensatory or fungible FSI). Following the 2013 circular, however, the same tenant would now become entitled for three homes, each of minimum 300 square feet (plus the applicable compensatory or fungible FSI) size. The minimum size for a rehabilitation home in such redevelopment projects is 300 square feet. In others words, the free built-up space doubled.

But the previous government had introduced a key safeguard to avoid undue claims and the possibility of an artificial inflation in the tenants’ list. It chose not to extend the benefit to past cases where the tenant eligibility had already been fixed. Both the circulars were applied prospectively, or from the date each had been published. Additional Chief Secretary (Housing) Sanjay Kumar, when contacted, confirmed to The Indian Express that a proposal to give retrospective effect to both the circulars had been approved. Sources said that Maharashtra’s housing minister Prakash Mehta too has given it a go-ahead. Sources further confirmed that a government resolution notifying the modification will be issued in the coming few days. Mhada had initiated the contentious proposal. Ironically, sources confirmed that Mhada had approached the government twice in the past with the same proposal, but the same housing department had turned it down.

Benefits for builders

The move will come as a major FSI bonanza for builders, with their sale incentives linked to the rehabilitation component. Against each tenement rehabilitation, the builder is entitled for a sale component equivalent to 50 per cent of the built-up space used for the tenant’s rehabilitation. Sources said that there could be an increase of anywhere between 20-100 per cent in the rehabilitation areas of some such tenants in ongoing projects. The builder’s sale area will shoot up. Real estate prices command a premium in the island city. The proposal now is to extend the benefit to all incomplete projects where the occupation certificate was yet to arrive. The government’s measure will also help the bigger tenants and the builders lobby to work around the cap of offering a maximum 750 square feet buildable space in free rehabilitation. Another section who may benefit a great deal from the move are real estate investors who have acquired multiple tenancy rights in old buildings. Earlier in December 2015, the Maharashtra government had legitimised tenant buyouts, lifting curbs on sale and purchase of tenancies. The government’s latest measure will sweeten the fruit further for such investors. There are also several cases in South Mumbai where the builders have themselves acquired multiple tenancies.

In defence

Sanjay Kumar, when contacted, said that the existence of cases where some deserving tenants had been denied the benefit for missing the cut-off dates had prompted the move. He even recounted a couple of such cases. But the top bureaucrat did not discount that the new arrangement may indirectly benefit builders and investors. “We’ll examine this. And if undue benefits are being passed on, we’ll cap the benefit,” he said. Mhada’s Vice President and Chief Executive Officer S S Zende, when contacted, however, refuted that builders would benefit from the move, a contention contradicted by some other senior state officials. Zende said complaints from tenants (in older cases) over the denial of the benefit had been piling up, and went onto count about “30-40 cases”.