How to navigate through redevelopment

The near-dilapidated state of many housing societies,necessitates redevelopment and selecting the right redeveloper is a job half done

In many cities,rising costs and lack of space make it unfeasible for residents to move out of aging and often sadly dilapidated housing societies. Not surprisingly,redevelopment has become a central concept and the subject of increasingly heated debate.

Let us take the case of Mumbai. Many of the citys older housing societies are showing signs of serious neglect. There are distinct safety and security issues and a complete absence of modern amenities. In this scenario,redevelopment is a sensible,viable,long-term solution in fact,often the only solution. However,while many developers sell the dream of redevelopment to housing societies,there have been several cases where the dream has turned sour for the families who reside in these societies.

There have been instances of many developers,even some prominent ones,who have defaulted on their redevelopment promises. It is quite evident that selecting a dependable and trustworthy builder who is familiar with and knowledgeable about the processes involved is fundamental to ensuring successful redevelopment.

A redevelopment project going wrong can have disastrous consequences for all stakeholders,and it is invariably the housing societys managing committee that becomes the scapegoat.

A failed redevelopment effort can be avoided by adhering to a proper process while selecting a developer to partner with. Once the developer is finalised,it is important to incorporate all of the standard 27 clauses that safeguard the society and its members into the development agreement. This can eliminate the possibility of disputes at a later date to a significant extent.

The cure for a botched redevelopment would be legal proceedings against the developer. However,as per law,a redevelopment project has to be completed within two years a period that can be extended to three years in exceptional cases. Legal proceedings against the developer could take several years,making this a non-viable route and often not an option at all.

While selecting a developer,both financial and quality aspects need to be considered. Most societies focus on only quantitative financial terms,which include:

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The carpet area offered to each society member,the corpus amount offered,FSI consumed,alternate accommodation,shifting charges,penalties and specification.

What gets ignored with such a blinkered focus are the qualitative aspects of the developer,which would include past experience and track record. Extensive research needs to be done on the developers construction,marketing and legal track record.

These are the questions that need to be asked:

Quality and brand: Does the developer have a strong brand and will the rest of the redevelopment scheme be on par with the quality of the developers portion?

Legal matters: Is the developer known for violations? What is the track record on aspects such as title? Can he get all necessary approvals in time?

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Operations: What are the systems and processes? Does the developer have strong teams for execution? The record of cost and time overruns also has to be factored.

Finances: What are the developers abilities in raising equity and debt funding? What is the current fund availability and funding pattern,and is the accounting transparent?

The society should do a reference check where the developer has constructed and delivered projects. It is essential to establish whether he adheres to promises on quality and timelines made in the agreement. A developer with good credentials would not only command a premium over competition in pricing but also have easy access to low-cost capital.

The Search

There is no single,standard solution in redevelopment. The process is complex and there are no one-size-fits-all choices among re-developers. The process involved in searching a developer should be customised,flexible,transparent and in line with the redevelopment rules. The society should engage a good advisor so that the final selection garners the highest value for the society.

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Any commercial offers from potential developers should be driven by competition rather than price. Awareness has to be created amongst all the relevant developers,and a single,unified message should go out to them from the society.

Author is Managing Director 8211; West India,Jones Lang LaSalle India