The trend of re-development of properties in India

Redeveloping properties is a recent trend catching up in India

The trend which has been followed in the western countries has gained momentum in India too. The re-development of property is one of the emerging trends in the India real estate sector. Due to the large populace spread all over and the stagnation of the properties in central areas, the land development process has come in to action in India. Many apartments and the properties in India have adopted the concept of re-development through renowned developers. India also has many re-development projects coming up in the next few years.

What is re-development of properties?

The real estate re-development is a multidimensional business which encompasses the activities that range from the makeover, re launching and the re-leasing of the existing buildings with improved land parcels to the customers. The main co-ordinators of this activity are the developers who convert the ideas of paper into the real property development.

The concept of re-development has been endorsing many positive ideas. For e.g.; if you think that renovating your old building is not worthy because of its bad state, you are wrong. The broken pipes, the cracked walls and the major repairs should be taken care of with the process of re-development. This will need a large amount of fund to the society and a society cannot manage the perpetual repairs which the building might have in future. In such cases, the re-development process acts as a greater means of real estate.

Why is re-development important in India?

As mentioned earlier, many regions in major cities like Mumbai, Bangalore, Chennai and others are stagnated. The repairs in the buildings in these areas cannot be funded always; hence re-development is the best option.

Cities like Mumbai and others have adopted the re-development technique, as majority number of the buildings are owned by the co-operative societies and have become old without proper care. In such cases, the builders approach the old societies or an open plot of land or owners of the old structures who are willing to demolish and reconstruct new buildings.

When the owners are informed about this advantageous development, they agree with the developers. In return, the builders pay an amount of consideration to the society for permitting the re-development of the building or the open plot. The developers also construct a bigger building by using the Transferable Development Right (TDR) and the Floor Space Index (FSI) once the building is demolished. The members of the flat are provided with alternate residential flats until the complete construction of the building. This entire process will help in creating newer and better projects on the same old plot in the cities.

Essentials of the re-development process

• In order to proceed with the re-development process, the builder and the owner has to take a lawyer’s advice who is well aware about the provisions of the Stamp Act, the Co-operative Societies Act and the Income Tax Act of the particular city. Throughout the re-development process, both the owner and the builder should be aware of all the documentations which are required and also should understand the tax implications on the property development.
• One of the most important documents in the re-development process is the “development agreement”, which authorizes the developer to develop the land. During this process both should make sure that the appropriate stamp duty and the registration are done.
• Under the re-development process the builder approaches the owner and enters into an agreement with the owner seeking for permission to develop the land on the owner’s behalf.
• The builder re-develops the project at his cost and retains some of the flats or part of the property for himself in order to sell it in the market. Whereas, the owner is given few flats or parts of the property as well as a monetary amount for the permission. The re-development process by the developer will be carried out under the capacity of a constituted attorney stating that the owners will appoint and not on his own behalf.
• Once the re-development process is done, the re-developed property is sold by the developer in the open market which fetches him the profit. The builder saves on the stamp duty cost. Later when the building is completed, both the owner and the builder are part of the conveyance deed on which the stamp duty is payable and is registered.
• A society or an owner should have a valid conveyance deed of land and building in their favour before passing it for the re-development. This includes acquiring the marketable title, the permission for the reconstruction of additional floors using the TDR and FSI. If not the property might not get an approval of the plan from the Municipal Corporation. Due to the ignorance, majority of the builders fail to convey the title to the owner when the property is re-developed on the land.

Most of the owners in many cities do not have the land conveyed in their favour. The reason for this is that, in most cases the builder or the previous owner still is the owner of the property. This leads to a situation where the re-developed property owners have only the possessor rights and not the ownership of their property and are deprived of the main driving sources; i.e., the additional FSI and TDR.