After having spent lakhs on maintaining their almost 40-year-old cooperative society in Mumbai, residents decided to redevelop their complex themselves instead of handing it over to a developer. With help from a redevelopment consultant, they first got a cost analysis done, ensured they had all technical papers and approvals in place, appointed an architect and even got a loan sanctioned by a bank.
Once the project is completed within 18 months, residents will not only get additional redeveloped space but will also be handed over 25 additional apartments that can be sold in the open market to generate additional funds. “It is a win-win for us,” say residents.
Self-redevelopment, explains Pranay Goyal, founder, Wedevelopment, is all about the residents getting together to redevelop their 30 to 40-year old cooperative societies. After Mumbai, the organisation has plans to do similar projects in Pune, Delhi and Nasik.
The organisation is currently working on two such projects in Borivali in Mumbai. “We are redeveloping an area of 30,000 sq ft. The society currently has 20 units, this will be redeveloped to 45 units,” he says.
There are several challenges along the way. The primary challenge is do with the residents themselves. Consent of members of the cooperative society is essential and so is the trust factor.
As for finance, major cost of the redevelopment is borne by banks. “Under our redevelopment model, we have a pool of investors who fund such projects and also banks who are keen to promote self- redevelopment and fund such projects,” says Goyal.
In fact, many financial institutions have started looking at it positively as self-redevelopment is a trillion dollar industry.
Which projects are eligible for self-redevelopment? The society should be at least 30 years old and have all the technical documents in place to take the process forward.
“The major constraint in redevelopment is the society members themselves. The choice for them is between redevelopment and self- redevelopment. We have managed to develop a one-window system for societies wherein we try and get on board professionals to work with us to provide end-to-end solutions to a society,” he explains.
In case of the two projects in Mumbai, flat members have contributed or purchased area equivalent to 25 to 30 percent of the total project cost and the rest of the funding has come from banks as term loans.
As for timelines, completing a project may take three to four years, depending on the size of the project. “As for these two projects in Mumbai, it will take around 18 months to complete,” says Goyal.
As for benefits that accrue to residents – they all have a share in the society. Owners get bigger flats and the society has the right to sell the additional flats in the open market. The money realised from the sales proceeds is either used for project completion or repayment of the bank loan. The surplus amount can be distributed among existing society members. The amount stays with the residents instead of the builder.
Finally, here’s what societies keen to self-redevelop their projects should keep in mind before getting into such an arrangement. There should be unity among society members for getting ahead with a self-redevelopment project and the objective for getting into self-redevelopment should be clear.