‘Move to allow district, state cooperative banks to fund self-redevelopment welcome’

A number of redevelopment projects in the MMR have been stuck in litigation between the developer and housing society. File pic

The RBI's June 8 announcement, allowing district and state co-operative banks to use 5 per cent of their total commercial real estate asset for self-redevelopment will come as a boon for thousands of stalled projects. Real estate experts have welcomed the decision and said self-re-development provides maximum security to the members, less litigation and provides additional benefits to the members in the form of additional area, additional corpus over and above what the developer offers.

mid-day in its article on April 30 had highlighted the pros and cons of self-redevelopment.

Advocate Shreeprasad Parab, director at Maharashtra State Housing Federation Ltd, said, "Self-redevelopment is the fulfilment of the dream of affordable housing by means of sharing the developer's profit among all the members and also providing flats at cheaper rate. The biggest hurdle of self-redevelopment was getting the funds required to develop the property. With the Reserve Bank of India's decision, this has become easier."

"Housing societies willing to undertake self-redevelopment should be prepared with the following compliances - get the conveyance of the property executed, feasibility report of the plot to ascertain plot potential, check the validity of the tenure of the managing committee, and update the records of the society as per the provisions of law," said Parab.

Less litigation, better profit

"The Maharashtra State Co-operative Bank has invited us [the federation] for framing the policy. We will insist that they fund self-redevelopment projects from the start [from the stage of receiving Intimation of Disapproval]. If this is accepted, we expect around 85 to 90 per cent of the cost will be financed and the remaining will have to be funded by the society," he said.

Chartered Accountant Ramesh Prabhu, founder chairman of Maharashtra Societies Welfare Association, said, "Considering the number of stalled redevelopment projects in the Mumbai Metropolitan Region, cooperative housing societies were looking for an option for redevelopment with least litigation and the assurance of getting the project completed. Self-redevelopment emerged as the best option where the societies appoint the architect to get the plan passed and the contractor to complete the project at fixed rate or on barter system. However, societies were also looking for bridge finance till the project is completed and Occupancy Certificate is obtained."

Nearly 3,000 unregistered projects and nearly 2,500 RERA registered projects are stalled in MMR while hardly 25 to 30 societies have opted for self-redevelopment.

The journey for funds

"Mumbai District Central Cooperative Bank and Maharashtra State Cooperative Bank used to give loans to their member societies for major repairs by mortgaging the land. Now since societies are planning redevelopment, Mumbai bank decided to lend funds for the same. Considering this, the state government on September 13, 2019 issued a notification declaring Maharashtra State Cooperative Bank as a nodal agency to grant funding for self-redevelopment. Accordingly, the bank sought permission from RBI in September 2019, but RBI denied it," explained Prabhu.

"After constant follow up by MahSeEWA and the federation and Mumbai banks, now RBI by notification dated June 8, 2022 allowed the district and state cooperative bank to lend for commercial real estate- residential housing projects. This means now all district banks and Maharashtra State Cooperative Bank may fund upto 5 per cent of the total assets for self-redevelopment. Considering the needs of the customers, individual housing loans for tier-I cooperative banks have been enhanced from Rs 30 lakh to Rs 60 lakh and for tier-II cooperative banks from Rs 70 lakh to Rs 140 lakh," he added.