Real Estate

Mumbai builders oppose state housing authority’s new re-development rules

PALAK SHAH Mumbai | Updated on December 11, 2019


Real-estate builders in Mumbai have lashed out at the state government’s ‘new proposed guidelines’ with regard to the re-development of old buildings, which want landlords to choose builders only from those registered with Maharashtra Housing and Area Development Authority (MHADA).

Builders who spoke to BusinessLine say this is return of ‘licence and permit Raj’ and guidelines amount to draconian set of rules for business when they are already subject to adherence of RERA provisions. They say that the right to select a builder for re-development of privately owned property should be with the owner, landlord, and society, and not MHADA.

A copy of the letter written by the Central Mumbai Developers and Welfare Association, that has largest Mumbai based developers under its umbrella, and addressed to Maharashtra housing secretary says such guidelines will give ‘controlling and unprecedented powers to MHADA’ and lead to ‘cease of doing business.’

Builders are of the view that such guidelines will never stand in the court of law as they simply open up newer vistas for corruption. The guidelines effectively say that MHADA will choose, as per specific criteria, and maintain a list of builders who are to be given re-development work in the state.

The letter, a copy of which is with BusinessLine, says that there is no need to frame any further contrary guidelines for builders when they are already subject to stringent norms under RERA and in addition strict terms already prescribed in MHADA No Objection Certificate under MHADA Act.

Curbing the rights

“Mandating landlord and owners of cessed properties to select a developer from those who have registered themselves with MHADA will amount to curtailing owners and landlords’ right to select a developer of their own choice. This especially, considering when majority of buildings are on the small plot in the island city with a lot of limitations to undertake such complicated re-developments under present norms,” the letter said.

“It will certainly create a monopolistic situation in the sector, which will not only be against the law but will also effect the healthy growth of the sector. There are more than 16,000 buildings in Mumbai alone which needs to be re-developed and curbing competition will result in driving up cost for reconstruction,” the letter added.

The guidelines

The proposed guidelines have put entry barriers on builders by specifying criteria such as turnover and completion of work in past, which legal experts say have a potential to render several builders ineligible despite their genuine capabilities and track record.

The guidelines say that property owners select a developer and they will require no objection certificate from Mumbai Building Repair and Reconstruction Board (MBRRB). The MBRRB will first check the status of rehabilitation in the past projects and only then issue NOC for the new.

If this rule is to be followed, it will create chaos as occupation certificates for buildings for several years are still pending in Mumbai and a large number of builder will become ineligible for any new work.

The guidelines also say that the builder to open a new escrow account jointly with the proposed society to be formed. This is practically impossible as society yet to be form has no statutory recognition.

The letter says that builders are already bound by a legal agreement for rent and other dues, and new guidelines will lead to duplication of investment and blockage of developers substantial amount.

As per RERA, a builder is already required to deposit 70 per cent of sale proceeds in a separate bank account and should be utilised for project including transit rent.

Data collected by the associations show that MHADA in, till date, has granted 2,600 NOCs for the re-development scheme in the past 25 years out of which only 50-60 owners or developers have left the scheme incomplete which amounts to just around twoper cent.

The association says that it simply means re-development projects are going well if the government considers these statics and there is no need for ‘harsh’ norms when projects are registered under RERA.

Published on December 11, 2019

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