What is Self Redevelopment?
When the members of a housing society take up the onus of redevelopment of the old building(s) in their housing society and undertake all steps required to redevelop including raising finance and managing the project execution themselves without a Builder, it is known as Self Redevelopment.
Is Self Redevelopment a new concept?
No, it is not a new concept. In fact, self development was the main approach of development undertaken in the 1960s when people used to come together, form a society, collate funds through mortgage and get the project executed by appointing a contractor. The norms and regulations were not too complex like they are today.
Is Self Redevelopment more beneficial as compared to builder redevelopment?
Yes. The benefits of self redevelopment in terms of control over the project, additional carpet area for members and profit are far more as compared to builder redevelopment.
Why should a Housing Society opt for Self Redevelopment instead of builder redevelopment?
In Mumbai, there are more than 5800 projects which are stuck in builder redevelopment at different stages affecting more than 1.25 lakh families. Traditional Redevelopment gives maximum power in the hands of the builder which is often misused by them, whereas in self redevelopment the entire process is in control of the society members.
MDCC Bank and Funding for self redevelopment projects in Mumbai
What is MDCC Bank?
MDCC Bank (also referred as Mumbai Bank) stands for Mumbai District Central Co-operative Bank Ltd. It is a central financing agency of all affiliated co-operative societies in Mumbai district. It is currently the only cooperative bank in Mumbai providing finance to self redevelopment projects in Mumbai.
How much funding does MDCC Bank give for Self Redevelopment in Mumbai?
For self redevelopment projects, MDCC Bank can provide finance up to 95% of the project cost to a maximum of Rs. 115 Cr at a 12.5% simple rate of interest per year.
What about the remaining 5%?
The society members need to arrange for the initial 5% of project funding for the self redevelopment project. They can generate this amount through extra area purchase by members. The other option is to generate funds through investors or NBFCs.
What is the loan duration provided by MDCC Bank for repayment of loans given to Self Redevelopment projects in Mumbai?
Based on the size of the Project, MDCC Bank offers the following options.
- For Projects requiring funding up to Rs. 50 cr, loan repayment term is 7 years, out of which first 2 years are the moratorium period.
- For Projects requiring funding of more than Rs. 50 cr, the loan repayment period is 10 years out of which the first 3 years are the moratorium period.
What does moratorium period mean?
Moratorium period is a time within the loan repayment term during which the borrower Society is not required to make any repayments i.e. the loan repayment starts at the end of the moratorium period. It is a waiting period before which repayment by way of EMIs begins. However, the interest income starts getting accumulated even though your EMIs don’t start.
What part of the project cost of a Self Redevelopment Project is covered under the loans provided by the MDCC Bank?
The MDCC Bank covers all cost heads of the self redevelopment project cost – e.g. construction cost, purchase of TDRs, costs of premiums and approvals, fees of professional agencies involved, rent for alternate accommodation during the reconstruction period, shifting members to alternate accommodation and reshifting back to the redeveloped building, brokerage that will be incurred to sell extra flats, new amenities planned in the redeveloped society like garden, play area, clubhouse etc.
Self Redevelopment Process
How do I start with the Self Redevelopment process in Mumbai?
The self redevelopment process starts with initiating and presenting the idea of self redevelopment among the society members and getting consent from 51% of the society members and passing a resolution in SGM for self redevelopment, to begin the process.
What is the process to get the required 51% approval?
To start the process, not less than 1/5 of the members of the society should submit an application along with their plan and suggestions regarding self redevelopment of the building to the Secretary of the Managing Committee of the society and for arranging a Special General Body Meeting. During this SGBM, 2/3 of the total number of members of the society should be present and 51% of the total members of the Society should approve the Self-Redevelopment proposal.
Is 51% approval mandatory for housing societies of all sizes?
Yes. As stated in the Revised Redevelopment Direction dated 4th July, 2019 issued u/s 79A of the MCS Act, 1960.
The members of our society have discussed and are okay with the idea of Self Redevelopment. However, none of us have the time or expertise to initiate and lead a project like this. What can we do?
You can take help from seasoned professional Project Management Consultants (PMC) for self redevelopment like Wedevelopment, who manage the entire project execution of the project making it a hassle-free aproach for the Society.