Redevelopment Of A Real Estate Project In Gujarat

Redevelopment of real estate projects has become a vital aspect of urban development, especially in densely populated areas where land is scarce. In a dynamic landscape like Gujarat, where urbanization is rapidly advancing, the process of redevelopment holds immense potential to transform outdated structures into modern, sustainable, and aesthetically appealing developments.

Redevelopment is the process of demolishing and reconstructing an existing building or a group of buildings to create new and improved structures that meet the current needs and standards of the occupants and the society.

This article aims to provide a comprehensive insight into the process, benefits, and legal guidelines surrounding real estate redevelopment in Gujarat which is governed by the Gujarat Ownership Flats Act, 1973 and its amendment in 2019. We will also briefly include snapshots of important judgements on redevelopment.

Reasons of Redevelopment.

• To replace old and dilapidated buildings that are unsafe and unhealthy to live in;
• To increase the floor space index (FSI) and utilize the land potential more efficiently;
• To provide larger and better amenities to the residents, such as parking, fire safety, security, etc.;
• To enhance the aesthetic and environmental quality of the area;
• To generate revenue from the sale of surplus units or commercial spaces.

Redevelopment is done by:-

• The owners or members of the building or society themselves.
• The developers or builders who enter into an agreement with the owners or members.
• The public authorities, such as Gujarat Housing Board (GHB), Urban Local Bodies (ULBs), Urban Development Authorities (UDAs), etc.

Legal guidelines for redevelopment in Gujarat.

• The redevelopment has to be done with the consent of not less than seventy-five per cent of the members of the society.
• The redevelopment has to be done after twenty-five years of the issuance of the permission for development or if the building is declared dilapidated, ruinous or dangerous by the concerned authority.
• The redevelopment has to be done by a registered developer or builder who has experience in redevelopment projects.
• The redevelopment has to be done as per the Common GDCR, Redevelopment Rules, Affordable Housing Policy, etc.
• The redevelopment has to be done with all the necessary clearances and permissions from various authorities, such as GHB, ULBs, UDAs, RERA, fire department, environment department, etc.
• The redevelopment has to be done with safety norms and environmental standards.
• The redevelopment has to be done with transparency and accountability.

Process of Redevelopment

• Initiation: The redevelopment can be initiated by the managing committee of the society suo-moto or by an application from at least one-fourth of the members of the flats. The managing committee has to call for a special general meeting within a period of one month on receipt of the application. The meeting has to follow the rules and bylaws of the society with respect to convening, notice, agenda, quorum, decision, agreement, minutes, etc.
• Consent: The consent of not less than seventy-five per cent of the total members of the society for redevelopment is necessary. The consent has to be obtained in writing.
• Developer selection: The managing committee along with the society members has to select a developer for construction of the project. The proposals of redevelopment received from various developers shall be evaluated based on various parameters, such as financial capability, technical expertise, quality standards, track record, etc. However, the society shall give more priority to the experience and project completion capacity of the builder over other things. The selection can be from the internal references or through a tender bidding process.
• Registered Development Agreement: The society has to select the best developer or builder and enter into a registered development agreement with him. The society can engage advocate/consultant for preparation/verification of the documents so as to safeguard their rights. The agreement has to specify the roles and responsibilities of each party, the scope and specifications of work, the payment terms and schedule, the penalty clauses for delay or default, the dispute resolution mechanism, etc. The said development agreement must be registered with the sub-registrar. Currently the stamp duty of 3.5% of the Jantri Value and registration fees of 1% of Jantri value is payable on the same.
• Plan Approval and Permissions: The developer or builder has to obtain all the necessary clearances and permissions from various authorities, such as GHB, ULBs, UDAs, RERA, fire department, environment department, etc. for carrying out the redevelopment project. The developer or builder has to comply with all the applicable rules and regulations, such as Common GDCR (General Development Control Regulations), Redevelopment Rules, Affordable Housing Policy, etc.
• Demolition: The developer or builder has to demolish the existing building or society after vacating all the members and providing them with alternative accommodation and rent as agreed upon. The demolition has to be done in a safe and scientific manner without causing any damage or inconvenience to the neighboring properties or people.
• Construction: The developer or builder has to construct the new building or society as per the approved layout plan and design within the stipulated time frame. The construction has to be done with quality materials and workmanship under the supervision of the architect or project management consultant. The construction has to follow all the safety norms and environmental standards.
• Handover: The developer or builder has to hand over the possession of the new flats or units to the members after obtaining all the completion certificates and occupancy certificates from the concerned authorities. The developer or builder has to also hand over all the documents and records related to the redevelopment project to the managing committee.

Benefits of Redevelopment

• Infrastructure Upgrade: Redevelopment projects provide an opportunity to upgrade and modernize infrastructure, including roads, drainage systems, and utilities, enhancing overall living conditions.
• Increased Housing Stock: Redevelopment optimizes land use by replacing old structures with modern, multi-story buildings, thereby increasing the available housing stock.
• Enhanced Aesthetics: The introduction of contemporary architectural designs and landscaping improves the visual appeal of the area, contributing to the overall urban aesthetics.
• Improved Amenities: Redevelopment projects often incorporate amenities such as green spaces, recreational facilities, and commercial spaces, enhancing the quality of life for residents.
• Economic Growth: The real estate and construction industries experience growth through increased demand for skilled labor, building materials, and related services, fostering economic development.

Some important Judgements in relation to Redevelopment

Hansaben Ratubhai Prajapati v. State of Gujarat. ? (Gujarat High Court decided on 11-04-2023)

When a redevelopment scheme is in the interest of public at large, the entire project cannot be put to a standstill at the behest of few persons (14 petitioners) when 75% of the occupants have consented to the redevelopment.

Adityaraj Builders v. State of Maharashtra. (Bombay High Court decided on 17-02-2023.)

• A development agreement (DA) between a cooperative housing society and a developer for developing society’s property (land, building, apartments, flats, garages, godowns, galas) requires to be stamped.
• The development agreement need not be signed by individual members of society as a mandate. Even if individual members do not sign the DA, it controls the re-development and society members’ rights.
• A Permanent Alternate Accommodation Agreements (PAAA) between developer and an individual society member does not require to be signed on behalf of the society.
• Stamp cannot be levied twice. Once the DA is stamped, the PAAA cannot be separately assessed to stamp beyond the requirement of Rs. 100 under Section 4(1), if it specifically relates to rebuilt or reconstructed premises in lieu of the old premises used/occupied by the member. The same applies even if the PAAA includes an additional area available to the member, since it is not a purchase or a transfer but is in lieu of the member’s old premises. The stamp on DA includes reconstruction of every unit in the society building.
• If PAAA is limited to rebuilt premises in the absence of actual purchase for consideration of any additional area, such PAAA is an incidental document under Section 4(1) of the Stamp Act.
• PAAA between a developer and a society member must be additionally stamped if it provides for purchase for actual stated consideration and a purchase price of additional area beyond the area given to the member against the earlier premises.
• Assessing stamp on PAAA on construction cost of the new premises in lieu of old premises cannot be sustained.
• Reference to redevelopment and homes includes garages, galas, commercial and industrial use and every form of redevelopment of the society.

Redevelopment is a complex and challenging process that requires careful planning and execution. It involves various stakeholders, such as members, managing committee, developer, builder, architect, consultant, authorities, etc. It also involves various risks, such as legal disputes, financial losses, delays, defects, etc. Therefore, it is advisable to seek professional guidance and assistance from experts in the field of redevelopment.

Redevelopment is a powerful tool for revitalizing urban spaces in Gujarat, catering to the growing demands of modern living while simultaneously enhancing the aesthetic and economic aspects of the region. By adhering to the established legal guidelines and fostering cooperation between stakeholders, successful redevelopment projects can contribute significantly to the state's urban development narrative. As Gujarat progresses towards a more vibrant urban future, redevelopment stands as a testament to innovation, sustainable growth, and community development.