Property Redevelopment

Redevelopment in Mumbai — the complete guide (what, why, how, who, and how to do it right)

Mumbai’s redevelopment market is large, fast-moving and legally complex. Old chawls, “cessed” buildings, co-operative housing society blocks and slums are constantly being redeveloped to meet demand for modern, safe housing and to make better use of scarce land. Redevelopment can give flat-owners new apartments, modern amenities and (often) financial consideration — but the process involves many stakeholders, regulations and risks. This guide explains everything a society committee, owner or investor needs to know.

1) What is redevelopment (in Mumbai terms)?

Redevelopment means demolishing (or substantially reworking) an existing building or group of buildings and constructing a new building(s) in its place — typically with higher floor-space and modern amenities. Redevelopment projects in Mumbai generally occur under one of these routes:

• Society-led redevelopment for co-operative housing societies (developer gives new flats + sale component).
• Slum Rehabilitation / SRA projects, where slum dwellers are rehoused and developers get extra FSI/TDR as incentive.
• MHADA / Cessed building redevelopment, using special schemes for dilapidated or ‘cessed’ tenement blocks.
• Private redevelopment / commercial redevelopment where individual owners or promoters redevelop their plot.

Each route follows different rules and incentives set by the State and municipal authorities.

(Cited background on categories and public agency roles is discussed in Maharashtra / Mumbai redevelopment documents and industry guides.)

2) Why redevelop? Benefits and motivations

For owners / society members:

• Modern, safer homes (structural safety, earthquake, fire norms).
• Free new flats (one or more flats given to each owner, often with better layout).
• Improved amenities (parking, lifts, clubhouse, security).
• Better returns — sale of developer’s “sale component” usually funds the project; owners may also receive cash compensation or additional built-up area.

For developers:

• Profit from sale component or transfer of FSI/TDR.
• Opportunity to build high-value inventory in prime locations.

For the city:

• Densification done in a planned way, removal of dilapidated stock, and improved infrastructure when done rightly.

However, benefits are conditional on the chosen scheme, the builder, and adherence to rules.

3) Key government norms and rules you must know

Redevelopment in Greater Mumbai is governed by municipal Development Control & Promotion Regulations (DCPR), state policies (MHADA rules, SRA scheme), RERA and other notifications. Key concepts:

• DCPR 2034 / Uniform Development Control Regulations: These set how much built-up area (FSI/FSI bonuses), road width criteria, and other planning permissions work for redevelopment projects. DCPR 2034 includes specific redevelopment sections that impact how much redevelopment incentive FSI or sale component can be generated and how it’s released. godbolemukadam.com+1
• FSI, bonus FSI and Transferable Development Rights (TDR): Base FSI is the standard floor area ratio for a plot. Projects can access additional FSI via fungible FSI, redevelopment bonus and by buying/using TDR. For slum/SRA projects the state may allow higher FSI. These levers determine the size of the developer’s sale component and therefore project economics. Acres Developers+1
• SRA & MHADA Schemes: Slum rehabilitation and MHADA have separate norms, with incentives like higher FSI or specialized compensation mechanisms to ensure on-site rehabilitation or relocation. (Recent amendments and government drives have made MHADA more active in pushing cessed building redevelopment.) The Times of India+1
• Consent thresholds & society approvals: Historically societies required a high threshold to approve redevelopment. Recent statutory changes and legal updates in Maharashtra have altered consent requirements and timelines (consult current circulars / society law specialists to confirm exact percentage and procedure for your case). “Rest The Case”+1
• RERA (MahaRERA) registration: Most redevelopment projects where flats are sold must be registered with MahaRERA; this gives buyers and owners statutory rights, project disclosures, timelines and a dispute resolution forum.
• Statutory clearances: Environmental clearance (if applicable), tree removal permissions, coastal regulation zone (CRZ) rules, labour & contractor compliances, and approvals from the municipal building department are all required before construction starts.

Because regulatory frameworks change and municipal notifications are periodically updated, always confirm specific numbers and steps from the latest DCPR notifications, MHADA, SRA and MahaRERA portals.

4) The step-by-step redevelopment process (society-led / common scenario)

Below is a typical sequence for co-operative society redevelopment — timeline commonly ranges from 3 to 6+ years depending on approvals and construction speed.

1. Initial feasibility & structural audit
   • Structural audit confirms building is old/dilapidated and recommends redevelopment. This is essential for MHADA/cessed building cases and often used to justify redevelopment.
2. Formation of redevelopment committee
   • Society forms a small committee to manage RFPs, builder selection, legal checks and member communication.
3. Shortlisting & inviting proposals from builders
   • Invite multiple builders, get conceptual proposals (plans, built area offer to members, timelines, sample agreements).
4. Due diligence & builder checks (see detailed checklist below)
5. Approval & consent by members
   • The society holds a general body meeting and passes the resolution authorising the committee to finalize the builder once required consent is met. (Percentage consent depends on the applicable law/amendment; confirm current threshold.)
6. Draft & sign redevelopment agreement / JDA (or MOFA/Other)
   • Typical legal instruments: Joint Development Agreement (JDA) between society & developer OR Development Agreement or Agreement to Enter into Development Agreement. Agreements must be detailed about timelines, flat sizes, handover schedule, escrow, penalties and dispute resolution.
7. Planning approvals & statutory clearances
   • Architect & developer prepare plans; submit to BMC / planning authority for permission under DCPR; obtain tree, environment, utility & other clearances.
8. Carrying out construction
   • Phased demolition & construction, temporary accommodation / transit rent for residents (if applicable), handing over of new flats; compliance with labour & safety requirements.
9. Handover & registration
   • New apartment conveyance, mutation, stamp duty payment and occupancy certificate (OC).
10. Post-handover maintenance & defect liability

• Defect rectification period, maintenance transition (often developer runs maintenance for a fixed period or hands over management to society).

For a practical guide on the stages and responsibilities, see step-by-step redevelopment guides used by practitioners.

5) How project economics work (who gets what)

• Owner compensation: Usually in the form of a new carpet/built apartment for each old flat owner, with the developer providing additional sale units (the “sale component”) to cover costs and profit. In some cases, owners may receive a portion of sale proceeds in cash or a mix of cash + unit.
• Developer’s incentives: Sale component, extra FSI/TDR, and sometimes rights to commercial space. The FSI rules and DCPR incentives determine the size of the sale component and how many sale flats the developer can sell.

It’s essential to model: (1) total built-up area permitted, (2) owner entitlement area, (3) saleable area, (4) cost of construction, statutory charges, and (5) developer margin. A transparent, auditable calculation should be part of the JDA.

6) Choosing the right builder — detailed checklist

Selecting the right developer is the single most important decision. Use this checklist:

1. Legal & financial track record
   • Check company registration, affiliated entities, audited financials (if available), promoter background, land-bank and past litigations. Confirm if the promoter has encumbrances or mortgage on balance sheet. (MahaRERA pages and company filings help.)
2. Project track record in redevelopment (not just new builds)
   • Redevelopment needs different skills (managing de-tenanted areas, transit accommodation, society coordination). Prefer developers with completed redevelopment projects nearby.
3. MahaRERA registration & complaints history
   • Check RERA registration for past/developer projects and any complaint history.
4. Technical capability & resources
   • In-house construction capacity or reliable contractors; capacity to build while maintaining safety and timelines.
5. Transparency in offer & accounting
   • Clear breakup of owner entitlement, developer sale component, parking allocation, clubhouse, maintenance; an escrow mechanism for collections; independent auditor clause for accounting.
6. Escrow & payment safeguards
   • Payments by society or owners to developer (or vice versa) should be in escrow with bank guarantees and phased releases tied to milestones.
7. Penalties, timelines & completion guarantees
   • Liquidated damages for delays, performance guarantees, completion guarantees by promoters or parent companies.
8. Conflict resolution & arbitration clause
   • Clear dispute mechanism and independent expert appointment process.
9. References & site visits
   • Visit past projects, speak with residents about handover quality and defect resolution.
10. Insurance & safety compliance
    • Builder must carry contractor all-risk insurance, workmen compensation, and follow labour & safety norms.

A practical guide from professional advisors covers exactly how to score and shortlist developers.

7) Legal protections for members / important contract clauses

When reviewing the JDA or redevelopment agreement, ensure these clauses are present and precise:

• Exact entitlement schedule: Carpet area/ built-up area per owner; location/flooring allocation rules.
• Time schedule with milestones and LDs (liquidated damages) per month/day of delay.
• Escrow mechanism & audit right: Who controls the sale proceeds and when monies are released.
• Independent architect / consultant: Appointment for measurement, certification of completion and deviation checks.
• Defect liability & rectification period: 24-36 months is common; who bears cost.
• Title & encumbrance warranty: Developer must ensure sale titles to sale units are free of encumbrances.
• Mortgage & security clause: If developer mortgages site, protect owners’ rights and ensure consent processes are clear.
• Exit clauses & alternative remedies: Where developer fails, society’s remedies and transfer of project to alternate developer.
• Third-party approvals & statutory compliance: Who pays for charges, development cess, infrastructure charges etc. — be precise.

Have an independent legal counsel (ideally with redevelopment experience) review all documents before signing.

8) Finance, taxation & costs owners should watch

• Stamp duty & registration: Owners may pay stamp duty on new flat conveyance in some structures — check current state rates and whether the developer pays on behalf of the society.
• Capital gains / tax implications: If owners get a cash component or extra built area that leads to a deemed sale, get tax advice.
• GST & construction taxes: Applicable as per project status and whether construction is sold as under-construction asset.
• Maintenance set-up: Decide post-handover maintenance and who funds initial maintenance corpus (often developer funds temporary maintenance).

Tax and surcharge rules change — take a CA’s opinion for each project.

9) Common pitfalls & how to avoid them

• Choosing builder purely on highest sale offer: The financially highest offer can be tempting, but inferior builders with higher default/delay risk cost more in the long run. Prioritise track record and safeguards.
• Vague agreement language: Ambiguities on carpet area, parking, or timing cause disputes — insist on precision.
• No escrow / poor monetisation checks: Funds released without milestones lead to project abandonment. Use bank escrow tied to certified milestones.

10) Timeline & realistic expectations

• Feasibility, approvals & tendering: 4–12 months (varies widely).
• Planning approvals, environment, and statutory clearances: 6–18+ months depending on complexity.
• Construction & handover: 24–48 months for medium projects; larger projects may take longer.

Delays are common. Ensure the JDA has realistic timelines and meaningful penalties.

11) Practical checklist (for society committees / owners)

1. Get a structural audit and a feasibility report.
2. Form a small redevelopment committee and engage an independent legal and technical advisor.
3. Prepare a clear RFP and invite at least 3 reputable developers.
4. Score developers on track record, financial strength, construction capability, offer clarity and safeguards.
5. Demand MahaRERA registration proof and check complaint history.
6. Negotiate a detailed JDA with escrow, audits, penalties, timelines & independent architect clause.
7. Ensure member consent is properly recorded and lawful notices issued to all owners/tenants.
8. Get statutory approvals and confirm who bears levies and charges (development cess, TDR, infrastructure charges).
9. Keep members informed via periodic meetings and transparent accounts.
10. Before handover, confirm OC, title transfer, defect liability & maintenance details.

(Use a professional adviser to draft and check each step.)

12) Where to get up-to-date rules & professional help

• MahaRERA portal for project registration and complaints.
• Brihanmumbai Municipal Corporation (BMC) / DCPR 2034 documents for planning & FSI rules.
• MHADA / SRA websites for cessed and slum rehabilitation norms.
• Specialist redevelopment lawyers and engineer consultants who handle society JDAs regularly.

Because rules (DCPR sections, FSI incentives, consent thresholds and SRA amendments) change with government notifications and legislative amendments, always confirm the latest versions on official portals and with advisors.

13) Short case study (typical outcome)

A 20-flat society contracts a reputable developer offering alternate flats to owners plus a sale component. After consent and JDA:

• Statutory approvals obtained in 9 months.
• Construction carried out in 30 months, with quarterly escrow releases certified by an independent architect.
• All owners received new flats with better area + parking; the society received corpus funds for maintenance.
• Developer sold sale component units to recover costs and profit.

This is an ideal scenario — many projects follow similar timelines when the developer is credible and contract safeguards are strong.

14) Final recommendations — how to proceed safely

1. Do not rush. Time spent in diligence is cheaper than moving fast with a wrong partner.
2. Hire independent advisors: a redevelopment lawyer + chartered accountant + structural/architect consultant.
3. Prioritise transparency: insist on detailed computations and an independent auditor clause.
4. Protect funds: escrow accounts and stage-linked releases are non-negotiable.
5. Check registration & grievances: verify MahaRERA registration and complaints history for any shortlisted builder.
6. Plan for the long run: factor in delays and have contingency funds.