Opt for outright sale as ready cash is a better option than dealing with redevelopment, which has many uncertainties.
Big names in real estate are approaching members of the 29,000-sq feet Vineeta Apartments Co-operative Housing Society. And, their offers are lucrative. Some builders want to buy out all the flats to construct a luxury project, and pay the owners a premium over the prevailing prices. Others have offered to redevelop the society, in exchange for bigger houses to its members. The 55-member society is divided on which of the two is a better option.
Vineeta Apartments is not the only housing society in Mumbai to get such offers. “With hardly any freehold land available in the city, builders are seeking land through the redevelopment of old properties or slum rehabilitation,” says Anand Narayanan, national director – residential, Knight Frank property consultants.
| KEEP IN MIND |
REDEVELOPMENT PREFERRED WHEN
WATCH OUT FOR |
- Delay in the project
- Builder changing, or not meeting, the specifications
- Maintenance charges will go up in new construction
- You may need to buy a parking slot unless you owned one earlier
In case of redevelopment, the builder demolishes the property to build a newer and bigger one. The residents get a new flat in exchange for the old. And, the builder profits by constructing more flats or office/shops, and selling these in the market.
In case of an outright sale, the builder buys the entire property. Residents get a higher price, as compared to what they would manage by selling their flats individually.
Redeveloped properties
Some builders promise residents new flats equivalent to the area they owned, prior to redevelopment. Some may also offer an extra 20 per cent. So, if the home was 600 sq feet, another 20 per cent would mean an increase to 720 sq feet. If the society members demand bigger flats, the builder would offer the same. In this case, the former would need to shell out extra money.
While the project is under construction, the builder also pays money to flat owners to stay in rented accommodations until they can move back into the reconstructed houses. The rent offered is in line with the current rentals prevailing in the locality.
At present, builders have also started paying rent based on the area of the flat. The developer pays the rent per square feet of the flat.
Getting re-housed in the same location is a dream come true for many, especially older members, who may be sentimentally attached to their place. Yet, there could be other reasons for opposing redevelopment.
Vile Parle-situated Ketan Harkare’s Malkauns Co-operative Society opted for redevelopment. From a 13-member society, the new building would house 30 more flats after the redevelopment. “This led to concerns of higher maintenance because of the addition of newer amenities such as a lift, which was not required in the old building,” says Harkare.
Most builders get around these concerns by handing over some part of the corpus to the society’s coffers. This helps reduce the costs of maintenance.
Once agreed upon, the legal terms include promised specifications for the new flat, besides a high interest penalty clause in case of delayed projects.
The choice between getting re-housed in the same locality and cashing out the property is usually guided by personal preferences. For instance, individuals do not wish to move to another locality if their children go to school in the same area, since getting admission is difficult. In addition, they prefer a specific location as their community is dominant in the area or they have families nearby.
But Pranay Vakil, chairman of real estate consultancy firm Knight Frank, cautions societies opting for redevelopment of property. Problems such as delays and mismatches between the promised and delivered construction specifications may surface.
According to Vakil, “The building size could double after the redevelopment, but the area on which it is constructed stays the same. This may lead to a lack of parking space for the all occupants.” In case the society did not have a parking space earlier within the colony’s perimeter, the builder may even charge for providing it within the compound.
His advice: check the builder’s track record in redeveloping properties and meet the members of some of the societies that have dealt with the builder earlier.
Outright sale
It is because of such problems that a few members, such as Rajat Joshi who belongs to Vineeta Co-operative Housing Society, preferred an outright sale of his flat. “Some research about the builder who approached us showed that their earlier projects were delayed,” Joshi says.
Even Vakil recommends relocating. “Financially, it is the best if you encash the property. You can get adjusted to a location once and for all, rather than move back and forth,” he says.
Taking up this option will depend on the amount of cash that the builder is offering, since it should be enough to help you pay for your costs of relocation.
According to Sunil Rohokale, executive director, ASK Investment Holding, “If the members feel the future worth of the property is not as much as the builder is offering them, they could go for an outright sale.”
