All Posts By

Satish

Self-Redevelopment Loan Policy

By | Blog | No Comments

Self-Redevelopment Loan Policy

Who will fund my society’s Self-Redevelopment project?

Let’s understand the loan policies and criteria for getting a loan approved for your Self-Redevelopment project. As of today, Mumbai District Central Co-operative Bank Ltd. (Mumbai Bank) is the only bank that provides loans for Self-Redevelopment projects.

Earlier, the Mumbai Bank would provide only construction loans but over the years, looking at the requests from Societies they introduced a special policy for supporting societies in their Self-Redevelopment projects. This policy has gone through several revisions and is now quite lucrative for societies as it gives them a better advantage and makes the process easier.

Who can take a Self-Redevelopment loan? The Mumbai Bank offers loans to co-operative housing societies that are members of the bank and have a savings bank account with the bank. A few loans have already been sanctioned and disbursed as in the case of Wedevelopment-managed projects – Jayakunj CHS and Suma Sam CHS in Borivali West, Mumbai.

When are these loans available? Loans from the Mumbai Bank are available post the society gets the ‘Intimation of Disapproval’ or IOD for the project. Societies have to fund the project themselves or seek support from external investors/ NBFCs till the IOD stage, after which they can receive the bank funding.

Lastly, what are the key features of this loan? The Bank currently funds up to 95% of project cost or up to Rs. 110 Crores, whichever is lower, at 12.5% per annum rate of simple interest and a small processing fee of 1%. Project cost considered by the Mumbai Bank includes cost of TDR, cost of premiums/ approvals/ NOCs, rent, brokerage, fees for professionals/ consultants, construction cost, cost of additional amenities like solar, etc.

The society can later repay the loan and the interest through the revenue generated from the saleable area. The bank also offers a two to three year moratorium on the loan based on the Project size. Mr. Uday Dalvi, DGM at Mumbai Bank and a key nodal officer for Self-Redevelopment, explains this – “Though interest on the loan is calculated for this period, we don’t take it until the end of two years or three years depending on the size of the project. Meanwhile, societies sell the saleable flats and pay the loan with interest. So, the society does not have to pay any interest from its pocket initially while the project needs funds.” Mr. Dalvi and his team have been the headliners in shouldering this responsibility by organizing hundreds of meetings with societies and engaging with the society members across Mumbai over the last few years to promote Self-Redevelopment.

Looking at the number of societies opting for Self-redevelopment, Wedevelopment has started approaching other banks and financial institutions too for giving further funding options for societies. Many of these banks have passed verbal approvals as well. It is expected that in the next six to eight months there will be an entry of many financial institutions in the Self-Redevelopment funding space. Even Mumbai Bank is approaching other cooperative banks to create a consortium and give benefits to more and more societies taking this initiative.

Self Redevelopment projects in Mumbai

By | Blog | No Comments

Self-Redevelopment projects in Mumbai

In 2017, as per reports, there were 16,000 derelict buildings in Mumbai. The shocking number of old buildings in Mumbai is a matter of concern, as news of such buildings collapsing is on the rise. While MHADA helped in repairing 1000 dilapidated buildings, 3000 buildings have been repaired by the society members themselves. However, for some dilapidated buildings, this repair solution is an expensive and temporary affair.

Most societies typically opt for redevelopment of their building through a developer. But with problems related to traditional redevelopment piling up along with delays in commencement and completion and a lack of benefits, many of these societies have decided to opt for Self-Redevelopment instead of builder-led or traditional redevelopment.

But Self-Redevelopment is not a new concept. In fact, it is the oldest and most beneficial approach of redevelopment that is making a comeback due to the distrust and delays involved with builders.

The government has been extremely supportive of the concept, launching the Self-Redevelopment scheme 2018 on January 8, 2018. The scheme was a move to accelerate the Self-Redevelopment process. The Maharashtra Housing and Development Authority (MHADA) too has provided a single window system in order to secure the required permissions promptly for society’s opting for self-redevelopment, thus giving a boost to the popularity of this approach.

Presently, the Mumbai District Central Cooperative Bank Ltd (Mumbai Bank) lends finance required for Self-Redevelopment to societies and has already cleared multiple projects.

All of this support has resulted in society members leading the redevelopment project, making decisions and overlooking the process of the project themselves.

Saptarishi CHS in Borivali, currently standing tall, is an example of a completed Self-Redeveloped society. “The builders were unwilling to proceed and the society’s condition was very dilapidated. We thought it made better sense to get a loan by mortgaging the property and go in for self-redevelopment”, said Arch. Umesh Gavade, member of the society who managed the entire project of Saptarishi CHS themselves, and is now a key part of Wedevelopment.

An example of an on-going self-redevelopment project in Mumbai is Ajit Kumar Society, Goregaon. Here, the old structure, only 3 storeys high, is now being replaced with a 9 floor block where each apartment gains at least 100 sq. ft.  The secretary of the building stated that the processing of project approvals has been fast, as the bank – as a government entity – has tied up with state agencies to expedite formalities.

Apart from few societies managing Projects themselves, there are also societies who have taken support of professionals and are moving ahead at an accelerated pace. Two of these, Harmony (Suma Sam CHS) and Jayakunj CHS in Borivali West, being managed by Wedevelopment, have received disbursements from the MDCC Bank and have reached further stages of construction. In both these projects societies are getting double the benefits than what any builder was ready to give. “We got to know that Mumbai District Cooperative bank grants loans for self-redevelopment of old buildings and that Wedevelopment will take care of all the other requirements managing and supporting the process. The managing committee of our society helped the residents (especially the retired people) understand that they will not have to run around to do the paperwork, look for contractors or finding a house to rent temporarily and moreover the benefits were double of what any builder was offering us,” says Vijay Ladhe, 68, chairman of the managing committee, Jaya Kunj Co-operative Housing Society.

These projects have paved a success path of self-redevelopment for the other societies to tread on.