Wednesday, 25 May 2016

Redevelopment Alert! How Builders make Bakras of Flat-owners

Mumbai, 25th May, 2016: While we are sitting in the comfort of our homes, an unfolding tragedy is transforming proud flat-owners into paupers and destitutes who will die in tiny rented homes, senior citizens homes or in the houses of their children, and the memories of the flats that they once owned will be cremated with them. In the name of redevelopment, millions of flat owners are being led like sheep to the slaughter – not only humble salaried workers, unthinking housewives, aged pensioners, over-dependent widows, but also doctors, lawyers, CAs, MBAs, MNC executives, bureaucrats, businessmen, tech-savvy housewives and career-women. Cooperative housing societies are full of financial illiteracy, ignorance of ground realities, overconfidence and gullibility. The redevelopment mantra of cooperative housing societies is: "jo sabka hoga, woh hamara hoga, bharosa rakho" i.e. "What happens to others will happen to us, so have faith."

A few thousand builders with names like "Shah Group of Builders", Kamala Group, etc, exploit these millions of bakras to build up their fortunes. In the building industry, "group" does not mean a company and its subsidiaries, it just just means a motley bunch of builders temporarily collaborating to hunt down a society of flat-owners like a pack of hungry wolves surrounding a flock sheep.

From the point-of-view of a builder, redevelopment is like hunting or trapping sheep. Every builder actually thinks in terms of taking over or "acquiring" a society and its assets. (Indeed, there are estate agents who specialize in "society-acquisition" i.e. bundling up the society-members in agreements, and transferring it to the highest-bidding builder.)

Please remember, redevelopment is basically a cooperative housing society (owner and possesser of the land and building) giving a civil contract to demolish their old building and reconstruct a new one while utilizing extra FSI and TDR. Since housing societies can't afford to pay the contractor, they give him permission to construct extra flats and sell them to make a profit.

Yes, these contractors need to draw up architectural plans and get dozens of permissions and clearances from the civic authorities, and also mobilize multi-crores of project finance. Because of the lengthy, weighty and complex nature of this relationship, societies enter into lengthy contracts called Letter Of Intent (LOI), Memorandum Of Understanding (MOU), Development Agreement, Alternative Accommodation Agreement (also known as Individual Agreement or Tripartite Agreement), "Irrevocable Consent", Power Of Attorney (POA) etc.


These contract documents are typically drafted by lawyers paid by the contractor/builder. By the wordings of the various documents, the nature of the actual contract (i.e. the contract of a property-owner with a civil contractor) is distorted. What emerges from the clever wordings is a different sort of contract, wherein the civil contractor appears like an equal party with the society, and not a mere contractor. The wordings make the builder seem like a purchaser or owner of the premises, to whom the society hands over all control. Words and clauses are included to endow the "builder" with all sorts of rights and entitlements over the property, stripping the housing society and the flat-owners of all their legal rights, including the right to revoke the contract if the builder fails to perform his contractual obligations. Unfortunately, almost all the society members sign on these papers without reading and understanding the implications; and the few who protest are also eventually forced to sign by the sheepish majority

After this paperwork is stamped and registered, the flat-owners come to believe that the builder is now the whole-and-sole owner and possessor of their property. So, society members and office-bearers start thinking of their redevelopment contractor as a "dhani", "mai-baap", benefactor and an absolute owner and possessor of the plot and building. People lose all sense of control over the society and its property, which is actually their collective property.

Chairman, Secretary and Treasurer start behaving like the builder is an all-knowing, all-powerful god who can do no wrong. Anybody who criticizes or questions the builder's competence or intention is treated as a public enemy; the entire society gangs up and socially boycotts them.

Flat-owners are hypnotized into believing that they have got an "exchange offer" from the powerful builder: "You give me your old and dilapidated flat, I will gift you a 25% bigger flat, plus lift and extra amenities, plus corpus fund, plus adequate compensation for rental payments". So, flat-owners forget that the "builder" is actually a civil contractor and that the profits from sale of extra FSI actually belongs to themselves collectively, not the builder. They forget that all the extras that they are getting are theirs anyway, and that they have enabled the civil contractor to make a large profit by taking the lions' share.

It is normal for builders to make the office-bearers behave like their employees and agents, and make the office of the society shift to their own office. Commonsense dictates that the society's office-bearers should maintain an at-arms-length relationship, and should not share the voluminous files, registers, certificates, books of account, minutes books etc. with the builder, who is the opposite party in the contract. Sadly, the exact opposite happens, i.e. the society's office-bearers share each and every document and information with the builder, while denying access to their own society's members. 

Office-bearers feel hatred and contempt towards their society members, especially those who question or oppose the builder. Secretaries, chairmen and treasurers hand over the society's records lock-stock-and-barrel to the builder, to keep them safe from the so-called "non-cooperative members" who question the redevelopment. With this handover, the housing society loses all control over own fate. If ever a need arises to go to court, even the office-bearers will be unable to do so.
Redevelopment is a land-grab by unscrupulous builders, and all semblance of legality is only a pretense and a facade.
Office-bearers feel hatred and contempt towards the members of their society, especially those who question or oppose the builder. Secretaries, chairmen and treasurers hand over the society's records lock-stock-and-barrel to the builder, to keep them safe from the so-called "non-cooperative members" who question the redevelopment. With this handover, the housing society loses all control over own fate. If ever a need arises to go to court at any point in the future, even the office-bearers will be unable to do so... and this is something nobody wants to admit or even discuss.

  1. Office-bearers start frequenting the builder's office if they have become his partners or employees. Project Management Consultant (PMC) also becomes one with the builder, although he has been appointed by the society to safeguard and guide society members.

  2. Office-bearers start holding confidential meetings with the builder and/or PMC. They start acting like rubber-stamps and start putting their signature and seal wherever the builder wants them to. They become totally incapable of opposing the builder's point of view. 
  3. Maintenance bills, society's minutes of meetings etc. start getting issued from the builder's office rather than society's office. (The upgrade in stationery and colour printers used is usually noticeable.) The builder's office accountants start managing the society's routine work, and maintenance cheques etc. are collected and deposited by the builder's staff. 
  4. Society's chequebooks, passbooks, Fixed-Deposit certificates, etc. are quietly passed on to the builder's office. The builder gains control over the Repair Fund, Sinking Fund, Fixed Deposits, and other bank accounts.

  5. Routine pre-monsoon repairs stop being done, and blown-out lightbulbs and broken gutter-lids stop being replaced. The office-bearers argue, "Why waste money? The building will be demolished in a couple of months." Not even a rupee is spent on minor repairs and upkeep, and the quality of life in the building deteriorates. 
  6. General body meetings are held at the builder's office or at a nearby party-hall at the builder's cost. Dependency becomes imprinted on the minds of the general body members, and they feel incapable of holding any society meeting on their own. They suffer from feelings of guilt and anxiety if they hold separate meetings without the knowledge of the builder! Other society members, if they find out that such meetings are held separately, are quick to inform the office-bearers and the builder. 
  7. The builder and managing committee cannot be questioned in even minor matters. They cannot be held accountable, because any question or any attempt to hold them accountable is presented to the unthinking majority as "non-cooperative members opposing redevelopment". The builder, office-bearers and loyalists then launch a social-boycott campaign against the so-called non-cooperative members, and may even pass resolutions against them in general body meetings.

  8. The builder puts up large hoardings showing that he "owns" this plot. Without consulting anybody in the society, he changes the society's name (e.g. "Ram Krupa Cooperative Housing Society" is suddenly advertised as "Sunshine Towers, a quality project of Gupta Lifesyle Developers"). Without laying a single brick, the builder is now starts advertizing 2BHK, 3BHK etc. in the new project and receives lakhs and crores of rupees as booking amounts from early-bird investors. Thus, the builder starts creating claimants to the society's property, and the society has no say in any of this! 
  9. When the builder gets the crucial IOD (the so-called "Intimation Of Disapproval" which is actually an Intimation Of Approval) from Municipal Corporation, all the flat-owners breathlessly start awaiting the demolition of their building within a few months, and they mentally prepare to vacate their houses and move to leave-and-licence (rental) houses for the next 24 to 36 months. If the office-bearers haven't already deposited the entire lot of society's files, registers, etc at the builder's office, they will probably do it at this juncture, because "Yeh sab leke kahan-kahan ghoomenge?" If the society's records were until now stored in the building, e.g. cupboards in the pumproom or in the staircase landings, or a tiny society office, all the office-bearers start thinking that these box-files are a huge burden with only nuisance value and no practical value. The records of old societies weigh at least 40 kgs, and require several large cartons or gunny bags to carry. They are too voluminous to be stashed into safe-deposit boxes in banks, and office-bearers don't want to keep them in their rented temporary accommodations for the next few years. 
  10. If the rental amount paid by the builder is adequate, then most of the building's residents may live dispersed in the same neighbourhood or nearby localities. But if the society's members have agreed to accept inadequate rental amounts, then the society's members will seek rental accommodations in faraway suburbs or neighbouring cities like Vasai-Virar, Ambarnath, Kalyan, Panvel and Vapi. Some old folks return in their native villages, hundreds of kilometers away, while others go to live in old age homes and ashrams.

After the society members have dispersed from the plot and the builder has taken vacant possession, his power has become 100% and their power is down to zero. The society members are now totally powerless to control anything. The cooperative housing society has ceased to exist in reality, although it theoretically exists. If all goes well, and the builder finds it convenient, profitable and feasible, the society's building will rematerialize in its new avatar after a few years.


If for any reason all does not go well, and the builder does not complete the construction and hand over their flats to them, the former residents of the society are bhagwan-bharosey, along with the investors who entrusted him with crores of rupees. Can they all go to court? In theory, yes they can. In practice, however, it will be a miracle if they even land up in court, leave alone get favourable orders. Because they will just be a bunch of bitter, quarrelsome former neighbours without any papers to prove their entitlement. And how will they locate their office-bearers, who in all probability have gone absconding because they don't want to want show their faces to their former neighbours?

Will this dissimilar bunch of confused and aged people, who have lost their entire life-savings and all their society documents, overcome all these challenges and stake their claim in court a decade or more after their building was demolished and their documents were lost? Will the courts listen with a sympathetic ear, when they can afford only the cheapest and most inexperienced lawyers? Will the contractual documents, which were drafted by the builder's lawyers by signed by all these educated idiots, enable them to get justice in the end?

Not bloody likely. It will just be another sad story for which there will be no court judgments and no case laws, and newspaper reports or television exposes... because nobody will be around to tell the tale.

Krishnaraj Rao

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