Project management consultant crucial in redevelopment

Is appointment of project management consultant (PMC) compulsory for society redevelopment? What will be his role and association with the developer?

A circular issued by the Government of India through the department of cooperation makes appointment of a project management consultant one of the preliminary legal requirements for a co-operative housing society or premises a society contemplating process of redevelopment of its property.

Appointment of PMC is not merely a formality; it lays down the foundation of entire redevelopment, as successful completion of redevelopment largely depends upon ability, integrity, uprightness and transparent and reasoned approach of PMC.

The PMC should be knowledgeable on all legal and construction aspects of the redevelopment and be aware of the redevelopment business so that he applies his knowledge and imagination to various stages of redevelopment in a manner that the society gets the best of the terms without compromising at all with safety aspects. 

The society should be vigilant to ensure that the PMC has not been directly or indirectly sponsored by an interested developer. He should guard the interests of the society and its members so that no vagueness is left in the documentation of the redevelopment scheme. In a normal property transaction also there is no place of oral promises and assurances. Redevelopment is a very high stake transaction and, therefore, would require iron clad documentation. Aspects of termination and bank guarantee must be spelt out unconditionally to avoid possible manipulations. Process of redevelopment should start with preparation of feasibility report on appreciation of all relevant factors.

Drafting of redevelopment documents should be in accordance with applicable laws including MOFA, 1963, MCS Act, 1960, Transfer of Property Act, 1882, and other applicable property laws and laws and regulations and on consideration of possible liabilities towards income tax, VAT, service tax and other revenue laws. Individual agreements are a must for each member before he leaves his flat to document and protect his individual title. TDR documentation should be vetted from legal and taxes points of view.

PMC services should primarily be in the nature of consultation and suggestions. Ultimate decisions should be left upon the society. PMC should help the society in the decision-making process but should not insist upon a particular decision. The society and its members should be advised that redevelopment is a mutually beneficial exercise and in a competitive market the society is a giver of the benefits to the developer and, therefore, the society and its members should remain firm in their stand and should not compromise on vital aspects.

Tarun Ghia is a chartered accountant and can be reached at ghiatarun@rediffmail.com. Pradnya Vairale is an advocate and can be reached at advpradnyag@gmail.com