Samuel Amolik was taken to court with one other accused, Venkatesh Shettiar, and remanded till Feb 22, Navi Mumbai Commissioner of Police AK Sharma said.
Navi Mumbai builder SK Loharia was shot dead outside his own office in Vashi by two men disguised as security guards on Saturday morning.
Loharia, 52, was a director with SK Brothers, a realty company engaged in constructing residential and commercial complexes in Navi Mumbai.
The entire incident was recorded on CCTV camera installed at the entrance to his office.
Shettiar was arrested soon after the shooting as locals caught hold of him but his accomplice escaped on a motorcycle. The CCTV footage confirmed Shettiar to be one of the accused.
According to police sources, it was Shettiar who led them to Amolik.
Police sources said Amolik had been an "encounter specialist" who was arrested and suspended in 2003 for his alleged links with the underworld.
He resumed work after a few months and retired in 2011, last serving in Mumbra in Thane district.
Meanwhile, at a press briefing held by family members of Loharia, his brother Sanjeev claimed that the killers named seven people with whom his brother had been at loggerheads over some judicial disputes.
Loharia's son Sandeep said his father had filed a court case on the illegal FSI (Floor Space Index) used in buildings on Palm Beach Road (also in Navi Mumbai) and that those named as culprits in the scam were involved in his father's murder.
"We will not perform the final rites unless police arrest them all," he said.