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Mumbai: Self-redevelopment can give huge boost to realty, says Experts

Emerging model has potential to correct flat prices in Mumbai, say experts

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Self-redevelopment of old and dilapidated residential structures can make the cost of an apartment in such projects 15% cheaper compared to flats constructed by private builders, said experts, stressing that the emerging redevelopment model has the potential to correct realty rates in the city.

Housing societies opting for self-redevelopment are not driven by commercial interests and are too happy to sell the extra flats in the new construction at a lesser price than the rates prevailing in their neighbourhood, they said.

Over the past few years, more and more small and big housing societies have taken it upon themselves to redevelop their complexes without engaging a builder. This practice allows the members to be on a commanding stage.

They hire contractors, development managers and project management consultants on their own.

The potential is enormous. There are more than 14,000 cessed buildings – most of them in south Mumbai – under the control of state housing body Mhada. Of these, over 8,000 need urgent repairs, while 3,000 are in a dilapidated state which means residents of these buildings live in fear of collapse. Close to 20,000 other buildings in the city and suburbs need redevelopment in the near future.

Hiten Shah of New Consolidated Construction Company Limited, which facilitates self-redevelopment of housing societies, said a builder keeps a 30% margin as it is a business venture. "While a society gets loan for self-redevelopment at 12.5%, the rate is nearly 20% for a developer's project. Under self-redevelopment, the realty prices will see a correction up to 15%."

Chandrasekhar Prabhu, a housing expert who has aided several such projects, said the members always get more compared to what they would have got from a developer. "In self-redevelopment, most of the surplus area is consumed by existing members. Whatever the existing members want to buy, they are sold 30% cheaper than the free sale component."

As the prospects are attractive, most members take loans to buy additional space, said Prabhu. "Even the members' relatives can get a 20% discount which they would not have got from a developer. These days, not many banks are keen to give loans to developers. Even though the free sale component in self-redevelopment projects is less, it is still much more attractive."

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