A week back, an old residential building in Mumbai was sold at a huge sum of Rs150 crore. It was a century-old “cessed” property. Residential buildings that have been constructed before 1960 in Maharashtra are called cessed properties since the government collects cess from the residents or the tenants of these buildings. There is no such cess applicable on old buildings in other states.
In 2008, the Supreme Court allowed redevelopment of all the cessed and old properties in Maharashtra. Since land is a state subject, any old residential building is converted into a new one after necessary approvals from the local development authority.
If you own a cessed property
If you continue to live in the property in its present condition, you will have to continue paying cess to the government. The other option is to redevelop the property. In other words get rid of the present structure and build a new one on that land. However, to do so, you will need to get a demolition certificate and a new architectural plan approved from the local development authority of your city. For the new redeveloped property, you won’t have to pay cess and will switch to the property tax system instead.
The other option is to sell the property to a developer, who is interested in developing multi-storey buildings on such land. Usually, such deals fetch a good amount to the owner. If you negotiate with the developer properly, you may even get one unit of apartment in the building the developer redevelops. If you choose to settle down somewhere else, the developer may finance that decision too.
If you are a tenant in a cessed property
Tenants residing in a cessed property for about 30 years or more have a right in the property. Before redeveloping a colony or a building, a developer needs to obtain the consent of the tenants who have tenancy rights under the Rent Control Act.
However, the exact amount of share would depend on the settlement deal with the owner. If you have been living in such a property for at least 50 years as a tenant, you can even own one of the apartments in the new redeveloped building as part of the negotiations.
If you are living in an old housing society
In this case, the entire residents’ welfare association can jointly decide to sell the property in the open market or giving development rights to a builder. The new builder will build extra floors as per the new plan and provide spacious floors to each member of the society, in keeping with the agreement with the developer. If you don’t want to continue living at the same place, you can ask for a compensation instead.
For the period of construction or transition, developers also agree to pay a compensation to owners as well as tenants.