Rajiv Singhal, a resident of east Delhi, wants to convert his ancestral single-storey house into a three-storeyed building. However, little knowledge about the legal procedure and other requirements for redevelopment of property has made Singhal sceptical about approaching a real estate consultant or a developer. Singhal is just one example; there are many others who face the same dilemma. Here’s how you can go about redeveloping a property.

Why redevelopment

Old buildings often lack a proper drainage system, parking space or safe electrical fittings. Some even become unsafe for living. Such buildings require repair and upkeep. If you live in such a property, you can tie up with a developer and get your house converted into a safe and spacious multi-floor residential building within permissible limits.

What should you do?

Know your area and regulations: If you own a property and want to redevelop it, you should first do some homework. While researching, find out from your local development authority about the permissible construction limit in the area. A simple application under the Right to Information Act will answer all your queries relating to the construction norms and permissible construction.

For instance if the permissible construction limit is 10,000 sq. ft while your house has a construction area of just 3,000 sq. ft, a developer will construct additional floor to reach the specified limit.

Every authority puts a construction limit in an area by fixing a floor-space ratio (FSI). Based on FSI, a developer may utilize the entire area for living or may use a portion of the FSI and leave the remaining area for green cover and parking. After your groundwork, if you discover that there is scope for redevelopment, you can then go ahead with the plan to bring in a developer of your choice.

Find a developer: If the property is huge, it is better to appoint a project consultant to help you find a developer. However, often developers involved in redevelopment projects themselves approach property owners looking for redevelopment. “Often it is by word of mouth. Generally, it is the developers who look for redevelopment projects," says Sanjay Khanna, director, Kailash Nath Projects, a Delhi-based real estate firm engaged in redevelopment of properties.

In case your property is small, you can approach a builder through a real estate consultant or dealer. Make sure you approach a dealer with a good track record. The city development authority may also come to your help. Ravi Ahuja, director-developmental services, Cushman and Wakefield India, a property consultant firm, says, “Appointing a project management consultant ensures fair and impartial selection. City municipality also provides such consultants to those who are looking for redevelopment of their house."

The consultant will charge you depending on the nature and location of your property. “The consultant will then prepare a draft for the tender, in case the property is huge or there is a colony that needs redevelopment," says Lalit Kumar Jain, chairman of Kumar Urban Development Ltd, a Mumbai-based development firm having 45 redevelopment projects in the metro city. Developers bid for your property redevelopment after looking at your tender. The tender is advertised in local dailies.

Signing the agreement

Your consultant may select a few developers to hear their proposals and you can evaluate the offers. Says Roopesh Jaiswal, partner, Jaiswal and Co., a Mumbai-based law firm: “The agreement with the developer is crucial. It should include the details of the new house that the builder will provide you in the same location, the monetary compensation if any, an alternate temporary accommodation or equivalent rental compensation, the amenities that the new complex will have, the corpus for its maintenance and the penalty clause."

However, there are some relief measures for builders, too. Says Hemal Jain, business development head, Neev Homes, a real estate company involved in redevelopment projects across Mumbai: “The agreement is framed in such a manner that both parties cannot break the association unilaterally."

The agreement should bind the developer and protect your interests. Therefore, it is also important to get a completion date in your agreement.

Things to watch out for

The first and the foremost thing to look for is whether you are getting a good consideration. This includes the new flat that you will get in the same place and any monetary compensation. Usually one gets a minimum of 100-150 sq. ft more than what is surrendered, this translates into at least one or two extra rooms. “So if you surrender a one-bedroom house, then you can ask for a two bedroom instead," adds Jaiswal.

However, builders usually give the consideration based on the proposed flat area. Adds Jain: “The money that the developer gives to the property owner is based on the area of flat that has to be built."

He also says that the developer first analyses the market price of the new apartments or floors in the area and then pays a mutually agreed sum of money to the property owner. Therefore, it is in your interest if you do your research properly and know the prevailing market rates in your area.

However, a few other necessary checks may protect you from being cheated. Consulting a lawyer helps you to understand the legal intricacies of the agreement and its clauses. Prashant Solomon, managing director, Chintels India Ltd, a New Delhi-based real estate firm, says: “Developers usually pay a one-time compensation. If the owner takes a bank guarantee from the developer, chances are that the developer may complete his work on time and give quality construction."

However, surrender your property only after the builder has the following in place—the signed agreement between you and the builder, a plan of the new project approved by the municipal authority concerned and a demolition certificate.

Construction period

A redevelopment project may take a year or two for completion, depending on the scale of property, after the work commences on the site. The time that you get between signing the agreement until the commencement is meant for finding a place on rent or shifting to your second home. In both cases, however, the developer will have to pay the rent for the period until he delivers the new property.

Property title remains

Signing a redevelopment project doesn’t mean that you are giving away your land title. The original land title remains in your name. Says Subhash Tamhane, a resident of Mumbai who is considering redevelopment of his property: “Ask your builder to mention the title inheritance in the agreement." If you own the land, you can either sell the land to the builder or only grant him development rights. If a co-operative society owns the land, the society can sell the land to the builder or only sell him the development rights. Also whether you own the land or not when you surrender your house, the new house you get should be in your name.