1. What is your detailed track record and financial standing?
Before discussing amenities or extra area, the first step is intense due diligence on the developer. Go beyond the glossy brochures and ask for a comprehensive list of completed redevelopment projects. A trustworthy developer will be transparent about
their history. Don't just take their word for it; if possible, visit one or two of their completed projects and speak to the residents. Ask about timelines, quality of construction, and post-possession support. Equally important is the developer's financial health. Request to see their balance sheets for the last few years and confirm their financial capacity to see a project of your scale through to completion. Sometimes, builders create separate companies or special purpose vehicles (SPVs) for each project. Ensure the entity signing the agreement has sufficient assets and is not a shell company, which could leave the society with no recourse if the project stalls.
2. Is the project RERA registered and what are the exact timelines?
The Real Estate (Regulation and Development) Act, 2016 (RERA) is a crucial safeguard for society members. Any redevelopment project in Mumbai that includes flats for sale to the public must be registered with the Maharashtra Real Estate Regulatory Authority (MahaRERA). This registration makes key project details—like approved plans, completion dates, and developer credentials—publicly accessible on the MahaRERA portal. Insist on seeing the RERA registration number before signing any agreement. The Development Agreement must specify a clear and realistic timeline for completion, broken down into milestones: obtaining approvals, demolition, foundation, structural work, finishing, and finally, obtaining the Occupancy Certificate (OC) and handing over possession. A typical project takes 36 to 48 months from the day members vacate. Vague timelines are a major red flag. Ensure the agreement includes a strong penalty clause for delays, where the developer is liable to pay a specified amount for every month the project is behind schedule.
3. How are the corpus fund and transit rent calculated and guaranteed?
The commercial terms of the deal are often a major point of contention. Every member is entitled to a corpus fund, which is a one-time, tax-free lump sum payment from the developer to compensate for the inconvenience of shifting and to cover the increased maintenance costs of the new building. This amount can range significantly based on location and project scale. Ask for a clear calculation of how the corpus is determined—whether it's a fixed amount or based on a per-square-foot rate. Similarly, the developer is obligated to pay a monthly transit rent to each member for temporary accommodation during the construction period. This rent should reflect the current market rates in your locality. Crucially, the agreement must include an escalation clause (typically 10-15% annually) in case the project is delayed, and specify consequences for non-payment of rent.
4. What security do we have in the form of a bank guarantee?
What happens if the developer runs out of money or abandons the project midway? This is where a bank guarantee becomes your most powerful safety net. A bank guarantee is a promise from a bank to compensate the housing society up to a certain amount if the developer fails to fulfill their contractual obligations. According to a Maharashtra government resolution, developers are required to provide a bank guarantee equivalent to 20% of the total project cost. Do not proceed without this clause being explicitly included and enforced in the Development Agreement. The society should have the right to invoke this guarantee if the developer defaults on rent payments or fails to meet construction timelines. This financial security ensures that even if the worst happens, the society has funds to either complete the project or take necessary legal action without being left stranded.
5. Can we review the draft Development Agreement with our own legal expert?
The Development Agreement is the single most important document in the entire process. It is a legally binding contract that outlines every single right and obligation for both the society and the developer. Never sign a developer's standard draft without a thorough review by an independent legal professional who specializes in redevelopment. The agreement must precisely define the carpet area of the new flats, details of all promised amenities, penalty clauses, and termination rights. Any ambiguity in the agreement can lead to years of disputes. Pay close attention to the Power of Attorney you grant the developer; it should be specific to the project's needs and not give away blanket powers. A transparent developer will welcome scrutiny and be open to negotiating clauses to protect the members' interests, ensuring a fair and legally sound partnership.
