AMNESTY SCHEME TO THE RESCUE OF STALLED SRA PROJECTS IN MAHARASHTRA

The state government recently passed a resolution to frame a policy for effective implementation and completion of stalled SRA projects in the state

In a bid to breathe life back into stalled Slum Rehabilitation projects (SRA Projects) in the state of Maharashtra, the state government recently passed a resolution to frame a policy for effective implementation and completion of these projects in the state, several of which seem to have lost steam in the past years.

SRA Projects: The road so far

Vacant land is a scarce commodity in a densely populated city like Mumbai, primarily due to various large land parcels being encroached by slum dwellers over the past several decades.

To provide for improvement and clearance of these areas, Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971 was enacted for implementing slum rehabilitation scheme to such slum affected lands (the SR Scheme) across the State.

Till date, several SR Schemes have been implemented by developers, however, only a handful of such projects have been successfully completed. These failures in completion of SRA Projects can be attributed to various factors such as economic slowdown, financial constraints, change in political scenarios and more recently, demonetization and the COVID-19 pandemic. Due to this unsavory cocktail, many SRA Projects have either not taken off or are stuck at various stages of development, which leaves the slum dwellers with no options, but to continue to stay in the unhygienic conditions of such slums or transit camps.

The Revival Attempt

With a view to attract lenders and new developers to invest in SRA Projects, that are the only avenue available for creating affordable housing especially in the city of Mumbai, the state government has, in the last three years, proposed the following policies and schemes to boost stalled SRA Projects:

• Increase in FSI

In late 2019, we saw an increase in the floor space index (FSI) for SRA Projects from an FSI of 3 to an FSI of 4 in Mumbai and very recently, the same benefit has been extended to other parts of the State as well.

• Extension of time for payment of premium

During the outbreak of the COVID-19 pandemic, the time limit for payment of premium by developers for undertaking SRA Projects was periodically deferred.

• Public Notice – Change in Developer

After witnessing the plight of several stalled SRA Projects, which remained unattended by the appointed developers for several years, as a first step, the Housing Ministry, through the Slum Rehabilitation Authority (SRA), issued a public notice on 20 April 2022 calling upon the slum societies of about 517 SRA Projects across Mumbai (proposals whereof were approved between 2002 and 2014 but redevelopment for which was not completed), to appoint new developers and submit fresh proposals in a bid to kickstart their projects.

Pursuant to the aforesaid public notice, SRA has on 8 June 2022, issued guidelines to be followed by new developers to be appointed in respect of 517 recorded schemes which are currently at a standstill. Such guidelines inter alia require a new developer to (i) deposit one year's advance transit rent in an escrow account to be maintained by the SRA and developer, (ii) deposit cheques of the next two years for payment of rent to SRA, (iii) obtain a fresh general body resolution of the slum society in the presence of representatives of the co-operative department, SRA, and (iv) obtain a fresh Annexure III in relation to the financial capability of the new developer.

• Amnesty Scheme - Takeover of stalled SRA Projects

The state government via its recent resolution (i) authorized SRA to float tenders to appoint new developers for stalled SRA Projects (developers who offer a maximum number of units from their sale component to the SRA under affordable housing, would be picked through the tender process), and (ii) permitted financial institutions who have invested in stalled SRA Projects and are affiliated to the Reserve Bank of India, Security and Exchange Board of India and National Housing Board, to step in and complete such stalled SRA Projects as "co-promoters".

The following concessions are offered to such new developers / financial institutions while taking over the projects:

› Exemption from seeking the consent of slum dwellers and approval of the general body of slum societies.

› Payment of 5% transfer premium will not be applicable to financial institutions taking over such stalled SRA Projects. The resolution is silent on whether such waiver is also applicable for new developers taking over projects through the tender process. It will have to be seen if such waiver would even be provided to new developers. The State government should provide further clarity in this regard.

The resolution also provides for imposition of penalties on the new developer / financial institutions taking over the stalled project to ensure timely completion of rehab buildings within 3 years (additional time may be provided by the CEO, SRA for large slum projects). Penalties prescribed are as under:

› If 33% of rehab building is not completed in one year, then developer will have to pay 1% of the land cost of sale plot;

› If 66% of rehab building is not completed in two years, then developer will have to pay 2% of the land cost of sale plot;

› If total rehab building is not completed within three years, then developer will still have to pay 2% of the land cost of sale plot.

In pursuance of the resolution, SRA has issued a Public Notice on 31 May 2022 calling upon interested financial institutions to submit their expression of interest to SRA within a period of 45 days from 7 June 2022 to 21 July 2022. The Public Notice further records that any proposal / expression of interest received after 21 July 2022 will not be entertained by SRA.

The above move, could mean a free ticket for financial institutions to take over stalled SRA Projects without having to obtain any consent of the slum dwellers. However, financial institutions do not possess expertise to undertake the work of redevelopment of slums and may want to nominate a new developer to take over such development. We observe that the resolution is silent on whether the financial institutions, who are permitted to step in for the defaulting developers as 'co-promoter/lender', will have powers to unilaterally nominate a new developer to undertake and resume implementation of the concerned stalled project. Clarifications in this regard, should be provided by the state government.

In furtherance of the above, the Housing Department has issued a Government Resolution dated 7 June 2022 thereby constituting a Committee headed by the Principal Secretary (Housing), who would be responsible to make recommendations to the SRA in relation to the appointment of new developers for undertaking redevelopment of stalled SRA Projects through the tender process, and for examining the ability of the interested financial institutions that have expressed their intention to take over stalled SRA Projects.

Requirement of fresh GBR

It is interesting to note that the guidelines issued on 8 June 2022 by the SRA, and the Amnesty Scheme introduced by the State government, are contradictory as far as obtaining a fresh general body resolution for appointment of a new developer is concerned. The former requires a fresh general body resolution to be obtained, while the latter grants an exemption for new lenders / developers. Availing a fresh general body resolution for appointment of a new developer could prove to be a time-consuming exercise and may discourage new developers from taking over stalled SRA projects. Necessary clarity should be provided by bringing uniformity in both the policies.

Comment

The above initiatives by the SRA and the government will very well go in the direction to spell out the intention of the government to create a revolutionary revival plan for stalled slum projects thereby furthering the objective to make Maharashtra a 'Slum-free' State and provide a better standard of living and hygiene for slum dwellers and generate more affordable housing.

Disclaimer – The views expressed in this article are the personal views of the authors and are purely informative in nature.