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Financing self-redevelopment projects: The next big untapped opportunity


In the midst of rising apprehensions regarding redevelopment projects, the self-redevelopment model is a welcoming change for societies. The revolutionary system of refurbishing the project not only brings to the table a vast range of benefits but also ensures transparency and mitigates the risks involved in the process.

The self-redevelopment model has proven to be extremely beneficial for the society since they allow full control over the planning and execution process right from dealing with the vendors to managing finances and other aspects. This reduces the scope of conflict, delays, and contract breach.

However, it is essential to understand the initial phases of the process. In self-redevelopment, every member acts as an investor, invests in the initial stages of the project and shares the benefits derived from the higher returns during the sales stage.

Secondly, the society has to increase 15 percent of the project cost on its own in the initial stage until they receive a loan from the bank. In exchange for the amount raised, the society can give the interest benefit to the members rather than involving the external investors. This way, the society can get the desired funds, and the members also get an opportunity to gain better rates than what they would otherwise get from putting funds in a bank. This serves as a massive advantage for society as well as the members.

Through the self-redevelopment model, the society gets the full proceeds of the additional floor space (square feet) created. Members, in fact, enjoy an added advantage of increasing the area by investing in the property, which will be highly beneficial to them in the long run, as the property value keeps rising.

Overall, self-redevelopment by getting efficient consultants on board can be an extremely lucrative option for a society. Not only does it mean restoring old structures and improving the quality of life, but it also involves several monetary and other incentives as a result of land sales, government aid and more.

Reports indicate that there are over 16,000 societies in Mumbai that need redevelopment. Societies can replace traditional developers, appoint consultants and contractors.

On the whole, self-redevelopment is a pragmatic solution to the conventional problem and is emerging as a movement. In fact, many housing societies in Mumbai are resorting to it now. Not only does it assure government support to the distressed residents of old buildings but also ensure better planning, construction and timely delivery of the projects. We believe that this is the right time for the banks to join the movement and reap the benefits