Why buying flats in redvpt projects can be risky

Q. How safe is it to buy a flat in any redevelopment project? If the society terminates the development agreement with a developer, can home-buyers who have entered into an agreement for sale with such developer insist that the society honour the commitments of the developer and accommodate them in the same project? Is the society not legally bound to do so, since the redevelopment project becomes possible only through the money paid by new home-buyers?

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— Prakash Athavale,

Dadar (W)

A. It is true that redevelop-ment projects are substantially financed by home-buyers. However, it is equally true that during the intervening period, it is the developer who takes the risk and invests his money in anticipation of flat sales. Home-buyers intending to buy flats in such projects are therefore vulnerable to the society terminating the developer's contract.

In a redevelopment, the housing society enters into a development agreement with a developer. The society grants development rights to the developer in return for new flats for its members, along with extra area, amenities, transit rent, and corpus funds. In consideration, the developer is allowed to construct and sell additional flats — the ‘sale component’ — at his own cost and risk.