Investing in Mumbai’s redevelopment projects is a large market with high potential but also significant risks due to under-construction timelines, potential developer defaults, and shifting real estate trends. Key factors to consider include a developer’s track record, legal aspects like the 51% consent rule for societies, and regulatory frameworks such as FSI. While the market is competitive, with a large number of buildings needing redevelopment, focusing on specific micro-markets and appointing Project Management Consultants (PMCs) can help mitigate some risks. 

Factors to Consider for Investment

• Market Potential:A large portion of Mumbai’s buildings are old and need redevelopment, creating a significant market. 
• Developer Risk:Be aware of the under-construction risk and the possibility of developer default, especially with smaller or less experienced developers. 
• Regulatory Frameworks:Understand rules like the need for at least 51% member consent in a Special General Body Meeting (SGM) for societies to proceed with redevelopment. 
• Floor Space Index (FSI):The permissible FSI determines the potential buildable area for redevelopment, which can vary by location and building type. 
• Project Management Consultants (PMCs):Housing societies often appoint PMCs to act as a barrier, ensuring the developer is of the right size and scale. 

Key Aspects of Redevelopment Projects

• Developer Selection:Choose experienced developers with a strong track record and a sufficient financial standing. 
• Bank Guarantees:A bank guarantee of at least 20% is mandated to protect society members in case of developer failure. 
• Society Consent:A minimum of 51% of society members must provide written consent for a redevelopment project to move forward. 
• City Rejuvenation:Redevelopment revitalizes the city by replacing old structures with modern buildings, leading to improved amenities and more usable space. 

Risks Involved

• Under-Construction Risks:Projects can be delayed or stuck due to various issues during the construction phase. 
• Financial Commitments:Developers might fail to meet their promised saleable area prices or project timelines. 
• Real Estate Market Downturns:A decline in the overall real estate market could negatively impact investor returns. 
• Developer Default:If a developer fails to meet their obligations, the project could be stalled or abandoned.