Redeveloping an old society? Be careful while signing the POA in builder’s favour; know what to look out for

When a housing society decides to redevelop its complex because it’s no longer safe to live in or poses a risk to the neighbourhood, the first step is to check if they qualify for redevelopment under the Development Control Regulations. If they do qualify, the society needs to pass a special resolution during a special general meeting to move forward with the redevelopment.

Pooja Rao Putrevu, Founder, Annex Legal, says that once the special resolution is passed, the redevelopment will proceed according to the registered bye-laws of the housing society and follow the guidelines set out in the regulations.

According to Putrevu, the housing society can enter into a development agreement with a builder and issue a Power of Attorney (POA) for specific tasks, like getting municipal approvals, signing plans with planning authorities, or handling any regulatory formalities that need an authorised representative or any such activities that can only be done by the developer as per the development agreement.


Putrevu says: “The POA should be purpose-specific, revocable where appropriate, and narrowly drafted. A broad, unrestricted POA can unnecessarily dilute the society's control over the project and should be approached with caution.”

If the redevelopment results in additional parking spaces, what happens?

When it comes to ownership claims, the share that a developer or an investor receives, if there is investment involved, hinges upon the agreement drawn between the housing society and the developer.

Putrevu mentions that in the case of Nahalchand Laloochand Pvt. Ltd. v. Panchali Co-operative Housing Society Ltd, the Supreme Court ruled that after the redevelopment and once the property is transferred to the respective owners, the extra parking spaces become part of the common areas managed by the society. These spaces won’t belong to the flat owners and can be used by the society for guest parking or for any other purpose of the society as per the bye-laws.

Some legal aspects to look out for before redeveloping

Before appointing a redevelopment builder, a society should treat the project as a legal transaction, not merely a construction exercise.

According to Putrevu, redevelopment requires a transparent process, including a special general body meeting, feasibility assessment, tender evaluation, and member approval.

Putrevu says: “The Development Agreement with the developer should clearly specify carpet area entitlement, additional area, transit rent or alternate accommodation, possession timelines, bank guarantee, defect liability period, and compensation for delays.”

Redevelopment activity is the same as a new project; the only difference is that redevelopment is managed by the housing society, and the rights of the redeveloped society vest with the then existing owners of the society.

Putrevu says that her suggestion would be to conduct due diligence of the developer/builder to verify the builder's title, approvals, financial capability, and litigation history, if any.

Putrevu points out that “one overlooked clause can affect hundreds of families for years, making careful legal due diligence far cheaper than resolving disputes after construction begins.”