Problems faced while self-redevelopment

4 Pitfalls of Self-Redevelopment to Look Out For

The process of redevelopment for any building involves a lot of work, ranging from dealing with the government for approvals to handling  contractors during the construction phase. While self-redevelopment provides an opportunity for society members to avail benefits that would otherwise be taken by the developer, there are also several hurdles you might find yourself facing.  

1. Consent from members

Unlike traditional redevelopment, in this model, you need consent from all members because the land on which the building is located will be part of the mortgage for a loan. Any lack of unity amongst members can lead to delays that you cannot afford when it involves the future of your homes. 

2. Difficulty in the free flow of funds

Funding for self-redevelopment is obtained in the form of loans from banks. Banks are often apprehensive about providing loans for such projects because there isn’t surety in terms of repayment of the loan. The amount banks provide for these projects is limited to how much the project is estimated to cost, hence if there are any unforeseeable circumstances or mismanagement of funds, the project could stall due to a lack of money. With developer-led redevelopment, the builder is usually able to bring in additional funding to rectify such situations. 

3. Inexperience

When it comes to self-redevelopment, it will be the members’ responsibility to hire and manage the contractors and professionals involved in the entire process. They will need a certain level of experience and knowledge to manage the design, government approvals, construction and project management so that the project moves along efficiently and is also profitable. It is this inexperience that often overwhelms managing committees and leads to projects failing or remaining incomplete.

4. Inability to sell

Members are also responsible for the sales and marketing of the saleable flats of the redeveloped building. Without the name of an experienced builder to back you up, there may be some difficulty in getting people to have confidence in buying a house.

On the surface, self-redevelopment is the best way for members to get the most value when it comes to redevelopment. However, the complexity of the process often overwhelms even the most well-equipped society committees. A solution brought up in recent times to combat these issues has been the Development Manager Led Self Redevelopment model. Here, your society brings in an experienced builder to act as a manager for the entire process. The Development Manager either takes a fixed fee or a percentage of profits in exchange for their expertise. With this method, you get the advantages whilst also avoiding the pitfalls of self-redevelopment.