Julio Ribeiro recently wrote about turning land into a freehold, outlining financial challenges in some housing societies that result in conflicts and societal divisions. He concluded that this exercise benefited the construction lobby, but I believe he made an incorrect conclusion owing to a lack of a thorough understanding of the topic. Nearly 22,000 housing societies in Maharashtra, including Mumbai, are built on government-granted land, Class 2 or leasehold, and require an annual rent payment. In contrast, freehold or owned land is classified as Class 1.
The Class 2 tenure notion stems from the British feudal land tenure system. IAS/IPS officers were given land in good places in Mumbai, whilst average middle-class individuals were allocated land on the outskirts due to space constraints. They were given plots in marshy areas and required to build their own basic infrastructure such as roads, water supply, and electricity. They rose to the task. From the 1970s to the 1980s, middle-class citizens constructed large-scale suburban residences and buildings.
After 50-60 years, the structures built with low-quality ration cement have become old and unsafe. Some are in desperate need of development. Two years ago, the Naik Nagar building in Kurla collapsed and killed 19 people. Given these considerations, middle-class housing societies concluded that freehold conversion is required for redevelopment.
Finally, in March 2024, two types of freehold schemes for housing societies were introduced. The first program provides for freehold conversion at 5% of the Ready Reckoner (RR) rate, but the restrictions are stringent and difficult to meet. This initiative requires the society to handle redevelopment itself, with 25% of the additional FSI (Floor Space Index) designated for the Pradhan Mantri Awas Yojana.
The second program allows for freehold conversion at 10% of the RR rate, with no constraints. However, the 10% rate is prohibitively exorbitant for housing societies, and there are currently no alternatives. Ribeiro’s argument that this method benefits the builder lobby is wrong.
Writing about it without doing a comprehensive investigation undermines 13 years of struggle by housing groups. Ribeiro has disregarded the real issue, which is the corruption money required by authorities. The actual issue is over how much this sum should be, whether it reaches the authorities, and how to ensure transparency. I also urge the government and public representatives to continue this scheme, which expired on September 30 this year, for another three years. This extension would provide societies enough time to acquire the necessary cash. I propose that Ribeiro also make efforts in this direction.
Source: The Free Press Journal
