Redevelopment Warning: Housing Society Becomes ‘Promoter’ Under RERA If It Shares FSI With Builder, Liable to Homebuyers
In a significant ruling with far-reaching consequences for housing societies across Maharashtra, the Maharashtra Real Estate Appellate Tribunal (MahaREAT) has held that a co-operative housing society involved in area or FSI sharing with a developer can be treated as a “promoter” under the Real Estate (Regulation and Development) Act, 2016 (RERA).
The order was passed in a batch of appeals filed by Shri Sai Vishram Co-operative Housing Society Ltd., which had challenged a MahaRERA order holding it jointly and severally liable along with developers for delay in possession and payment of interest to homebuyers.
Background: Stalled Redevelopment and Homebuyers’ Claims
The dispute arose from a stalled redevelopment project in Borivali, Mumbai. The society had initially entered into a redevelopment agreement with a developer in 2010. Due to non-performance, the society terminated the agreement and later appointed a new developer.
Several flat purchasers who had booked flats with the earlier developer approached MahaRERA seeking interest for delayed possession. MahaRERA allowed their complaints and held the society, along with the developers, jointly liable.
The society challenged this finding before the Appellate Tribunal, arguing that:
- It was merely a landowner
- It had no privity of contract with the homebuyers
- It was not registered as a promoter under RERA
Key Legal Question: Is the Society a ‘Promoter’ Under RERA?
The central issue before the Tribunal was whether the housing society could be considered a “promoter” under Section 2(zk) of RERA, which would trigger:
- Liability towards homebuyers
- Mandatory pre-deposit under Section 43(5) to pursue an appeal
Tribunal’s Finding: FSI Sharing Makes Society a Landowner-Promoter
After examining the redevelopment agreement, the Tribunal noted that:
- The society was entitled to 50% of the additional constructed area arising from extra FSI
- This constituted a clear area-sharing arrangement
- Such an arrangement brings the society within the scope of MahaRERA Circular No. 12/2017
Under this circular, landowners or societies who share area or revenue from a project are deemed promoters, even if they do not directly sell flats.
The Tribunal held that by sharing FSI-linked constructed area, the society had commercial participation in the project, making it a landowner-promoter under RERA.
Why Earlier High Court Judgments Did Not Help the Society
The society relied on earlier Bombay High Court rulings such as Vaidehi Akash Housing and Goregaon Pearl, which held that societies are not promoters when they merely permit redevelopment.
However, the Tribunal distinguished those cases, observing that:
- In those matters, there was no area or revenue sharing
- In the present case, FSI benefits were contractually shared
This factual difference proved decisive.
Consequences: Joint Liability and Mandatory Pre-Deposit
Since the society was held to be a promoter:
- It was required to deposit the amount awarded to homebuyers, along with interest
- This deposit is mandatory under Section 43(5) of RERA before the appeal can be heard on merits
- The society cannot escape liability merely by claiming it did not sign agreements with purchasers
Why This Order Is Crucial for Homebuyers
This ruling strengthens homebuyer protection by:
- Preventing landowners and societies from distancing themselves after benefiting from redevelopment
- Ensuring multiple accountable parties for delay and non-delivery
- Reinforcing RERA’s principle that commercial benefit attracts responsibility
Homebuyers are no longer restricted to chasing only the developer if the society has financially benefited from the project structure.
Major Impact on Redevelopment Societies Across Maharashtra
The order sends a clear warning to housing societies:
- If you share FSI, additional flats, or revenue, you may be treated as a promoter
- Promoter status means:
- RERA compliance
- Exposure to delay interest claims
- Financial liability to homebuyers
Legal experts warn that societies must now carefully structure redevelopment agreements and fully understand the risks before agreeing to area-sharing models.
Conclusion
The MahaREAT ruling underscores that substance prevails over form under RERA. Even if a housing society does not sell flats directly, sharing development benefits is enough to attract promoter status and liability.
For both housing societies and homebuyers, this order marks a pivotal moment in redevelopment jurisprudence under RERA.
Also Read: Tribunal Rules Housing Society Not a Promoter Under RERA
