Consumer Connect: 'Be Careful Of 3% Tolerance Limit If Going For Redevelopment,' Says Expert

Q. My uncle’s society in Mulund with 120 flats is going for redevelopment. The developer has sent a draft Development Agreement (DA), which the managing committee has circulated and invited suggestions/objections from the members. One of the clauses in the draft DA is: “In case of increase or decrease in the actual final carpet area to the extent of 3% plus or minus of the area (tolerance limit) mentioned in the DA, neither party shall be entitled to claim compensation from the other party for such increase or decrease.” The clause further read, “If there is a decrease in carpet area beyond the tolerance limit of minus 3 % (shortfall area) then the developer shall compensate the member at Rs30,000 per sq ft over and above the shortfall area at the time of possession.” Can the members and the society oppose such a provision as I find it unfair. — Rajendra Rane, Borivali West A.

I would like to make it clear that the DA between the society and the developer for redevelopment is a legal document to be mutually discussed, negotiated, agreed upon and settled, before registration. For buyers, RERA has prescribed a model sale agreement, however, there is no model DA prescribed either by the government or MahaRERA for redevelopment projects. Hence, the provisions in the draft DA are negotiable and open to modifications.

Considering sky-rocketing property rates in the MMRDA area and even elsewhere, everysingle square foot carpet area matters. In your case, the rate appears to be around Rs30,000 per sq ft. If the new flat offered after redevelopment is say 600 sq ft then 3% shortfall would mean 18 sq ft less. This is equivalent to Rs5,40,000 considering Rs30,000 per sq ft. Why should members tolerate such loss and allow the developer to mint money? If you carefully notice the wordings of the said clause, the developer undertakes to pay the member at the rate of Rs30,000 per sq ft only for “beyond tolerance limit of minus 3 %”.

It means that if the final shortfall area is say 4%, then the developer is going to pay only for 1% because he wants the members to “tolerate 3% shortfall”. In your uncle’s case, the society will be fully justified in seeking modification of the clause by proposing that if there is any shortfall of even a single sq ft in the final carpet area, the developer shall pay the member at the rate Rs30,000 per sq ft. In the absence of such modification, just imagine if the developer is allowed such a 3% tolerance limit how much money he can mint. Assuming there are 100 flats and the developer deliberately gives 3% less area than the promised carpet area of say 600 sq ft; which works out to 582 sq ft.

In such a case, the developer is not liable to pay the members since it is not exceeding the so-called “tolerance limit”. In this way, he shortchanged all 100 flats for 18 sq ft each, totalling to 1800 sq ft i.e. worth three flats measuring 600 sq ft each! Look at the unjust enrichment this developer is trying to make in the sweet name of “tolerance level”. Now, it is for the society to take a call whether to tolerate such 3% cheating by the developer. I compliment you for bringing to my notice such an atrocious provision. It is a red alert for the housing societies going for redevelopment. Be careful and make sure that your DA does not contain such “tolerance limit” provision.

(Advocate Shirish V Deshpande is chairman, Mumbai Grahak Panchayat. Queries can be sent to him on email: shirish50@yahoo.com)

Published on: Monday, June 16, 2025, 11:25 AM IST