Understanding the Developer Agreement in Society Redevelopment Projects

For most societies, redevelopment is a once-in-a-lifetime opportunity to get a brand-new home with better amenities, more space, and upgraded living conditions — all at no personal cost. But it also involves signing a development agreement, a legal document that lays out the terms and conditions of the entire project. 

Before you hand over your property to a developer, it’s critical to understand the Developer Agreement, the legal contract that governs the entire redevelopment process.

If you don’t pay attention to the clauses in this agreement, your society could face delays, disputes, or even financial loss.

In this article, we’ll explain — what a developer agreement is, when it is signed, and the most crucial clauses you must check before proceeding.

What is a Developer Agreement?

A developer agreement (also called a development agreement) is a legal contract signed between the society members and the developer.

It outlines the rights and responsibilities of both parties in redevelopment projects, where:

• The society retains ownership of the land and building.
• The developer is permitted to demolish and reconstruct the building, and sell the additional flats to new buyers.

The agreement protects the interests of the society & its members and ensures the developer completes the project on time and as promised.

But what exactly should you look for in the agreement? Let’s break it down from the perspective of a society member and a flat owner.

Crucial Clauses in a Redevelopment Agreement To Check

History of Conveyance & Legal Foundation

The agreement should clearly state the history of how the conveyance deed was executed with the society — this establishes your legal ownership. The society’s registration number (under MCS Act, 1960) must also be mentioned to confirm its legal standing.

Carpet Area & Flat Particulars

List the particulars of existing flats, with carpet area occupied by each member. Specify the new flat’s carpet area (as per RERA) that the member will receive — avoid vague terms like “built-up” or “super built-up.”

Plot Area, FSI & TDR

The agreement should mention the plot area (as per the Property Register Card), the estimated FSI (including additional TDR), and how the developer plans to use it — as per DCPR 2034. Any unused FSI remains society’s property.

Parking Allocation

The agreement should define the number and type of parking spaces — open, stilt, or closed — allotted to each member. This prevents disputes later.

Timeline, Vacating & Approvals

Vacating Linked to Approvals

The agreement should specify that members vacate only after plans are approved by the authority.
Tentative dates for obtaining the IOD (Intimation of Disapproval), which signifies redevelopment commencement, should also be mentioned.

Development Timeline & Penalty

Define the construction timeline and mention a penalty clause if the developer fails to complete within the agreed period.

Transparency & Construction Details

The agreement must emphasize transparency in:

• Floor area (Carpet, Built-up, Super Built-up).
• Construction schedule & approximate completion time.
• Quality of materials & specifications.

It should also clearly state the amenities & specifications promised in the new building — such as lifts, gym, security, garden, etc., as per DCPR norms.

Developer’s Financial Obligations

Rent & Corpus Fund

The developer must pay market-rate rent to members during construction and contribute a corpus fund for society’s maintenance. This should have a fixed payment schedule and penalties for delays.

Bank Guarantee

Developers should furnish a bank guarantee (usually 20–25% of project cost) to secure society’s interests.

Developer’s Costs

The developer bears all costs of:

• Municipal taxes, premiums, and statutory payments.
• Obtaining Development Right Certificate (DRC) under Development Control Regulations. Neither the society nor its members should bear these expenses.

Ownership, Exit Clause & Property Details

Ownership Rights

Even after redevelopment, ownership of land & building remains with the society. Any future FSI benefits also belong to the society.

Exit Clause

Include a clause allowing the society to terminate the agreement if the developer defaults or fails to meet obligations.

Schedule of Property

The agreement must conclude with a detailed schedule of the property:

• Location, suburb, plot number, CTS number, area, municipal ward, and property card details.

Society Membership & Contributions

Each new flat buyer (introduced by developer) intending to join the society must pay:

• Entrance fee.
• Share allotment money.
• Contribution toward capital & sinking fund.

These amounts should be specified to avoid disputes later.

When Should the Developer Agreement Be Signed?

• After society passes a resolution (minimum 75% majority) selecting the developer.
• After vetting terms legally and conducting due diligence.
• Before handing over possession of flats.

Never sign under pressure — take your time and consult professionals.

Other Important Points You Should Know

Here are three more essential clauses you should insist on:

1️. No Possession Without OC

Once the construction is completed, society members should not move into the new flats until the developer obtains the Occupancy Certificate (OC) from the authorities. 

2️. Tax Liability & Costs

Ensure that the developer bears all construction-related expenses, municipal taxes, and any statutory costs — not the society members.

3️. Exit Clause

Include a clause that allows the society to terminate the contract if the developer fails to meet their obligations — this is your safety net in case things go wrong.

Power of Attorney: What to Watch Out For

Sometimes, the developer may ask for a Power of Attorney (PoA) to issue NOCs (No Objection Certificates) to new flat buyers for home loans.

That’s okay — but make sure the PoA is limited only to issuing NOCs and nothing more. Avoid granting blanket powers that can be misused.

Final Words

Redevelopment can transform your home and your lifestyle — but only if it’s done right.

Take the time to carefully review your developer agreement. Don’t hesitate to consult a lawyer or PMC to help you understand the legal jargon and negotiate better terms.

By being aware of these critical clauses, your society can protect itself from unnecessary risks and ensure a smoother redevelopment journey.

📌 Key Takeaways:

• Know your carpet area, FSI, and amenities clearly.

• Ensure timelines, penalties, and exit clauses are included.

• Never hand over possession or PoA without clear, limited terms.

• Always consult professionals before signing anything.