India: Municipal Market Redevelopment

Last Updated: 27 June 2019
Article by Snehali Karkera and Roopali Gosar

Municipal Market Redevelopment[1]

There are several municipal markets in Mumbai viz. Dadar Municipal Market, Crawford Market (also known as Mahatma Jyotiba Phule Mandai), Pali Market, being some of the big ones. This Article seeks to shed light on, hitherto unknown, various provisions affecting Municipal Market Redevelopment and the challenges faced in respect thereof.

Under Section 61(h) of the Mumbai Municipal Corporation Act, 1888, it is incumbent on the Mumbai Municipal Corporation to make provision, by any means or measures which it is lawfully competent to them to use or to take, for the construction and maintenance of public markets and slaughter houses and the regulation of all markets and slaughter houses[2] including inter-alia Municipal Retail Markets as an amenity for the general public. The Municipal Corporation of Greater Mumbai ("MCGM") allots units/ premises in such municipal markets to various persons being the vegetable vendors, fisher folks, shopkeepers, etc. on license basis and such licensees are required to pay to the MCGM the license fees. Such licensees in the municipal market come together and form an association. Some of these markets have been in existence for many decades and are now in a dilapidated condition and in need of major revamp, some of these have also been encumbered by slums.

In view of the aforesaid and the necessity of redeveloping these Municipal Retail Market, the MCGM had on 5th September, 2002 vide Resolution No. 931 sanctioned a Market Redevelopment Policy setting out guidelines for undertaking redevelopment of the markets ("Policy"). Thereafter, the MCGM has revised the aforesaid Policy on 27th February, 2004 and 5th May, 2005.

Under the Policy, there were six types of municipal market redevelopment based on the location of the market, the structure and whether there are any encroachments thereon:

(1) Development of Municipal plots reserved for constructing Municipal Retail Market and which are unencumbered;

(2) Redevelopment of existing Municipal Retail Market in the City;

(3) Redevelopment of existing Municipal Retail Market in the Suburban and extended Suburban areas;

(4) Development of Plots reserved for Municipal Retail Market and encumbered with slums;

(5) Development of plots reserved for Municipal Retail Market with structures existing prior to 1940 or cessed structure, under Regulation 33(7) of the Development Control Regulations for Greater Mumbai, 1991 ("Old DCR"); and

(6) Development of private vacant plots reserved for Municipal Retail Market by the owners.

Under the provisions of the old DCR, Municipal Retail Markets could be developed by MCGM, where the ownership of the same vests with the MCGM or by the owner in case of private ownership of the plots/lands reserved for municipal retail market. MCGM may acquire land and develop the Municipal Retail Market or may entrust the development to any suitable agency on such terms as are agreed between MCGM and the agency. In case where an agency or the owner is permitted to develop the Municipal Retail Market, such agency and/or the owner, as the case may be, is required to hand-over to MCGM, built-up areas with the type number and size of stalls as prescribed by the Commissioner, for the Municipal Market and free of charge. Thereafter the agency and/or the owner, as the case may be, will be entitled to have the full permissible FSI of the plot for other permissible users without taking into account the area utilized for the Municipal Market. However, the Development Control and Promotion Regulations for Greater Mumbai, 2034 ("new DCPR") only deals with development / redevelopment of existing municipal market of MCGM and land reserved for municipal market / existing municipal market on land belonging to MCGM and it neither deals with the lands which belong to private owners which are reserved for municipal market nor regarding the redevelopment of such municipal markets by private owners or agencies who had already obtained permissions and approvals under the old DCR and the Policy prior to the new DCPR coming into force.

Under the new DCPR, the existing licensed vendors on such lands, certified by the Market Department of MCGM, shall be entitled to 20% additional carpet area over and above the existing carpet area (excluding fungible BUA compensatory area) in the proposed redevelopment. The commercial galas so constructed pursuant to the redevelopment shall be first allotted to the existing certified licensed vendors, second to Project Affected Persons ("PAPAs") of vital public purpose projects, third to new licensees as per policy decided by the MCGM. Such licensee shall be licensees of the MCGM. Hence, the proposed unit purchaser of the residential component (in case residential user is permitted in the zone) or commercial component (in case commercial user is permitted in the zone) shall be a mere 'licensee' of the MCGM and shall not have any ownership/ leasehold rights in the unit. Also, the built up area as per zonal FSI or BUA required for accommodation or rehabilitation of the existing certified licensed vendors, whichever is more, shall be developed for market purpose and the balance potential may be utilized for the user permissible in the respective zone and subject to the regulations of the new DCPR.

Since the new DCPR provides for development / redevelopment of municipal markets only by MCGM itself, it is unclear whether MCGM would on its own undertake development / redevelopment of municipal markets or whether it would invite tenders from the private developers for the same and in case it invites private developers, in light of the aforesaid requirements of the new DCPR, whether it will be viable for them.

Further, under the Policy, the developer (whether any private owner or agency) was restricted from creating any charge, debt, claim, lien or mortgage of whatsoever nature on the plot and the structures thereon. Even, the free sale component could not be offered as security since the right therein was of a mere 'licensee'. In the event the developer could avail financial facility and/or any loan from financial institution, in an enforcement scenario, there was no tangible security, in the form of immovable property against which the lender could enforce the loan. Any change in developer would also require approval from MCGM. In light of such restrictions, it was difficult for any developer proposing to undertake redevelopment a municipal market, to obtain construction finance and/or financial assistance from any financial institution and/or lender since the developer was unable to offer the project as security.

The provisions under the new DCPR also throws fresh challenges under the Real Estate (Regulation and Development) Act, 2016 ("RERA"), as to whether MCGM would register itself as the Promoter under RERA since the new DCPR permits only MCGM to develop / redevelop municipal markets. Or in future in the event private developers are permitted by the MCGM, will such developers be required to register their Project under RERA, since the right/interest created in respect of even the free sale component is that of a mere 'licensee' and there is no sale and/or lease of the same.

Taking into account the conditions of the existing municipal retail markets and the challenges faced by the developers and the existing licensees to undertake redevelopment of the same under the old DCR and the Policy, it was expected that there would be some incentive and/or relaxation in the provisions relating to mortgage and/or nature of rights/interest created vis-à-vis allottees of the free sale component under the new DCPR.

However, the new DCPR fails to provide any clarity on the aforesaid. On the contrary, with the new DCPR stating that the redevelopment has to be only by MCGM, has put the fate of the existing redevelopment projects in the hands of private owners and/or other agencies in a limbo. It is necessary that MCGM promptly takes steps to come up with a Transition Policy to remove the lacunae in the new DCPR and amends the Policy to bring in more clarity so that the ongoing development of municipal markets which have been sanctioned under the old DCR can continue and with changes in the Policy to make it more viable vis-à-vis availing construction finance and sale of the free sale component.

[1] This Article deals with the development of Municipal Markets within the jurisdiction of the Mumbai Municipal Corporation.

[2] Section 61(h) of the Mumbai Municipal Corporation Act, 1988.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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