Short Answer

In a redevelopment project, the developer is generally responsible for bearing cost overruns or unexpected expenses, unless otherwise specified in the registered redevelopment agreement. The society or its members are protected under Section 63 and Section 74 of the Gujarat Cooperative Societies Act, 1961, which require the developer to complete the project as per agreed terms, including handling financial risks.

Detailed Explanation

Under the Gujarat Cooperative Societies Act, 1961, the managing committee of the society represents all members in executing and monitoring redevelopment agreements. These agreements are legally binding documents that clearly define who bears financial obligations during the project.

According to Section 63, the managing committee is empowered to enter into a redevelopment agreement on behalf of the society.

Section 74 further ensures that the committee manages the redevelopment transparently, protecting members from unexpected liabilities or financial burdens.

In a standard redevelopment model, the developer takes full responsibility for:

Construction and architectural costs

Project approval and legal fees

Temporary accommodation/rent for members

Cost escalations due to inflation or regulatory changes

This is because the developer typically benefits from saleable area (free-sale component) in the project, which covers their investment and profit margins. Therefore, any cost overrun or escalation risk must be borne by the developer, not the society members.

However, if the redevelopment agreement explicitly includes shared costs for major plan revisions or unforeseen legal expenses, members may be required to contribute only after general body approval. Such contributions must be voluntary and transparent.

Key Legal Safeguards:

Development Agreement Clause:

The agreement must clearly specify that all construction and cost escalations will be borne by the developer.

Members’ liability should be limited to their pre-agreed financial commitments (if any).

Section 18 of RERA (2016):

Protects allottees (members) from losses due to the builder’s delays or non-performance, further ensuring that cost burdens do not shift to members.

Force Majeure Conditions:

Only in extraordinary circumstances (natural disasters, court stays, etc.) can the developer seek an extension of time — not additional cost recovery from members.

Practical Examples

Scenario 1: A housing society in Ahmedabad signs a redevelopment agreement where the developer promises 25% extra carpet area and ₹15,000 monthly rent. Later, steel and cement prices rise by 20%. The builder cannot demand extra payment from members because the agreement fixed his financial responsibility.

Scenario 2: In Surat, the Municipal Corporation changes FSI norms mid-project, increasing design costs. The developer bears this additional expense under the contract clause covering regulatory risks.

Scenario 3: A Vadodara society faces an unexpected legal expense due to a land title issue. As the agreement did not include such costs, the developer and society mutually agree to share it through a general body resolution.

References

Section 63 of the Gujarat Cooperative Societies Act, 1961: Official PDF

Section 74 of the Gujarat Cooperative Societies Act, 1961: Official PDF

Section 18 of the Real Estate (Regulation and Development) Act, 2016: Gujarat RERA Act

Urban Development and Urban Housing Department Redevelopment Guidelines, Government of Gujarat (2019).