The Slum Rehabilitation Authority (SRA), the Maharashtra government’s key agency for slum redevelopment, has tightened regulations on free-sale inventory in slum rehabilitation projects. It now requires the preemptive freezing of designated sale flats to ensure transit rent payments and the fulfillment of permanent alternate accommodation (PAP) obligations for eligible slum inhabitants.
In a comprehensive office order issued in accordance with previous directives and the Bombay High Court’s rulings, the SRA stated that sale flats will be ring-fenced at the Intimation of Approval (IOA) stage, as well as during the issuance of amended IOAs, Letters of Intent (LOIs), or revised LOIs.
As part of this framework, the executive engineer will calculate the developer’s transit rent responsibilities for at least three years during the approval phase. From this evaluation, specific sale flats or areas will be earmarked and frozen for security, with lower-floor units typically reserved to maintain a clear and traceable inventory.
The order stipulates that all frozen flats should be clearly marked on approved plans and explicitly included as conditions in the IOA or LOI. Details including flat numbers, carpet or built-up area, floor level, and building identification must be provided, minimizing the possibility of changes post-approval.
Developers are also required to submit a formal affidavit confirming that the frozen flats cannot be sold, mortgaged, transferred, or otherwise encumbered. These restrictions will remain until rehabilitation is complete, PAP units are allotted to all eligible beneficiaries, and all transit rents and related dues are settled.
To enhance enforcement, the SRA mandates formal notification to the Inspector General of Registration and Controller of Stamps, along with the Maharashtra Real Estate Regulatory Authority (MahaRERA), regarding PAP and Permanent Transit Camp (PTC) details, as well as the inventory of frozen flats. Certified plans and necessary IOA or LOI documents must be shared with these bodies, and frozen units cannot be marketed or booked as free-sale inventory.
Defreezing will only occur after full compliance, which includes the completion of rehabilitation, allotment of PAP units, all dues cleared, and prior approval from the SRA’s deputy chief engineer.
The new regulations are expected to significantly impact risk assessments and funding structures for lenders involved in SRA projects. With a portion of the free-sale inventory effectively frozen and not available for sale, mortgage, or registration until certain rehabilitation goals are achieved, lenders might find their security cover diminished in the project’s initial stages.
This shift could prompt banks and NBFCs to reevaluate loan-to-value ratios, require greater promoter equity, or ask for extra collateral beyond the project itself.
Furthermore, project cash-flow models may undergo closer scrutiny, as revenue from frozen units cannot be utilized to service debts in the early phases.
Lenders might increasingly tie disbursements to rehabilitation advancements rather than just construction milestones, while also tightening escrow controls and monitoring end uses. Executives in the industry noted that this framework could slow down refinancing and exit financing for ongoing SRA projects, as lenders would likely consider longer lock-in periods before the inventory is freely available to developers.
