New Flat After Redevelopment: Stamp Duty and RERA

When a housing society is redeveloped, each existing member gives up an old flat and receives a new one, usually larger, in the rebuilt building. The document that records each member’s entitlement is the Permanent Alternate Accommodation Agreement (PAAA), executed between the developer and the member under the umbrella of the society’s development agreement. Two questions arise for almost every member with a new flat after redevelopment: how much stamp duty is payable on the PAAA, and whether the Real Estate (Regulation and Development) Act, 2016 (RERA) protects the member if the developer delays or changes what was promised. The answers are more settled than many members expect, and the second answer is narrower than many hope.

Two documents, one transaction

A redevelopment typically rests on two layers of documents:

• The development agreement between the society and the developer, which grants development rights over the society’s land and building, and records the developer’s obligations to the society as a whole: the new building, the area to be given to each member, the timeline, rent for temporary accommodation, corpus, security and so on.
• The PAAA between the developer and each member, which identifies the specific new flat the member will receive in lieu of the old one, its area, and the terms applicable to that member.

Where a member chooses to buy area beyond the entitlement, that purchase is typically recorded in the PAAA or in a separate agreement, at a price.

Understanding that these documents are part of one transaction is the key to the stamp duty question.

Stamp duty on the PAAA: Adityaraj Builders

For several years, the stamp authorities in Maharashtra treated each PAAA as a separate instrument liable to full stamp duty, in addition to the duty already paid on the development agreement. Circulars issued on 23 June 2015 and 30 March 2017 required separate stamping of PAAAs.

The Bombay High Court rejected that approach in Adityaraj Builders v. State of Maharashtra, decided on 17 February 2023 by a Division Bench of G.S. Patel and Neela Gokhale, JJ. (reported as 2023 SCC OnLine Bom 540).

The Court relied on Section 4(1) of the Maharashtra Stamp Act, 1958. That provision says that where, in the case of a development agreement, sale, mortgage or settlement, several instruments are employed for completing the transaction, only the principal instrument is chargeable with the duty prescribed in Schedule I, and each of the other instruments is chargeable with a duty of one hundred rupees.

Applying it, the Court held:

• once the development agreement has been stamped, a PAAA that relates to rebuilt premises given in lieu of the member’s old premises cannot be separately assessed to stamp duty beyond the Rs 100 required by Section 4(1);
• this holds even where the new flat is larger than the old one, provided the additional area is given as part of the redevelopment entitlement and not purchased;
• a PAAA is to be additionally stamped only to the extent that it records the purchase by the member, for actual stated consideration, of additional area over and above the area given in lieu of the earlier premises.

The 2015 and 2017 circulars were set aside.

What this means for a member

Two practical points follow. First, the benefit depends on the development agreement itself having been properly stamped, so members should confirm that it was. Second, where a member buys extra area, the PAAA should state clearly which part of the new flat is the entitlement and which part is purchased, with the price for the purchased part, so that duty is assessed only on what is bought.

Does RERA protect the existing member?

Members often assume that because the developer has registered the project with MahaRERA, they enjoy all the protections RERA gives to homebuyers: interest for delayed possession, a structural defect liability period, and a complaint before MahaRERA. The position is more limited.

The statutory exemption

Section 3(2)(c) of RERA provides that no registration is required for the purpose of renovation, repair or re-development which does not involve marketing, advertising, selling or new allotment of any apartment, plot or building under the real estate project.

In a typical Mumbai redevelopment, the developer sells surplus flats in the open market. That sale component involves marketing and selling, and must be registered. The rehabilitation component, meaning the flats given to existing members in exchange for their old ones, does not involve a sale to them in the ordinary sense.

Girish Shrikant Lad v. Ashwamedh Spaces

That distinction was applied by MahaRERA in Girish Shrikant Lad v. Ashwamedh Spaces Pvt. Ltd., decided on 5 January 2026. The complainants were members of a co-operative housing society that had entered into a redevelopment arrangement with the developer in 2021. They alleged, among other things, that a flat promised to them had been transferred to a third party and that the area promised had been reduced.

MahaRERA dismissed the complaint as not maintainable. It held that the rehabilitation of existing members fell outside RERA under Section 3(2)(c), and that the complainants, who held their rights through the society’s redevelopment documents and had paid no sale consideration for the flat, were not “allottees” under RERA. The arrangement rested on memoranda of understanding and the development agreement rather than a registered agreement for sale, and the developer contended that the complainants had not paid for the additional area they had agreed to buy. The members were left to pursue remedies before the civil court or in arbitration under their agreements.

The reasoning turned on the absence of a registered agreement for sale and of any price paid. The order does not decide the position of a member who buys additional area under a registered agreement for a stated price, and members in that situation should not assume either answer.

What actually protects members: the documents

If RERA does not cover the rehabilitation flat, the member’s protection lies almost entirely in the development agreement and the PAAA. These are the clauses that matter most.

Possession date and penalty

The agreement should fix a date for handing over possession of the new flat with an occupancy certificate, with any grace period stated in months, not left open-ended. It should provide a monetary consequence for delay, such as an increased monthly rent or a fixed sum per month, payable automatically rather than at the developer’s discretion.

Bank guarantee or other security

A bank guarantee in favour of the society, for an amount and duration linked to the cost of completing the rehabilitation component, gives the society a practical remedy if the developer abandons the project. The agreement should specify when the guarantee can be invoked and require it to be kept alive until the rehabilitation flats are handed over.

Rent and shifting costs

Monthly rent for temporary accommodation, its escalation, the advance period for which it is paid, and shifting charges should be stated in figures. The agreement should require rent to continue until possession of the new flat is actually offered with an occupancy certificate.

Corpus

Any corpus fund or hardship compensation should be stated per member or per square foot, with the dates of payment.

Carpet area and specifications

The PAAA should state the carpet area of the new flat as a number, identify the flat on an annexed plan, and annex the list of amenities and specifications. Vague references to “approximately” a given area invite later disputes.

Dispute resolution

Since MahaRERA may not be available, the dispute resolution clause determines where a member will go. Most development agreements contain an arbitration clause. Members should know whether the clause covers individual members’ disputes under the PAAA, and where the seat is.

Procedural changes to watch

The procedural framework for society redevelopment has been revised. The Maharashtra Co-operative Societies (Amendment) Rules, 2026 added rules on redevelopment special general meetings, and the State has issued a fresh Government Resolution under Section 79A of the Maharashtra Co-operative Societies Act, 1960, dated 30 September 2026, replacing the redevelopment directives of 4 July 2019. Societies at an early stage should check the current requirements before finalising their documents.

Frequently Asked Questions

How much stamp duty is payable on a PAAA after redevelopment?

If the development agreement has been duly stamped, a PAAA for the new flat given in lieu of the old one attracts only Rs 100 under Section 4(1) of the Maharashtra Stamp Act, 1958, as held in Adityaraj Builders v. State of Maharashtra (Bombay High Court, 2023). This applies even if the new flat is larger, so long as the extra area is part of the entitlement.

Is stamp duty payable on extra area bought from the developer?

Yes. Full stamp duty is payable on the additional area a member purchases for consideration over and above the area given in lieu of the old flat. The PAAA should separate the purchased area and its price clearly.

Is a member of a redeveloped society an allottee under RERA?

For the rehabilitation flat, MahaRERA has held not. In Girish Shrikant Lad v. Ashwamedh Spaces Pvt. Ltd. (5 January 2026), it held that the rehabilitation component falls outside RERA under Section 3(2)(c) and dismissed the members’ complaint.

Does the developer still need to register the project with MahaRERA?

Where the developer markets or sells flats in the redeveloped building, that sale component requires registration. Section 3(2)(c) exempts only redevelopment that does not involve marketing, advertising, selling or new allotment.

Where can a member go if the developer delays possession?

To the remedies provided in the development agreement and PAAA, which usually include an arbitration clause, or otherwise to the civil court. That is why the possession date, delay compensation, bank guarantee and rent clauses should be specific.

This article is for general information and is not legal advice.

This article is for general information only and is not legal advice or an invitation to engage the firm. Laws and judgments change; please obtain specific legal advice before acting.