Cooperative housing societies have existed in India for many decades. They play a crucial role in providing affordable housing solutions to lakhs of people. Housing cooperatives are self-regulated entities, governed by their members. They are formed through mutual cooperation and with consent of their members. Here, we discuss everything about co operative housing societies, including the benefits of investing in one.
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What is a cooperative housing society?
A cooperative housing society is a legally-established body or entity owned by its members or residents for common needs. The entity owns and manages properties consisting of one or more residential structures. The cooperative housing society purchases land, develops it, constructs flats and allots them to its members.
The working of housing cooperative societies in various states across India are managed by individual Cooperative Societies Acts, and Cooperative Societies rules regulated by the Registrar of Cooperative Societies entrusted by the government. Cooperative societies are mostly a part of the National Cooperative Housing Federation of India (NCHFI) and adhere to the model bye-laws under the Multi-State Cooperative Societies Act, 2002.
See also: All about RWA
Housing cooperative society objectives
The main objective of a housing cooperative societies is to provide support to its members. Some of the other objectives of a cooperative housing society are given below:
- Supporting the society members by providing loans for the construction of houses or additional structures within the complex.
- Acquiring land, constructing flats and distributing them among the members.
- Promoting economic interests of the housing society and encouraging self-reliance among members.
- Facilitating healthy living standards by enabling an ideal socio-economic environment within the housing society.
- Providing basic facilities like water and electricity supply and ensuring regular maintenance of the housing society.
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Cooperative housing society characteristics
- Voluntary organisation: Housing cooperative societies are voluntary organisations with respect to their functioning, based on the idea of self-reliance and self-help.
- Open membership: The membership to the co op housing society is open to all individuals having common interests.
- Autonomy and independence: Housing cooperatives are autonomous and independent in many aspects.
- Democratic leadership: The office bearers or representatives of a cooperative housing society are selected through a fair election process.
- Separate legal entity: A cooperative society is registered under the Cooperative Societies Act. Registered cooperatives become legal entities, subject to local/ national laws.
- Financial contribution: Every member of the housing society makes an equal contribution to purchase and maintain common properties.
- Limited liability: Expenses are shared equally to the extent of contribution made by every member.
- Beneficial for members: Welfare, convenience and prosperity are top priorities for each and every member of a housing cooperative without self-interest and power play.
- Training and information: Housing cooperative societies provide training and knowledge to their members about legal compliance, management and benefits of living in a community so that they can efficiently execute their roles.
- Mutual help: Housing cooperatives enable members to follow best practices and support them to have better living standards through local, national and international structures and paradigms.
History of cooperative housing society in India
India witnessed a substantial growth of the cooperative housing society movement around the start of the 20th century. The Bangalore Building Cooperative Society was the first cooperative housing society established in Karnataka in 1909, followed by the Bombay Cooperative Housing Association in 1913 in Maharashtra. The association also created the first ever model bye-laws and steered the growth of cooperative housing.
The National Cooperative Housing Federation was established in 1969 as a common forum to support housing societies to obtain funds and general insurance, carry out research and assist state-level Cooperative Housing Federations.
There have been several state and central-level schemes for providing loans and land development assistance to the housing societies. The government has introduced many amendments in cooperative housing laws to make them favourable for small and medium housing societies.
Also read all about the Maharashtra Cooperative Societies Act 1960
Types of housing cooperatives
Housing cooperatives are classified into the following categories:
- Tenant ownership housing societies: In this type of cooperative housing society, the land is held either on leasehold or freehold basis, by societies. The members are the owners of houses and leaseholders of the land. They need to adhere to the regulations for subletting and transferring the houses. However, they can construct their houses as per their needs.
See also: What is a leasehold property?
- Tenant co-partnership housing societies: Under this category, the cooperative societies hold the land and building either on a leasehold or freehold basis. The members get an occupancy right after paying an initial share and a monthly rent.
See also: What is freehold property meaning
- Housing mortgage societies: These housing societies are like credit societies that lend money to its members for constructing houses. However, the members are responsible for the arrangement of construction work.
- House construction or house building societies: In this category, the housing cooperative societies construct houses on behalf of their members. After the construction of houses, they are handed over to the members. The money spent on the construction are recovered as loans.
Housing cooperative society examples
- Swamitva Multi State Housing Co-Operative Society Limited, a multi-state CHS in Maharashtra.
- Citizen Multi State Housing Cooperative Society Limited operates in five states and one union territory.
- Sainik Cooperative House Building Society Ltd, a cooperative housing society in Bardez, Goa.
- Chandranagar Coop House Building C S, a housing society in Kerala registered in 1956.
How to form a cooperative housing society?
Most cooperative societies in India are part of the National Cooperative Housing Federation of India. The formation and responsibilities of a cooperative housing society and its members are governed by the model bye-laws based on the Multi-State Cooperative Societies Act, 2002. Other cooperative societies are governed by the Cooperative Society Act, 1912 or the Cooperative Society Acts of the respective states.
There should be a minimum of 10 members having a common objective, to form a society. The members, having same interests, should be residents of the same locality, employees of an organisation, or belong to one group, etc.
How to register a cooperative housing society?
Registration of a cooperative housing society is mandatory in India under the Cooperative Societies Act, 1912. The procedure to register a cooperative housing society is mentioned below:
- The first step to register a housing society is to elect a chief promoter by its members.
- The members must select a name for the society, along with two alternatives.
- Fill the application with the promoter’s name and occupation and submit it to the registrar and pay the registration charges.
- The bye-laws are then adopted. Every house will have a share capital that must be paid equally by all residents.
See also: How much can housing societies charge as society transfer charges?
Documents for registration of a cooperative housing society
The following documents will be required for registering a cooperative housing society:
- Application for registration.
- All bank certificates/account statements.
- Four copies of the application form, signed by at least 90% of the promoter members.
- Details of the promoter members.
- Explanation of the society’s working.
- Additional copies of bye-laws proposed for the society,
- Form D account statements,
- Proof of payment of registration charges.
- Other documents specified by the registrar.
- Title Clearance Certificate provided by an advocate.
See also: Income tax rules for cooperative housing societies
Advantages of living in a cooperative housing society
Affordability
The members of a housing society control and decide the financial issues. The cost, in terms of services and amenities for each member, is considerably less. With a reasonable down payment, lower pre-closure charges and longer mortgage term, it becomes more affordable than any independent ownership.
Safe and secure investment
Cooperative housing societies are stable and reliable as they have a separate legal existence and the means to sustain their operations.
Owning a house in a cooperative housing society is a safe investment. With no intervention from landlords, members of the housing cooperative societies can reside in their flats as long as they wish. Even after vacating the flat, the occupancy benefits remain intact and one can either lease or rent it.
See also: All about non occupancy charges in cooperative housing societies
Better services and amenities
The members take care of the premises with a feeling of ownership. One can expect better management and good facilities. Needs of every member are duly met as they can voice their opinion for the benefit of others.
Democratic leadership
A cooperative housing society is managed in a democratic way with every member being a shareholder. Each member of housing cooperative societies has equal rights and privileges. The office bearers, who manage the society, are elected through voting.
Shared responsibilities
The responsibilities as owners are divided between various members. The cooperative society will be responsible for maintenance and repair works, insurance and replacements. The members are required to pay the society maintenance charges for services provided within the society. Also, the members have a say, right from the inception to the redevelopment stages, in terms of design and planning. The maintenance and overhead charges are minimal and equally divided among the members.
Disadvantages of a Cooperative Housing Society
- Lack of tax benefits: In terms of tax benefits, property owners with mortgages enjoy certain tax benefits. However, the financial situation in different for the owners in a cooperative society.
- Strict rules and regulations: The rigid rules and regulation can sometimes affect their functioning and the efficiency of management.
- Conflicts among society members: There are possibilities of conflicts if the members of a cooperative society differ in their viewpoints.
- Financial challenges: Cooperative societies are formed by different members with limited funds. This may result in a shortage of capital.
Cooperative Housing Society vs Housing Society
| Parameters | Cooperative housing society | Housing society |
| Ownership | Members of the society jointly own and manage the property as a shared entity. | Members individually own the residential units and operate the property. |
| Maintenance | Members contribute equally to the maintenance and common properties | The residents contribute to the maintenance charges while the managing committee or Resident Welfare Association (RWA) oversees the maintenance activities and budget allocation |
| Membership | In a co-operative housing society, besides the members, there are joint members, associate members, nominal members and temporary members.
|
In a housing society, only the first owner of the house can have the right to vote and attend the meetings held by the society. Membership types do not exist. |
| Redevelopment | In a cooperative housing society, redevelopments take place based on specific government guidelines | There are no specific guidelines from the government regarding redevelopment in housing societies |
| Elections | In a housing society, the government does not have any control over the elections held within | In a co-operative housing society, elections are governed by rules and regulations made by the Co-operative Election Authority/Committee |
Buying a property in a Cooperative Housing Society
Before buying a property in a Cooperative Housing Society, a buyer should look at various aspects.
Legal due diligence: Before purchasing a property, one should check if it has a clear title and that relevant documents are in place. Buyers must ascertain if the housing society is genuine. A CHS provides its members with a certificate for registration of the society and its byelaws. Buyers must also check if the seller has cleared all dues, including the transfer fee, membership fee, etc. and does not have any pending liabilities.
Property inspection: Make sure to conduct a site visit to check the property. Ask the seller if there is a parking lot available for the member, and know about the various society rules beforehand.
Home loan: If one is purchasing the property through a home loan, then ensure all the documents are in place, as banks or lending institutions conduct due diligence before sanctioning the loan.
Society membership and title transfer: Another thing buyers must consider is obtaining society membership and title transfer. The buyer’s name should be registered as a society member (share certificate) through the formal process at the first Annual General Meeting (AGM) or committee resolution. This is an important step to get complete ownership.
It is advisable to consult a property lawyer. This will be beneficial for first-time buyers or in cases where the property sale is through a power of attorney.
How can a member of a cooperative housing society transfer or sell their flat?
The membership in a cooperative housing society or occupancy of a flat in the housing society can be transferred if the following conditions are fulfilled:
- The member applying for transfer must seek the consent of the housing society. A member who wishes to transfer their shares in the property must provide a 15-day notice to the secretary of the society in the prescribed transfer form.
- There is a specified fee that must be paid to the housing society. A housing society allows its members to sell or transfer the shares and interest in the property only if the seller has paid the prescribed fee.
- All the dues to the housing society must be settled by the transferor. Alternatively, the transferee should agree to pay the dues after getting the consent of the housing society.
- The flat must be vacated and possession should be given to the transferee. After this, the transferee has to apply for membership in the housing society.
How to ensure effective functioning of a cooperative housing society?
- The members can organise regular events to create a sense of community and achieve a harmonious atmosphere.
- Ensure there is open and transparent communication between the managing committee and the residents. This will enable efficient decision making and smooth functioning.
- Properly enforce the rules and guidelines to prevent any legal issues.
- Conduct regular reviews of the by-laws and regulations and invite suggestions for any amendments which will help improve the overall functioning of the society.
Annual General Meeting (AGM)
Every cooperative housing society conducts an Annual General Meeting (AGM), which is a yearly meeting to discuss various issues, review the activities that happened in the year and make important decisions for the benefit of the society and its members. The meeting is attended by the president, secretary and treasurer among other members.
Housing.com News Viewpoint
Investing in a self-regulated cooperative housing society can be an affordable housing option for a buyer. However, it comes with certain responsibilities. Compliance with the rules and regulations is necessary. Otherwise, it can lead to negative consequences for the members, including expulsion from the society. Thus, it is essential to understand how a cooperative housing society is formed and its regulations.
FAQs
Who can become a member of a cooperative housing society?
Any adult (minimum 10 in number), having common interests, can voluntarily form an association, become its member and register with the Registrar of Cooperative Societies.
What are the objectives of a cooperative housing society?
One of the main objectives of a cooperative housing society includes the purchase of land, construction of houses and allotment of the same to its members.
Are all members of a housing society given equal rights?
All members of a housing society are given equal rights and privileges. They are allowed to express their opinions.
Should every housing society be registered?
Every housing cooperative society must get registered under the Cooperative Society Act of 1912. The cooperative housing societies are governed by the relevant national/state laws.
What is the minimum number of members required to form a cooperative housing society?
A minimum of ten members are required to form a cooperative housing society.
What is the history of Bangalore Building cooperative society?
The Bangalore Building Cooperative Organisation was the first cooperative housing society to be created in Karnataka in 1909.
What is the difference between RWA and cooperative society?
While RWA is constituted by the residents after a residential project is completed while a co-operative society owns and manages the property.
What is GST on co-operative housing societies?
GST on Co-operative housing societies or RWAs is refers to the tax imposed on the monthly maintenance charges collected by such societies or associations from their members. Co-operative housing societies or RWAs having an annual turnover exceeding Rs 20 lakhs have to register under GST and pay tax at the rate of 18% on the monthly maintenance charges collected from their members.
Can a member of a co-operative housing society be expelled?
The housing society can expel a member on specific ground. This includes being a regular defaulter in clearing any dues, if the member has violated any regulation or obtained the membership through fraudulent means (false statement or false documents) or if the member has worked against the interest of the housing society.
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