Buying property in a Co-operative Society in India
Housing Co-operative Societies are autonomous associations of persons who unite voluntarily for meeting their housing needs with economic, social and cultural advantages. Together, they form a not-for-profit Co-operative Corporation.
A Housing Co-operative Society is jointly owned by its members and works on a democratic basis to own or control housing and/or related community facilities. Each month, members simply pay an amount that covers their share of the operating expenses of the Co-operative Society.
Role of Housing Co-operative Societies in India:
In recognition of the importance of Housing Co-operatives in creating good housing conditions, the government and other public authorities have found a major contributor to their efforts for proper housing in the country. In Tamil Nadu, for instance, the Housing Cooperative Societies are playing an important role in achieving the government's objective of 'A House For Each Family'. Several Co-operative Societies are functioning to fulfill the housing needs of members in urban and rural areas.
General guidelines for a Co-operative Society:
Formation of a Society is subject to some basic guidelines that are State specific.
Given below is a general overview of the guidelines:
1. Membership is open to all who will co-operate in good faith, irrespective of race, caste or creed. The number of members of a Society is dependent on the directives of the Registrar. Usually, it is ten.
2. Members should not be of the same family.
Members should be eligible to enter into a contract under the Indian Contracts Act, 1872.
3. There is no limitation on who can or cannot join the Society.
4. The Society should be registered under the Societies Registration Act, 1860.
5. It should be financially strong and able to bear the costs of the Co-operative's development drives.
6. Different types of Housing Societies:
7. Housing cooperatives embrace a range that includes high-rise apartment buildings, garden-style apartments, townhouses, single-family homes, and senior housing.
Flat Owners Society:
It is a Society formed by different purchasers of residential tenements under the State Acts governing ownership of flats. The builder constructs flats and sells them to flat owners.
Such a Society acquires a plot of land with a building from the Board and manages, maintains, and takes responsibility for the administration of the same.
Open Plot Society:
In this, members purchase or take on lease a plot of land and undertake construction of the building.
It is a Society formed by individuals with an objective to buy a plot of free land and construct a tenement thereon to administer, maintain and manage.
City and Industrial Development Corporation (CIDCO), Mumbai besides leasing out plots as tender plots also allots plots to Housing Co-operative Societies (governed by the Maharashtra Cooperative Societies Act, 1960) formed by persons of 15 years of domicile in Maharashtra at concessional rates.
Becoming a Member:
When you buy into a Co-operative Society, it means you are buying shares or a membership in a Co-operative Housing Corporation. The corporation owns or leases Real Estate. Becoming a member will entitle you to an exclusive right to live in a specific unit for as long as you want, provided you do not violate its rules or regulations.
The purchase price may vary as it is subject to factors including the kind of neighborhood the property is in, how big the unit is, whether the Co-operative places a restriction on resale prices, and whether the Co-operative has an underlying mortgage for the entire property.
Advantages of buying from a Co-operative Housing Society:
* Affordability: It involves lower down payment, much lower closing costs, and is more affordable than other ownership housing. It grants permanent right of habitation to its members.
* Controlled monthly charges and maintenance costs: Monthly charges remain reasonable, unless taxes or operating costs go up drastically.
* Direct maintenance responsibilities: Since the cooperative association is responsible for insurance and upkeep of common grounds and facilities, direct responsibilities are less.
* Tax Deductions: For income tax purposes, the Co-operative member is usually considered a homeowner and is allowed to deduct his or her share of the real estate taxes and mortgage interest paid by the Co-operative.
* Equity: Co-operatives can provide for accumulation of individual member equity.
* Savings: Encourages savings as Co-operative members can benefit from economies of scale in operating costs as well as from its not-for-profit operation. Transfers of shares involve fewer settlement costs.
* Voting rights: As mutual owners, member residents get to participate at various levels in the decision-making process. They can exercise a vote in the affairs of the corporation.
* Consumer Action: Through their cooperative association, members can jointly act as a consumer advocate to influence tax rate changes and utility prices and obtain improved services from the local government.
* Security: It permits economic self-administration of houses, arrests incidence of abuse of property and promotes improved and shared security arrangements among members.
* Spirit of Co-operation: It nurtures the concept of mutual help and human relations amongst its members. Governed by the principles and practices of Co-operative organisations, Housing Co-operative observe the values of self help, self responsibility, equality, equity and solidarity and encourage promotion of economic interests or general welfare of the members/public.
However, their realization will depend upon the effectiveness of the organisation, the motivation and dedication of the members and competence of the management.