If you’re planning to be a homeowner, a residence in a housing co-operative would have been recommended a good deal. The proliferation of housing co-operatives and related legal framework across India is a mammoth subject of study. To better understand the basic concept and the fabric of housing co-operatives, this article is a good place to start.
Essentially, a co-operative housing society is a membership-based legal entity made of one or more residential buildings. You become a member by buying shares in the housing co-operative. In return, as a member, you get the right to occupy a housing unit in the society, be it an apartment or a house. A commonly accepted definition states that in a housing co-operative, the members “pursue the same cause of meeting the common need of housing or its improvement based on mutual assistance.” To elaborate, it is a democratically governed enterprise that entails voluntary management, shared expenses and community living. To borrow from Alexander Dumas’ The Three Musketeers – One for all, and all for one – is the motto of a co-operative.
The origin of housing co-operatives
In India, the idea was introduced by the British who founded the first Co-operative Societies Act in 1904 but only applied to credit societies for farmers. The first co-operative housing society was established in 1909 in Bangalore called The Bangalore Building Co-operative Society, followed by the Bombay Co-operative Housing Association in 1913, which also established the first ever model bye-laws. The Central government formed the Co-operative Societies Act in 1912 to lay down constitutional mandates for co-operatives.
The post-independence era saw a slow but steady growth of housing societies aided by five-year plans. In 1969, the National Co-operative Housing Federation was formed as a common forum to aid housing societies to get funds and general insurance, conduct research and to assist State Level Co-operative Housing Federations. Due to rapid urbanisation and government intervention, housing societies have received the benefit of multiple state and central level schemes, which provide loans and land development assistant, in addition to amendments in co-operative housing laws that are more friendly to small to medium housing societies.
Types of housing co-operatives (categorised on type of ownership):
There are two levels of housing societies; (1) primary housing societies at the individual level, and (2) Apex Co-operative Housing Finance (ACHFS) at the state level. According to a housing co-operative profile dissertation on Shodhganga, these ACHFS consist of around 92,000 housing co-operatives all over the country out of which, about 31,000 housing co-operatives are affiliated to State level ACHFS for getting financial aid. The rest of the co-operatives are those that get finances from other sources and those which have repaid their loans fully.
(1) Ownership Housing Societies: The society holds the land on lease or freehold basis by societies, and members own the houses.
(2) Co-Partnership Housing Societies: These housing societies hold both land and building, either on leasehold or freehold basis and allot flats to their members.
(3) House Mortgage Societies: Such societies lend money to their members for construction of houses. The members have to build a house on their own.
(4) House Construction or House Building Societies: The society provides the money to the member for building the houses and live in them. The money spent is recovered as a loan.
What are the characteristics of a housing society?
Open to all: Regardless of your gender, caste, social status, political or religious beliefs, you are welcome to join a co-operative housing society.
Voluntary organizations: Housing societies are voluntary in their functioning, based on the idea of self-help and self-reliance.
Democratic Ownership: Co-operatives are by the people, for the people, of the people. Office bearers/ representatives are chosen through a fair process of election.
Self-regulation: Co-operative housing societies are operated and governed by members, thus are truly autonomous and independent in all aspects.
Training and information: Co-operatives train and educate members with respect to management, legal compliance, and benefits of a communal living so that they can perform their parts effectively.
Mutual help: By the means of various local, national and international structures and paradigms, co-operatives enable members follow best practices and help them create better living conditions.
Concern for members: Welfare, convenience and prosperity of every member is the priority of a co-operative without self-interest and power plays within its functioning.
Financial contribution: Each member contributes equally towards common properties and maintenance.
Limited liability:Expenses are shared equally in maintenance and to the extent of contribution made by each member
Legal entity: A registered co-operative is a legal entity subject to local, national laws
What is the procedure to become a member in a housing society?
Once you decide which co-operative housing society you wish to be a part of, you need to apply for a membership in the prescribed form and fulfill the following terms:
(i) pay the full price of the number of shares needed for admittance and the entrance fee.
(iii) declare information with respect to any other property/home you or your family own anywhere in the area of the society’s operation.
(iv) present a guarantee that the flat/home you are investing in will be used for the purpose for which it is being purchased and for no other reason.
(v) declare all your sources of income/your dependence on others as a source of income.
(vi) a certified copy of the stamped agreement you’ve entered into with the Promoter (Builder) or transferor.
(viii) any such other declarations required under any bye-laws of the society.
Government policies and legislation
As such, each state has its own version of model bye-laws which you are required to follow as a member of a co-operative housing society. Other than that, below listed are some legislations that you could read up on.
1. Co-operative Societies Act (1912, 1950) for national level legislation and policies
2. The Multi-state Co-operative Act (2002) for the National Federation and Multi-State Co-operative Societies
3. National Building Code (including compliance to make buildings earthquake resistant)
4. Societies Registration Acts which differs from state to state
Each co-operative society falls under the purview of the Registrar of Co-operative Societies which is appointed by the state government.
What are the advantages of living in a co-operative housing society?
1. Housing societies are affordable since the cost per member goes down considerably in terms of all services and amenities.
2. It is not a public enterprise nor is it a profit seeking initiative. The very motive of a housing society is to provide a fair financial deal to its members, eliminating any exploitation or centralised financial control.
3. Housing societies are safe and secure environment to live in since every member is screened and vetted before allowing membership. Criminal elements are not entertained. Such is not the case in other types of residential areas.
4. Living in a housing society is an asset when it comes to tax deductions. Since you are considered a homeowner, you can deduct your portion of real estate/mortgage tax paid by the society.
5. Members have a say from the inception to the redevelopment stages of the society, in terms of design and planning. Maintenance and overhead charges are kept at minimal and divided equally among all members.
6. Outside intervention (such as a landlord) is eliminated. As a homeowner, you are secure and get to enjoy the benefits of residency for as long as you wish. Even after you vacate the premises, your post occupancy benefits remain intact.
7. You are a part of a bigger, more diverse community that encourages brotherhood, camaraderie and social acceptance.
8. You can avail better management, amenities and well-maintained facilities in a joint venture such as a co-operative. Since the members are prompt to act, take care of the premises with a feeling of ownership and allow voicing of opinion for each member, everyone’s needs are duly met.
9. Co-operative societies are stable and reliable. Members may come and go, but since the society has its own legal existence and the means to sustain itself, it is a long-term arrangement, ideal for investment as well as residence.