Cooperative Society: Types, Characteristics & Features

It’s been over a century since cooperatives were introduced in India. The values of collective action and support were used during the colonial era to promote agricultural and credit cooperatives. Soon, these ideas extended to the housing sector, creating cooperative societies. Today, India has over a lakh of them. But what is a cooperative society really? How would we define it? How is it formed, and what is the registration process? This blog explores all this and much more. Find everything you need about cooperative societies in India in this comprehensive and detailed blog.

What is a Cooperative Society?

In a cooperative society, a group of members come together to own and manage a property. Members buy shares of the society and receive property ownership in return. A cooperative society is a legal entity where members collectively make decisions. As a result, both responsibilities and benefits are shared.

The basic idea behind cooperative societies is to offer affordable housing and ensure democratic functioning. They are formed to provide quality housing at reasonable costs by pooling resources and sharing expenses. In addition, each member gets to have a say in the society’s functioning. 

The Bangalore Building Cooperative Society, established in 1909, is widely regarded as India’s first-ever cooperative society. It was soon followed by the Bombay Cooperative Housing Association in 1913. In the meantime, the Cooperative Societies Act of 1912 had also been enacted. In 1969 came the National Cooperative Housing Federation. It is the apex organisation that supports housing cooperatives across India, providing them with guidance, training, and financial assistance. Today, cooperative societies in states are governed by different State Cooperative Society Acts and regulated by the Registrar of Cooperative Societies. 

Objectives of Cooperative Society

Affordable housing and shared living are two major goals of cooperative societies. Here are some of its many objectives:  

1. Providing affordable housing solutions to its members. 
2. Offering financial assistance to its members for the construction of houses. 
3. Encouraging a self-reliant way of living. 
4. Provide a safe and secure living environment. 
5. Fostering a healthy living standard by providing all basic amenities.
6. Ensuring due compliance with all relevant laws and regulations. 
7. Resolving disputes within the society and fairly addressing the conflicts. 

Features of Cooperative Society

Multiple factors distinguish cooperative societies from other housing setups. Here are some of its highlighting features:  

• Open & Voluntary Membership: Membership in a cooperative society is voluntary. Individuals can choose to join or leave the society as per their own will, provided they adhere to the housing society’s rules and regulations.
• Democratic Functioning: Cooperative societies function with the idea of ‘one man, one vote.’ All members enjoy an equal say in decision-making, and the office bearers are elected through fair processes. 
• Collective Ownership: Each member has a share in the ownership of a cooperative society. This is because housing units are available to the members only after they purchase the society’s shares. 
• Welfare Motive: Cooperative societies are not driven by a motive to maximise profits. Instead, they focus on providing the maximum value to the members with minimum resources.
• Autonomous Legal Entity: Cooperative societies are autonomous bodies that must be legally registered under the specified State Cooperative Societies Acts. They enjoy complete independence in their daily functioning. 
• Shared Financial Responsibility: The purchase and maintenance of society properties is a key responsibility of every society member. This fosters a division of administration and greater inclusivity. 
• Transparency and Accountability: Transparent functioning ensures that the housing society’s rules and regulations are always fulfilled. Regular audits, general meetings, and detailed financial reporting are essential to a cooperative society’s functioning. 

Types of Cooperative Society

There are multiple types of cooperative society setups. The four major types are listed below: 

• Ownership Housing Societies: In an ownership cooperative setup, the society owns the land, and the members own the houses. The land is owned on a freehold or a lease basis. Members can carry out construction but must adhere to housing society rules and regulations to sublet or transfer the homes. 
• Co-Partnership Housing Societies: The society here owns both the land and the building on a lease or freehold basis. Members can occupy the allotted flats immediately after making the initial payment and the monthly rent. 
• House Mortgage Societies: Such societies lend money to their members to help construct their properties. However, the members oversee the entire construction themselves.
• House Construction or House Building Societies:  Such cooperatives oversee the construction on the members’ behalf and hand it over to them upon completion. The amount spent on the construction is later recovered from the member as a loan.  

Advantages of Cooperative Society

Now that, the question of what is a cooperative society is out of our way. Let’s take a look at some of its highlighting advantages: 

Affordable Housing Option

The per-head cost in a cooperative society is considerably less. Members enjoy modest down payments, minimal pre-closure fees and longer credit tenures. 

Tax Benefits

Members of cooperative societies enjoy tax deductions. For instance, they can claim deductions on housing loan interest payments and principal repayments under specific sections of the Income Tax Act. These benefits help reduce their overall tax liability, making homeownership even more affordable.

Self Governance

The members of a cooperative society are solely responsible for their well-being. From budgeting to repairing, legal tasks to administrative work, cooperative society members enjoy complete freedom to govern themselves however they want. 

Long Term Arrangement

A cooperative society is a long-term arrangement. As a legal entity, it remains unaffected by individual members’ entry or exit, making it a desirable avenue for long-term property investments. 

Close Knit Community

Since cooperative societies focus on collective living, members are more interdependent on each other. This often fosters a positive community spirit that is less prominent in other society setups. 

How is a Cooperative Society Formed?

The first step in forming a cooperative society in India is to gather at least 10 members who share a common housing vision. These members will act as the society’s promoters and play a key role in its registration process.

In India, many cooperative societies seek support from the National Cooperative Housing Federation of India (NCHFI). The bye-laws governing these societies are provided by the respective state cooperative societies acts or the Multi-State Cooperative Societies Act, 2002, if the society operates in more than one state. Further, cooperative societies are also governed by the Cooperative Societies Act, 1912 or other state-specific acts.

How to Register a Cooperative Society?

A cooperative society in India must be registered under the respective State Cooperative Societies Act or the Multi-State Cooperative Societies Act, 2002. It is an important part of adhering to housing society rules and regulations. Here are the steps to follow:

1. Elect a chief promoter of the society from the group of promoters. 
2. Choose a desired name for the society while also providing two alternatives. 
3. Obtain Form A from the Registrar of Cooperative Societies office. 
4. Fill in the form with all details and submit it to the registrar along with the due payment of all charges.
5. Once approved, the bye-laws will be adopted, and a certificate of registration will be issued.
6. Further, each house in the society will enjoy a share capital shared equally with all residents. 

Documents Required While Registration Cooperative Society

Document requirements for registering a cooperative society vary from state to state. Members must inquire at the registrar’s office before submitting their application. Some of the common document requirements are listed below:

• Application Form (Form A) 
• A Memorandum of Association (MoA) including the objectives, member details, and registered office address.
• Articles of Association (AoA) outlining the rules, regulations, and operational guidelines.
• Four copies of the Application Form with the sign of at least 90% of the promoters.
• Four copies of the proposed bye-laws.
• A list of promoter members with their names, addresses, and personal details.
• Bank statements related to the society.
• A cover letter stating the purpose of forming the society, signed by all founding members. 
• Proof of payment of registration fees. 
• Title Clearance Certificate issued by a practising lawyer. 
• Others as specified by the registrar. 

How to Become a Member of a Cooperative Society?

Upon deciding on the desired cooperative society, one should follow these steps to gain its membership:

1. Apply for the society’s membership form.
2. Pay the required share price and entry fees.
3. Provide the necessary information about ownership of any other property/ asset.
4. Provide an assurance that the purchased property will solely be used for the intended purpose.
5. Disclose all your income sources.
6. Provide a certified copy of your stamped agreement with the promoter.
7. Submit other declarations/ documents needed as per the society’s bye-laws.

What is the Importance of Adhering to Housing Society Rules and Regulations?

Adhering to housing society rules and regulations in India is crucial for maintaining a peaceful and well-functioning living environment. Here are some key points highlighting its importance:

• It promotes peace, reduces conflicts, and establishes harmony among residents.
• It upholds the spirit of mutual understanding. 
• It ensures a safe and secure living environment for the residents. 
• It protects property and amenities by enforcing regular maintenance.  
• It provides necessary usage restrictions to prevent damage.
• The regulations promote social interaction and participation in society meetings.
• They help establish financial stability through timely fee payments and transparent audits.
• Society’s rules keep local laws in place and avoid penalties.
• It promotes fairness and equality, ensuring all residents are treated equally and enjoy fair dispute resolution. 

Wrapping Up

Cooperative societies provide an unmatched sense of community. Members enjoy a supportive and organised living environment that gives everyone equal opportunities. The affordability of cooperative societies makes them a highly popular choice in India. Whether you want to join or start a co-operative housing society, it is important to understand the necessary legal procedures. Further, adhering to the housing society rules and regulations in India is equally important. Keeping the collaborative core of cooperative societies intact is the key responsibility of society residents and helps keep the spirit of shared living alive. 

FAQ’s about Cooperative Society