State wants Centre to exclude housing co-ops from purview of Real Estate Act

Cooperation Minister H S Mahadeva Prasad said on Wednesday said the state government has urged the Centre to exclude House Building Cooperative Societies (HBCS) from the Real Estate (Regulation and Development) Act, 2016 passed by Parliament recently.

The way these societies function is entirely different from real estate companies involved in the construction of apartment complexes. It will become extremely difficult for the societies to function as per the provisions of the Act. Hence, Chief Minister Siddaramaiah has written to the Union government to exclude them from the ambit of the Act, Prasad told reporters here.

The Act envisages protecting the interest of property buyers by imposing certain regulations on promoters, which also includes HBCSs. The Act intends to establish Real Estate Regulatory Authorities (RERAs) at the state level. Promoters have to register their projects with RERAs.

Official sources in the Cooperation department said promoters can’t advertise their project and sell properties before the registration, as per the Act. The RERAs give permission to register a project only if the promoter has obtained all approvals from the competent authorities. But HBCSs are not like real estate companies. A group of like-minded people come together and form a society to fulfil their dream of owning a property.

Moreover, the societies cannot mobilise resources like real estate companies. HBCSs first advertise their projects, collect initial deposit from its members and then approach the competent authorities seeking approvals. Hence, it becomes difficult for them to function as per the Act.

Besides, the Act makes it mandatory for the promoters to deposit 70% of the money received from buyers in an escrow account, the officials explained.

Prasad said the Cooperation department has proposed to bring in an amendment to the Co-operative Societies Act to regulate the functioning of HBCSs and to protect the interest of property buyers. A draft bill  prepared for the purpose is put on hold in the wake of the Centre coming up with the Real Estate Act, he added.