Housing cooperatives: Are they serving the purpose?

Many housing cooperatives have hit the headlines for all wrong reasons: violation of rules, mismanagement, non-allotment of sites and more. The question is, have they forgotten the original purpose behind their formation?

Rajesh (name changed), one of the founder members of NGEF Housing Society, was in for a shock when he realised that he himself was not going to get a site in NGEF Layout, Mallathahalli. Rajesh had paid for a 40X60 site, but when he tried to get a khata, he was told that the site did not exist in the approved plan. It was instead part of the original land owner’s share. It was after a long legal battle that he was finally allotted a site.

Many buyers are often not as lucky. Many have lost their money to House Building Co-operative Societies (HBCS) in the city. HBC Societies were originally meant to help people to get housing, without having to depend on government agencies like BDA. The idea was that government will give land to HBCS at concessional rates, and the HBCS will, in turn, allot sites at low cost to its members. But over time, HBC Societies have become as corrupt as any other housing segment.

The office of Vyalikaval House Building Cooperative Society in Malleshwaram Pic: Shree D N

What are HBCS?

HBC Societies are governed by the Karnataka Co-operative Societies Act, 1959. Under this Act, model bye-laws were drafted for housing societies. Housing societies are supposed to conform to these bye-laws.

HBCS have to apply to the state government for land. Government acquires land from farmers at guidance value rates (nominal land rates fixed by the government), and transfers it to the society at the same rate. Society only has to pay small amounts as additional charges.

Earlier, HBC Societies could get land only from the government, and not directly from farmers. Now, farmers can directly sell land to such societies. But farmers themselves have to get the land converted first. They should apply to the DC for land conversion, saying the land is unfit for cultivation. The DC will allow conversion based on a land inspection report submitted by the Tahsildar. After this, farmers can directly sell their land to HBCS.

After getting land, society has to get the layout plan approved by BBMP or BDA – whichever is the local authority for the area. As land is usually unavailable within BBMP limits now, most layouts come under BDA limits. After plan approval, society will get sites developed (roads, drains, civic amenities etc), using the development charges collected from members.

Who can get sites from HBCS?

Sites are allotted on first-come-first-serve basis. Bye-laws say that only the members who own shares in the society are eligible to get apartments. Bye-laws also mention the conditions for someone to be a member.

If a person owns a site/house in his own name within the jurisdiction of the local authority under which the Society exists, he cannot be a member. In the case of Employee HBCS (meant for employees of specific organisations), only those who have been employees of the company for at least five years, can become members. Members make up the general body that holds annual general body meetings and makes all decisions. The general body also elects office bearers of the society.

Societies can register associate members also – such members cannot attend general body meetings or become office bearers. They may be put in waiting lists initially, and can get a site only after they become a member. Nominal membership is given to those who have financial transactions or contracts with the society; this membership is terminated once the transaction/contract is over.

In the 90s, courts also ordered that associate members should not be given sites. In 2002, government also passed an order saying the same. But in 2010, government issued a notification reversing its own previous order. The 2010 order said that associate members can get sites, can vote in meetings and even head the society. This order has been challenged in court; but as of now, associate members are allowed to get sites. Because of this, in some societies, there are more associate members than actual members.

Sites allotted to non-original members

In many cases, the management committee sidelines original members and give sites to those who are not even eligible. In many Employees’ HBC Societies in the city, sites are given to non-employees even though they were originally meant for employees of the organisation. Non-employees register as associate members. Often there is no transparency on the management’s actions either.

“There are some 10,000 sites in Telecom Employees’ Layout in Devanahalli. Sites were sold to society members for Rs 750 per sq ft, and to non-employees for Rs 1500 per sq ft. In this case, the management made money by selling sites to ineligible people at higher rates,” says K Prathapan, a Bangalore-based lawyer. He says that, of the 4-5 completed layouts owned by Telecom Employees’ Society in the city, only about 10% of the sites have been given to Telecom employees themselves.

Managements sometimes engage agents who sell membership applications in the open market, to those who are not connected to the society at all. Such buyers often make payments in cash. Those who are actually eligible end up being in waiting lists.

Prathapan says that there are also cases where the management will buy extra land without informing members, but using their money. “For example, the management will buy 250 acres, but mention only 200 acres on paper. But they will collect enough money from members to buy and develop the entire 250 acres. The developed extra 50 acres will be sold to others at a higher price,” says Prathapan.

There are also those who get sites from societies even though they already own a site. Former Lokayukta Shivaraj Patil had to resign when it was exposed that he owned two HBCS sites – one in his nameand the other in his wife’s name – even though he already owned a house in the city.

Hand-in-glove with developers?

Another issue is that HBCS get developers to get Power Of Attorney for farmers’ land and to get the land converted. Developer will develop the sites and sell them to the society. Developers may set the site prices very high, in collusion with society management. The management gets a cut from developers, and the members are forced to pay very high rates. This defeats the whole purpose of housing societies, which are supposed to make housing affordable.

Such violations by housing societies were pointed out as early as 1988 by the government-appointed G V K Rao Committee report. The report had inquired into 98 HBCS in Bangalore. The report had said that many societies did not have genuine members, benefited only associate members, and colluded with middlemen. Even after knowing that many middlemen were not capable of buying land for the society, societies would collect money from members and give it to middlemen without any security. Most societies had never held general body meetings. The situation remains more or less the same now.

Some tips for buyers:

  1. Check credentials of the society – if it is formed and functioning as per bye-laws
  2. Know beforehand what you are paying for and how much. Sometimes members are asked to pay within a short time, and there is no time to verify what the payment is for. All transactions should be by cheques
  3. Get the approved plan copy from BDA and check if your site exists in the plan. Visit the land and verify that your site actually exists.
  4. Verify that your site is not meant for park/civic amenity as per the approved plan.


  1. V Kumar says:

    Very True. The Shanti Nagar Housing Coperative Society land (SHCS) in Koramangala is a classic case of this. The layout is a scam. Can the govt machinery do something about it?

  2. Duped Bangalore says:

    Bangalore basedSrushti developers duped me and 4 friends of 30lakh each in name of selling land names Suresh Venkataramanappa and S Harish Kumar. Conman Harish lured all into this plot and Suresh ran away with money after selling agricultural land in Hosekote Whitefield ,as residential leaving us to grapple with legality,yet another land scam in Bangalore beware of this builder. New layout coming up in name of Nadavathi for those still interested no BDA approval not even complete panchayat khata but advertised as BDA approval in Land Scam capital of india

  3. mani says:

    Getting sites from HBCS – some clarifications needed

    I understand that according to Karnataka HBCS rules and bye-laws say that if a person owns a site/house in his own name within the jurisdiction of the local authority under which the Society exists, he cannot be a member.
    Some clarifications on: If a person owns a site/house in his own name within the jurisdiction of the local authority under which the Society exists, he cannot be a member and get a house allotted.
    1. The site or house that he owns may have been purchased from a third party from the market and not obtained from any government schemes at low cost such as from BDA allotment… Does this make the person still ineligible to apply for and allotted a society site as an associate member (AM)?
    2. Does this rule apply if the AM has been sold the site by the society at a price different from that of other members and at the government guidance value? If so, the argument that he is getting at a concession is invalid and hence his ineligibility also is invalid?
    3. What is the jurisdiction of a local authority applicable in this case? Who is the local authority for the application of this clause?
    4. What happens if the Society office is located in the jurisdiction where he has another house but the housing project / site is being developed in an area outside the society’s office jurisdiction? He may want to live in a new area in the society site!
    5. I may own a small house purchased form the market, but I may want to improve my standard of living over time, and may want to invest in a HBCS site, where I want to put up a more comfortable house? This rule prevents that
    6. What if I plan to make a bigger house in a newly acquired society site and sell off my old one? Does the law prevent such an act? If so, is this not retrogressive in that the govt. wants its citizens to never come out of their poor standard of living through this rule?
    7. Is this not a game plan to promote housing by private apartments and site promoters by restricting supply through HBCS?
    8. What action has been taken by Govt. on those who have procured a site despite he/she owning a house in the larger Bangalore metropolitan area?
    9. What are the court cases on this matter to understand the logic of the rulings on this clause?
    10. Many societies are promoted by employees of the government and they themselves flout the rules. Does this mean Govt. is indirectly supporting them?
    11. Even many societies use nationalise bank funding for their projects? How can such banks be party to illegal acts?
    12. Is this law not a violation of fundamental rights to own property?
    13. Hasn’t this law been challenged?
    14. Who is at fault? Society or the member?

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