A mint condition flat in Mumbai at a 10% discount, and bank loans for the taking… So what’s stopping Gopal Tiwari from grabbing this deal? “The developer has not yet handed over the project to the tenants despite its completion five years ago,” says the 35-year-old marketing professional.
However, Tiwari need not avoid this deal, and should first find out why the builder has not transferred the possession legally, say experts. There could be various reasons for this, including the probability that there is no registered housing society.
If it does exist, one can typically source the information about a property from the housing society. Says Sandeep Sadh, CEO of Mumbaipropertyexchange.com, a Mumbai-based realty portal: “The developer may not have received the occupancy certificate (OC) from the civic authorities. He has to take permission for 40-45 things from 30 departments and this takes time.”
Another explanation could be that the developer hasn’t yet used the authorised floor space index or does not want to hand over the possession to buyers till he sells his entire inventory. Of course, it is also possible that the developer is not getting the OC because he is indulging in an illegal activity. This is why due diligence on the part of the buyers is crucial.
Assuming all is above board, Tiwari could buy the flat and kick-start the process of registering the society. If more than 60% of the flats are sold in a project, the residents can form the society on their own.
How to get a society registered
The residents will first need to conduct a general body meeting of all the flat owners to elect the chief promoter. Typically, a 14-day notice is given to call such a meeting.
As the developer has the first right to act as the chief promoter for registering the society (under the flat owners type of cooperative society), if he hasn’t done so, the registrar will first issue a notice to him for non-cooperation. If he does not respond, an ex-parte decision will be taken for registering the society. This additional step makes the process longer.
After electing the chief promoter, the next step is to propose a name for the society. The proposal should be signed by at least 10 promoters who have attended the meeting. If the number is less, the flat owners will have to take special permission from the state government. They will also have to form an ad hoc managing committee, electing members to function as chairman, vice-chairman, secretary and treasurer.
The registrar will allot the name and also grant permission to the society to open a bank account. When this is done, the chief promoter has to collect the share capital and entrance fee from the promoters and deposit these in the account. Where the developer takes on the role of the chief promoter, this amount is collected when the property is sold. The money cannot be withdrawn from the bank till the society is registered, except with the prior written permission of the registrar.