In Mumbai, housing societies are bypassing legal transfer fee caps of INR 25,000 by demanding up to INR 30 lakh as 'voluntary donations' for flat transfers in affluent areas like South Mumbai. This widespread practice, criticized as 'arm-twisting' by experts, aims to bolster societies' infrastructure funds, despite legal constraints. Advocates highlight the adverse impact on sellers, who often pay hefty sums to expedite transactions, amidst calls for regulatory adherence and fairness in the property market. Critics argue for transparency and equitable contributions from all members to address maintenance costs without overburdening individual transactions.
In the upscale neighborhoods of South Mumbai, housing societies are going against legal limitations on transfer fees by demanding hefty 'donations' from members selling their flats, a practice that has raised concerns about fairness and legality. These 'donations', which can range from INR 10 lakh to INR 30 lakh, significantly exceed the legally mandated cap of INR 25,000, highlighting a widespread issue in the city's real estate transactions.
A case in point involves a businessman in South Mumbai who was taken aback when his housing society requested a share of his flat's sale proceeds as a 'voluntary donation' for issuing the No Objection Certificate (NOC) required for the transfer. According to Nauzer K Bharucha's report, similar instances have seen sellers paying up to INR 28 lakh for the transfer of their properties.
The unofficial charges, described as donations, often equate to 2% of the sale value, particularly in areas like Lower Parel, Worli, and Prabhadevi. This rate translates to about INR 10 lakh for a two-bedroom flat, escalating to INR 15 lakh for three bedrooms, with some central Mumbai societies even demanding INR 1,200 per square foot.
These contributions are justified by societies as necessary for their infrastructure funds, despite the legal cap. The discrepancy between the legal limit and the actual amounts demanded raises questions about the practices of cooperative housing societies, especially those with significant financial reserves.
Chetan D Narain of Narains Luxury Properties India criticizes this practice as an 'arm-twisting' tactic to augment the society or developer's corpus, pointing out the unfair burden it places on both buyers and sellers in transactions. This practice is prevalent across various property segments, not just luxury estates.
Property market experts argue that these charges are a way for societies to cover rising maintenance costs without increasing member fees. However, the classification of these payments as 'donations' or 'voluntary contributions' rather than transfer fees enables societies to sidestep legal restrictions, putting sellers under pressure to comply to avoid delays in the transfer process.
Legal experts highlight the challenges faced by members who contest these fees, often leading to disputes over the legality and taxation of such payments. The principle of "mutuality" is frequently invoked to exempt these amounts from income tax, underlining the complex legal landscape governing these transactions.
The practice, while generating income for housing societies, imposes an unfair financial burden on individuals involved in property transactions, prompting calls for stricter enforcement of legal caps and more transparent handling of transfer fees.
In conclusion, the imposition of exorbitant transfer 'donations' by Mumbai's housing societies not only contravenes legal caps but also places undue financial strain on buyers and sellers. This trend underscores the need for more robust regulatory oversight and equitable practices in the real estate market, ensuring that property transfers are conducted fairly and within the bounds of the law.
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