Society formation

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Premlata Jain (Querist)
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28 March 2011 Dear sir / madam,

I am working as an internal auditor in real estate developers company.

During audit, i came to know that many sites for which possession has been given but still society formation was pending.

But do let me the advantages / disadvantages of not forming a society ,Even if minimum sale condtion is fulfilled??

Thanks in advance..

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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28 March 2011 generally if you registered you can avail many benefit / exemption of incometax .

any inquiry contact:-

http://www.mukeshraj.com/enquiry.html

Premlata Jain

Premlata Jain (Querist)
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31 March 2011 Qyery is whether it is beneficial to the real estate developers if they are not foming society.
if not,
What are the diadvantages to the real estate developers?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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25 July 2025 Here’s a clear summary regarding **society formation after possession in real estate projects**, focusing on advantages and disadvantages from a developer’s and buyer’s perspective:

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### Advantages of Society Formation (Why it is beneficial):

1. **Legal Ownership & Management:**

* Society formation legally transfers common areas & amenities management to residents.
* Helps establish clear ownership and management control.

2. **Compliance & Regulatory Requirements:**

* Many state laws mandate society formation once possession is given.
* Avoids legal hassles or penalties for developers and buyers.

3. **Financial Transparency:**

* Society collects maintenance charges directly, reducing developer’s liability.
* Proper fund management for upkeep of common areas.

4. **Income Tax Benefits:**

* Developers can claim certain exemptions after society formation.
* Buyers get clear title and legal recognition.

5. **Better Governance:**

* Residents get a formal body to address maintenance, disputes, and community issues.

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### Disadvantages of **Not** Forming Society (Risks to Developers and Buyers):

1. **Legal Complications:**

* Delay or failure in society formation can lead to legal action by buyers.
* Developers may face penalties or litigation for non-compliance.

2. **Disputes & Mismanagement:**

* Without society, no formal body to manage common facilities.
* Misuse or neglect of amenities can lead to dissatisfaction and disputes.

3. **Financial Risk:**

* Developers may remain responsible for maintenance charges, increasing costs.
* Lack of transparency may cause trust issues with buyers.

4. **Reduced Buyer Confidence & Marketability:**

* Buyers often prefer possession with society formed to avoid management hassles.
* Delayed society formation can affect sales of remaining units.

5. **Regulatory & Tax Implications:**

* Developers might lose out on certain tax benefits linked with society formation.
* Buyers may face difficulty in getting loans or resale without society documents.

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### In Summary:

* For **developers**, **delaying or avoiding society formation** might seem easier short-term but leads to legal, financial, and reputational risks.
* For **buyers**, society formation is crucial for ownership rights and management of common areas.

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**Recommendation:**
Developers should proactively facilitate timely society formation once possession is given to avoid legal complications and maintain goodwill.

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If you want, I can help draft a checklist or a detailed note on society formation process and compliance requirements. Would that be helpful?

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