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Understanding Maintenance Charges

Posted by Balaji on February 16, 2021
| 0

Maintenance charges are one of those sneaky costs that seep in and inflate what

seemed like a reasonable price until then. Often, new home buyers are caught

unawares as they get attracted by the enticing figures that builders cleverly promise on

new houses and projects. But those numbers change considerably once relevant

infrastructure, approvals, and other facilities are set in place as they need to be

managed at a separate cost. These additions drive up the spending that ultimately

goes out from the home buyer’s wallet.

To understand the ins and outs of maintenance costs, and prepare yourself if you are a

first time home buyer, we have compiled a handy guide for you.

 

What do maintenance charges cover?

Maintenance charges essentially encompass all the basic infrastructure and amenities

like elevators, parks, emergency exits, fire and safety, common areas, parking

facilities, and centrally controlled services like water and electricity among others.

Initially, it is the responsibility of the builder who collects the maintenance charge from

the tenants to maintain these facilities.  Once a residents association takes shape, this

responsibility falls upon them, and they are allowed to change or implement new rules

for consistently improving maintenance.

In the absence of a society or association, the builder continues to be in charge of

maintenance.

 

Are there any laws that regulate charges for maintenance?

The Real Estate Regulatory Authority (RERA) specifies that the builder must sign a

maintenance agreement, which mentions the fees, payment schedule & breakdown of

costs for utmost transparency.

 

How can maintenance charges be split down?

Usually, maintenance fees are charged on an individual flat or per square foot basis.

Service charges like cleaning, housekeeping, and usage of equipment, as well as the

expenses required for repair and maintenance of common facilities like elevators, are

split equally among the flats. Electricity and water charges would be as per the

consumption of each flat.

 

Interest-Free Maintenance Security (IFMS) charges

IFMS is a compulsory lump sum that the home buyer pays the builder who deposits it

in a separate account before a residents association is formed. Following that, the

builder is expected to pass the total sum to an association for maintenance

expenditures. The system is useful in case of unexpected breakdowns in facilities or for

future improvements such as park extensions or tightening security.

In addition to the IFMS, some developers collect a sinking fund that distinguishes

between the two. A sinking fund is a sum reserved by homeowners for emergencies

and repairs, while the IFMS is used to cover regular and ongoing maintenance costs

such as minor repairs and contractors’ fees, according to the developers. So new home

buyers should get proper information before moving in.

 

What about taxes?

Before the introduction of GST, a service tax of 15 percent and Swachh Bharat tax of

0.5 percent, and a non-agricultural tax of 0.5 percent was imposed on maintenance

charges. With the coming of GST, the tax rate has gone up to 18 percent.

 

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