Uttar Pradesh Real Estate Regulatory Authority (UP RERA) recently introduced strict new rules under Regulation 47, making the 12th amendment regarding the collection, management, investment, transfer, and proper use of interest-free maintenance security (IFMS) funds collected from homebuyers. The amendment comes amid frequent complaints from buyers that builders charge substantial amounts in the name of maintenance security, with no transparent accounting. The move aims to ensure complete security for buyers’ funds and curb fraudulent transfers to Residents Welfare Associations (RWAs) at the time of project handover.
According to Venket Rao, Founder, Intygrat, and former legal advisor to UP RERA, these regulations will apply across the state, including Ghaziabad, Greater Noida, Agra, Kanpur, and Varanasi.
Earlier, UP RERA capped flat transfer fee at Rs 1,000 for legal heirs.
Key details homebuyers must know
IFMS rates on a project-specific basis: UP RERA has also fixed the IFMS rates according to the category of projects:
- Group Housing (Residential): Rs 20 to Rs 100 per square foot (depending on the category of flat).
- Commercial projects (non-centralised AC): Rs 40 per square foot.
- Commercial projects (centralised AC): Rs 50 per square foot.
- Plotted Projects: Different rates have also been fixed for residential and commercial plotted developments.
“The notification lays out the IFMS charge by type, i.e., EWS, LIG, MIG, HIG, Luxury, etc in group housing and for plotted & commercial projects separately. The rates are per sq meter and accordingly, the type of project is relevant and not the location, as the regulations apply across UP,” Rao said.
Funds to be deposited in a separate bank account
Promoters will be required to collect the IFMS amount from allottees at the time of registration of sale, lease or sub-lease deeds and deposit the entire amount in a separate designated bank account with a scheduled bank.
Invest in the highest-interest FD
To protect your deposited funds and earn the highest returns, builders should obtain quotations from banks. Then, they should invest in the FD with the bank offering the highest interest rate.
Transfer of entire funds at the time of handover to RWA
At the time of handing over the common areas of the project, the builder will have to transfer the entire IFMS corpus to the RWA or Association of Allottees.
Complete audit trail of accounts
The builder will now have to submit unit-wise collection, expenditure details, audit trail, and the final balance statement to the RWA.
“The funds will be handed over by Developer to RWA along with a Transfer statement mentioning total collected, expenditure incurred along with audit trail ( prior handover) at the time of handing over of common areas and thereafter RWA has to keep accounts, and it has to be got periodically conducted by a professional appointed by RWA,” Rao said.
Money to be used for these works
IFMS funds can be used only for repair or replacement of common areas, lifts, parks, generators and shared equipment of societies.
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