There are several confusing and interchangeable terms as far as the finance mechanisms of sustaining a housing society are concerned. Once you decide to become a homeowner, you’d be introduced to concepts like Corpus Fund, Sinking Fund, and Hybrid Maintenance Calculation, among others. It’s not a point of concern because everything a housing society spends is well accounted for and highly regulated by the managing committee.
What is corpus fund in housing societies?
In general terms, Corpus Fund meaning can be referred to as a capital fund; an amount kept aside for an organization/entity to operate, exist and maintain itself. These funds are not meant to be utilized for the attainment of any objectives and are accrued through voluntary contributions.
With respect to corpus fund for apartment, it’s the responsibility of the developer to collect the corpus fund in order to maintain the amenities and facilities. In other words, it’s a lump sum amount collected (think of it as a pre-paid maintenance charge) from the home buyer for maintenance purposes and is not included in the total sale amount of the property. Not the corpus fund but the interest generated on the amount can be actually utilized by the developer for the aforementioned maintenance expenses. However, once the housing society or the apartment association is formed, the developer has to hand over the corpus fund to the managing committee. For further permanent upkeep, residents pay a maintenance charge to the MC on a monthly, quarterly or annual basis on a calculation method decided unanimously.
How is the corpus fund generated in housing societies?
At the time of the property sale, every buyer of the apartment/ home contributes his share of a predetermined amount, which collectively forms the Corpus Fund. The builder hands over the finished product to the buyer usually within two years’ time if the property is under construction. Thus a considerable amount is collected from the buyer to take care of expenses over a long period of time.
What is the corpus fund used for?
The developer uses the interest or dividend generated from the Corpus Fund to pay a facility management and supervision agency which takes care of amenities, common areas, light bill, servicing, cleaning, etc. The builder cannot use the interest generated from the Corpus Fund for any other purposes.
What do the bye-laws say about the society corpus fund?
Model bye-laws of Maharashtra clearly state that a minimum of Rs 10,000 to a maximum of Rs 25,000 premium on the transfer of property rights can be charged. But these come into effect once the society is formed; mostly builders calculate corpus fund on sq feet basis and the amount can be well over Rs 1 lakh. Once the housing society is duly formed, the Corpus Fund amount can also be transferred to the Sinking Fund which is used for major repairs, reconstruction, structural addition or redevelopment. Many societies prefer to collect a big amount of corpus funds from every owner and from the interest generated, they maintain the amenities for decades, only charging the owners for additional repairs and replacements. The general body of the society can form its own rules and regulations with regards to the amount, its investment and its utilization. If a homeowner needs clarity on this fund and its specific use, he can obtain a copy of the bye-laws from the society’s office and demand to see the annual financial report of the society.
How should the developer handover the corpus fund?
A Corpus Fund must never be misused or embezzled by the builder or any third party for their own benefit. A detailed expense accrual with signatures and stamp has to be produced by the builder during the handover process so that the homeowners are aware of how the Corpus Fund was utilized. These expenses are registered in the annual balance sheet as well so that all residents have access to the records. Transparency regarding the corpus fund is crucial as it changes hands throughout the life cycle of the residence.
What if the developer refuses to return the corpus fund?
Send a legal notice to the builder and if that doesn’t work, file a complaint in the consumer court as well as RERA. It’s a civil case, not to be disposed of in the criminal court. Note that the corpus fund amount cannot be paid in installments by the builder. The same redressal can be sought if the builder has misused the Corpus Fund and refuses to account for the monies swindled from the owners.
Before you sign the dotted line, make sure you have gained clarity from the builder about how much money he aims to collect as a corpus fund and be sure to understand every line item from the proposed utilization format of the fund amount. Better beware today than to be surprised tomorrow.
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