Cooperative Housing Society Funds and their Utilisation

September 25, 2019
By Rahul Sarkar
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You would rarely come across a well-run housing society in a shambles, where lifts are defunct, lawns are unkempt, floor bulbs are broken and water pipes are leaking. All of your society’s amenities and services run smoothly like a river because they are paid for and looked after. The nitty-gritty of a society’s financial management is no joke. Members are often confused and even agitated when they are asked to contribute towards funds that seem to be inconsequential on the surface, but when understood well, they make a whole lot of sense. In this article, we will shed light on a variety of housing society funds that create a perfectly healthy state of affairs.

Types of funds in a cooperative housing society

  1. Reserve Fund: A Reserve Fund is made up of entrance fee paid by the members, transfer fees when shares are transferred with occupancy rights, transfer premium received when a member transfers interest in the capital/property, general donations (not for a specific purpose) received by the society. Accumulated Reserve Fund gets carried forward to the next year every year.
    Utilisation: As per the model bye-laws, Reserve Fund is used for repair, maintenance and renewal of the society’s property.
  2. Repairs and Maintenance Fund: This fund is made up of a fixed maintenance amount paid by the society’s members on a monthly, quarterly, bi-annual or annual basis. It is calculated at a rate decided at general body meetings based on per square feet, equal division or hybrid methods. Bye-laws state that rate is subject to the minimum of 0.75 per cent per annum of the construction cost of each flat for meeting expenses of normal recurring repairs.
    Utilisation: As explained in the title of the fund, it is used for the expenses of amenities, bills and maintenance of premises of the society, repairs, service staff fee, common electricity expense, water charges, etc.
  3. Sinking Fund: A Sinking Fund is a separate amount that the members have to pay on their maintenance bill. A housing society saves this amount for the time when there are any structural additions or alterations to the buildings/wings of society. A Sinking Fund is fixed at the general body meeting and is subject to the minimum of 0.25per cent per annum of the construction cost of each flat, excluding the proportionate cost of the land.
    Utilisation: These are done after consulting the society’s Architect who may recommend such additions/heavy repairs to strengthen the integrity of the structure for the safety of the members and also for posterity.
  4. Education & Training Fund: Members have to contribute to this fund. Each member has to pay Rs 10 every month or as decided by the general body meeting.
    Utilisation: The purpose of this fund is to analyse the issues and complaints of the society with respect to administrative measures and create an atmosphere of camaraderie and unity through conducting training programs in order to develop professional skills among members, distribute articles, books, etc. to train members for a specific skill, to run training classes pertaining to the co-operative movement and issue certificates/diplomas to upskilled members.
  5. Other Funds: Major Repairs Fund is to be created by the society to fill the gap between maintenance fund and Sinking Fund. This has to be paid as and when required and decided by the general body at the rate fixed on an area basis. Additionally, some societies create a surplus fund as and when needed in order to celebrate festivals, special days and other occasions. This does not constitute a formal or mandatory fund, however, members contribute voluntarily to participate in the festivities and to partake in the activities of communal living.

Why do societies generate these funds?

A housing society is a cooperative and democratic movement that functions on the basis of contributions made by the member. All amenities, services, repairs, etc. are paid by the members themselves and there is no outside agency that is going to swoop in and bear the expenses on behalf of the society. Neither the managing committee nor the members would subject themselves to any negative surprises due to lack of funds, a scenario that can be easily avoided if funds are generated fairly and properly in advance. To avert any unexpected financial losses in terms of repairs, failure of amenities, structural damage, the society has to be prepared in order to be able to bear the expenses. It does so by collecting money on a monthly basis in general so as to not burn the pockets of its members. The common ways to generate funds are mentioned below:

  • Entrance Fees
  • Deposits
  • Loans/subsidies
  • By issuing shares
  • Voluntary donations
  • Maintenance bills
  • Fees on the transfer of shares
  • Non-Occupancy fees
  • Renting space for advertisements, billboards
  • Renting terrace space for mobile towers

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