To reduce disputes over maintenance funds, the Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has introduced a new framework for the collection, management and transfer of Interest Free Maintenance Security (IFMS) funds. Developers must deposit the IFMS amount collected from homebuyers into a separate bank account and transfer the entire corpus, along with accrued interest, to the Residents’ Welfare Association (RWA) or the Association of Allottees at the time of project handover.
Separate designated account for IFMS funds
Under the amended regulations, promoters must collect the IFMS amount from allottees at the time of registration of the sale, lease or sub-lease deed and deposit it in a separate designated account with a scheduled bank. The funds must then be invested in the fixed deposit offering the highest interest rate among eligible banks, after obtaining quotations, to ensure the corpus’s safety, transparency, and optimal returns.
Mandatory transfer of the entire IFMS corpus
A key amendment requires promoters to transfer the entire IFMS corpus, along with accrued interest, to the RWA or the Association of Allottees upon handover of the project’s common areas. The regulator said the move is aimed at ensuring transparency, accountability and proper utilisation of maintenance funds, UPRERA said in a statement on July 15.
IFMS can be used only for maintenance
The amended regulations specify that the IFMS corpus can be used only for the operation, maintenance, repair and replacement of common areas, equipment and shared services. The fund must be maintained in a separate bank account, independent of regular monthly maintenance charges.
The RWA or Association of Allottees must maintain proper accounts of all receipts, payments and utilisation of the fund. These accounts must be audited by a chartered accountant, with the audit report placed before the Annual General Meeting or Extraordinary General Body Meeting within three months of completion.
The changes, notified under the 12th Amendment to the Uttar Pradesh Real Estate Regulatory Authority (General) Regulations, 2019, came into effect immediately upon publication on UP RERA’s website on July 15.
When can developers collect the IFMS amount?
Promoters can collect the IFMS amount from buyers at the time of registration of the sale, lease or sub-lease deed. The collected amount must be deposited in a separate designated bank account and invested in the highest interest-bearing fixed deposit among eligible banks, it said.
What is Interest Free Maintenance Security (IFMS)?
IFMS is a one-time, interest-free deposit paid by homebuyers to the developer, typically at the time of taking possession. It serves as a long-term maintenance reserve for the housing society after the project is handed over to the RWA or Association of Allottees.
The fund has often been at the centre of disputes, with RWAs alleging delays in the transfer of the corpus, lack of transparency in its management and disagreements over the amount due. The new framework seeks to address these issues by prescribing clear rules for the collection, investment, transfer and utilisation of IFMS funds.
What are the prescribed IFMS rates?
The regulations prescribe project-wise IFMS rates based on the type of development:
- Group housing projects: ₹20- ₹100 per sq ft, depending on the category of residential units.
- Commercial projects: ₹40 per sq ft for non-central air-conditioned buildings and ₹50 per sq ft for centrally air-conditioned projects.
- Separate rates have also been notified for plotted residential and commercial developments.
What happens at the time of project handover?
At the time of handing over the project’s common areas, promoters must transfer the entire IFMS corpus, along with the accrued interest, to the RWA or Association of Allottees.
They must also provide a detailed transfer statement containing unit-wise IFMS collections, expenditure incurred, the audit trail and the final balance transferred to the residents’ body, UPRERA said.
UP RERA Chairman Sanjay R. Bhoosreddy said the amendment aims to ensure transparency, accountability and financial discipline in the collection, investment, transfer and utilisation of IFMS funds.
“Homebuyers contribute these funds for the long-term upkeep of common facilities, and it is essential that the corpus remains secure and is utilised only for its intended purpose. The new provisions will safeguard the interests of allottees by ensuring proper collection, investment, transfer and audited utilisation of IFMS funds. This reform will strengthen the role of Residents’ Welfare Associations and promote better maintenance and sustainable management of real estate projects across Uttar Pradesh,” he added.
