So you are on the verge of buying your dream house. But a grey area for most home buyers is the upfront maintenance charges that have to be paid for buying any property. A certain amount is charged by the builders from potential buyers to meet the maintenance and upkeep of the apartment including common areas.

This is charged under the head known as “Advance Maintenance Charges” and this head instills a lot of confusion, questions and uncertainty among buyers. This article intends to address those in detail.

JOIN OUR NEWSLETTER
Join over 30,000 home buyers who are following our newsletter.
We hate spam & we respect privacy.

Currently, only the state of Maharashtra has model bye-laws of cooperative housing society which includes aspect of maintenance as to how much should be charged and under what heads.

So let us clear the air and demystify ‘maintenance charges’ through the following Q&A’s. This will cover in detail everything you need to know about this very important component in your home buying price tag. 

Featured Project: Sobha Dream Acres, Whitefield | 5 Club Houses | 80 Acres | Pre fitted Kitchen & Cupboards

What is a maintenance charge in home buying?

Every developer, till the handing over of the apartment to the buyer, charges a certain amount by way of maintenance charges from the buyer for the upkeep of the same. This amount is usually charged lump sum at the time of booking and purchase of the apartment by the developer for the first one year and subsequently it is charged monthly or quarterly. 

Every apartment has common areas, amenities, recreational facilities that are the collectively shared by every allottee. As a result, even the expense for their maintenance and upkeep has to be jointly borne by all those residing in the apartment. Any material goods in the due course of time experience wear and tear.

To ensure that the building, the common areas, and the amenities provided for, like swimming pools, gymnasium, tennis/badminton courts, jogging track etc, sustain for a long period of time, their maintenance is an important factor. Thus a certain amount is to be kept aside for the care and upkeep of the building and the amenities associated with it.

Let us look at the following examples to get a better understanding of how maintenance charges are taken from the buyer at the time of booking an apartment.

Cost Sheet Sample 1: 

Maintenance Charges & Corpus Fund in Cost Sheet

Maintenance Charges & Corpus Fund in Cost Sheet

Cost Sheet Sample 2:

Maintenance Fund in Cost Sheet

Maintenance Fund in Cost Sheet

Initially, till the time the buyer has taken possession of his flat/apartment the onus of maintenance falls on the developer. To this effect Section 11(4)(d) of RERA states the following:

The promoter shall be responsible for providing and maintaining the essential services, on reasonable charges, till the taking over of the maintenance of the project by the association of the allottees;

Pursuant to the above quoted section of RERA, it is conclusive that the onus of maintaining the apartment including payment of water charges, electricity charges, municipal or local taxes, maintenance of elevators, parking areas etc. lies flatly with the developer only.

Henceforth, once the apartment is handed over, the maintenance charges shall be borne by the buyer. However the amount to be contributed by each allottee shall be decided after an association/society/co-operative society is formed by the residents of that particular apartment/building. Typically such associations/societies are formed under the Societies Registration Act(SRA), 1860 and these associations are generally known as Resident Welfare Associations (RWA).

Examples of maintenance work  

Normally the maintenance charge head would include components that relate to the day to day working and regular wear and tear of the building and its amenities per se. Some of its components include:

  • Running of lifts
  • Repair and maintenance of lifts
  • Common area maintenance including painting, cleaning, lighting.
  • To celebrate and hosting common get togethers
  • Water charges- In some cases water charges are included in the common maintenance fee as opposed to individual houses paying the same.
  • Maintenance of parking area including lighting, cleaning etc.
  • Miscellaneous charges
  • Sinking fund-This is an amount of money that is set off for any future emergencies like reconstruction of the whole building etc.

How is maintenance charge calculated?

This is a very contentious and debatable topic among most home buyers. What am I paying these charges for? Am I paying too much for too less? Let us look at concerning aspects below. Maintenance charges can be calculated in following ways:

  • Per sqft basis

Certain apartment complexes may house units of different sizes depending on the area as per sqft. As a result, these apartments levy their charges as per the area i.e. sqft basis.

For e.g. ‘A’ owns an apartment of 1000 sqft and the maintenance charge has been set to Rs 3 per sqft per month for that particular apartment complex. Thus ‘A’ ends up paying Rs 3000 per month as maintenance charges.

Calculation as per sqft basis is a win win situation for all as the buyer ends up paying only as per his or her apartment area.

However many home buyers may argue that since the common amenities like gymnasium, swimming pool, lawn courts are shared by all despite their apartment area size, residents with a bigger area size, end up paying more maintenance amount by only virtue of the fact that their apartment area is big.

JOIN OUR NEWSLETTER
Join over 30,000 home buyers who are following our newsletter.
We hate spam & we respect privacy.
  • Equitable maintenance

This method is widely practiced as it involves paying of equal maintenance fee for the apartment irrespective of the sqft area of the apartment. The total amount needed for maintenance of the apartment is calculated and thus divided equally among all the residents. The equitable maintenance could be collected either monthly or annually as a lump sum towards the maintenance of the apartment.

  • Combination of per sqft basis and equitable

In certain cases, a middle ground may be arrived at by using both the equitable and per sqft basis. Apartment may decide to charge equitable maintenance when it comes to utilization of common amenities like a swimming pool, gym, parking area, maintenance of lifts etc; whereas, in cases of building repair or maintenance etc the per sqft method will be employed.

What do the terms ‘Corpus Fund’ & ‘Annual Maintenance Charge’ mean?

A corpus fund is a large amount of money that is collected by the builder from the buyer at the time of booking of the apartment. These funds are utilised towards building and maintaining of the several recreational amenities that have been guaranteed by the builder through his advertisement/prospectus.

The corpus would also include maintaining all common areas like parking till the apartment is handed over to the respective buyers. However, as such the corpus amount is out of bounds and it is only the interest that accrues that is to be used for maintenance purposes.

Also Read: The Ultimate Guide to Carrying Out Legal Review of Properties

On the contrary, maintenance charges could also be collected quarterly or annually by the builder and transfer the same once possession has been handed over the allottees or association of allottees.

Nonetheless, by whichever way funds are collected for the purpose of maintenance be it through a corpus or an annual charge, there has to be complete transparency with regards to the usage of these funds. The funds thus spent, shall be scrutinised and audited and the results of the audit shall be published in a balance sheet for all the residents to peruse through.

Funds collected through a corpus shall be thoroughly inspected so that these funds are only utilised for the intended purpose and that the builder does not personally benefit from it. Also the funds collected by the Resident Welfare Associations (RWA’s) shall also be reviewed to ensure development and maintenance ensues.

How are maintenance charges collected once the builder moves out? 

A builder is in charge of developmental work in a project from the beginning till he hands over possession to the intended allottees. However, he has an additional task of ensuring a transfer of his liabilities to another body of persons. This objective is achieved through the formation of a Resident Welfare Association/Society.

The builder shall by virtue of Section 11(4)(e) enable in the formation of an association/society/co-operative society of allottees as the case may be within a period of 3 months of the majority of the allottees booking their apartment.

To ensure a smooth transition, the builder has some of the following responsibilities and duties to fulfil:

  • Execute an undivided proportionate title in the common areas to the association of allottees
  • Hand over physical possession of the common areas to the association of allottees
  • Hand over necessary documents, plans to the association of allottees
  • Transfer all documents relating to insurance to the association of allottees

Equally, every allottee also has a duty to participate and contribute in the formation of the association or co-operative society or society of allottees.

Does unoccupied property attract maintenance charge?

An important question that arises is when a buyer has purchased an apartment but has not started living in it nor has he rented it out, would he still be liable to pay maintenance charges? The answer is Yes! The buyer will very much be liable to pay maintenance charges, despite the flat being unoccupied.

The fact that by it remains unoccupied by the buyer nor is it rented out cannot be a reason for maintenance charges not being paid as maintenance activities of the apartment still have to be carried.

What are additional hidden costs while calculating Maintenance Cost?

Let’s suppose, you invest in a 2 BHK apartment of 1,000 sq ft with a maintenance cost of Rs 3/sqft. In that case, ideally your monthly maintenance charge should be Rs 3,000. Now, that’s not true. In reality, it will be much more than Rs 3000 as service tax and GST will be applicable on this number.

For instance, in the year 2015, Tahnee Heights at Malabar Hill and Mittal Tower located at Nariman Point in Mumbai, increased their maintenance charges for water and security due to payment of service charges. This sudden rise in the maintenance cost agitated the Resident Welfare Association (RWA), which then appealed to Customs, Excise and Service Tax Appellate Tribunal (CESCAT) and demanded refunds.

GST on Maintenance Charge

Earlier, a service tax of 15.55 per cent was applicable on all residential apartments with a maintenance charge over Rs 5,000. However, since the introduction of GST the tax rate applicable on maintenance charges has been revised and as per the latest update, GST on maintenance charges would be applied @18% provided the maintenance charge exceeds Rs 7500 per month.

Hence buying a luxurious apartment will just be a one time investment. But maintaining it will be more expensive and exhausting with the new taxes applicable.

Maintenance Charge Trend for Apartments 

Here are two graphs depicting the growth in average maintenance charges per month since 2015 in two major metropolitan cities of India – Mumbai and Bangalore.

Avg. Monthly Maintenance Charge Trend for Apartments in Bangalore

Avg. Monthly Maintenance Charge Trend for Apartments in Bangalore

The above graph represents a growth in average maintenance charges per month of residential apartments and villas all over Bangalore. The maintenance charges of 1 BHK, 2 BHK, and 3 BHK flats have seen a steady growth starting from Rs 1/sqft in 2015 and going upto Rs Rs 4/sqft in 2019.

Avg. Monthly Maintenance Charge Trend for Apartments in Mumbai

Avg. Monthly Maintenance Charge Trend for Apartments in Mumbai

Mumbai – The city of dreams welcomes all individuals from different income groups. This city is divided into South Mumbai, Central Mumbai, and Suburban Mumbai. And all these locations have various residential apartments at different maintenance rates suiting your requirements. With so many 1 BHK, 2 BHK, and 3 BHK flat options in different regions of Mumbai, it has seen a drastic growth in average maintenance charges per sqft of apartments starting from Rs 3/sqft in 2015.

Conclusion

Maintenance charges are an important component in the building of any apartment/building. Builders charge an amount of money by way of maintenance charges so as to ensure upkeep of the amenities provided by him. The purpose for which this amount is to utilised has to be disclosed properly by the builder and the buyer must be informed of stage by stage development in the project.

At the same time resident welfare associations/societies should also aim at being transparent in the utilisation of the funds collected for the intended purpose. A yearly/quarterly report should be published publicly so as to keep the residents apprised  of the maintenance activities carried out from time to time.

A model law on the lines of the Maharashtra bye laws would ensure that there is complete uniformity with regard to maintenance charges and this shall drastically reduce any disputes that may arise in the future with regard to maintenance charges and its various components. A homebuyer at the end of the day would thus know what he is paying for under the name of maintenance charges.

Read property reviews on India’s most trusted property reviews platform. Get authentic price, location and legal insights from home buyers working for Fortune 500 companies with verified profiles.

JOIN OUR NEWSLETTER
Join over 30,000 home buyers who are following our newsletter.
We hate spam & we respect privacy.

Facebook Comments


Aparna Sriram

A lawyer by profession. Currently a work-from-home mom. Enjoys writing and learning new languages. Loves reading fiction. An avid crocheter.