Owners of properties in housing societies have to spend a certain amount of money every month as maintenance charges. The monthly outgo on maintenance charges can make a big difference to your personal finance and saving money on this can help you accumulate a significant amount in the long-term.
What are maintenance charges? What all do they include?
Maintenance charges are fees collected by the residential society to maintain the buildings and common areas within the complex. These charges cover expenses for upkeep, electricity, service costs, and other amenities to ensure a comfortable living environment for residents. Here are some common components of maintenance charges you should be aware of
- Property taxes
- Water charges
- Common electricity charges
- Contribution to the repair and maintenance fund
- Expenses on repair and maintenance of the lift of the society, including charges for running the lift
- Contribution to the sinking fund
- Service charges
- Car parking charges
- Non-occupancy charges
- Insurance charges
- Leases rent
- Non-agriculture tax
- Education and training fund
- Election fund
- Societies may allocate charges for organizing festivals, cultural events, and community gatherings, ensuring these activities are conducted seamlessly without requiring extra financial contributions from residents.
It may also include salaries of office staff, liftmen, watchmen, etc., society office property tax, electricity, water charges, printing, stationery and postage, travelling allowance of staff of members, subscription to education fund and other charges, explains Rituraj Verma, partner at Nisus Finance.
Maintenance charges for luxury amenities: Luxury amenities like swimming pools, gyms, and clubhouses require specialised upkeep, including cleaning, repairs, staffing, and utility expenses. These costs are typically shared among residents, either equally or based on apartment size or through usage-based fees for specific facilities. While these amenities enhance the living experience, they significantly increase maintenance charges, making residents need to account for these costs and ensure transparency in their calculations.
Calculation of Apartment Maintenance Charges
According to flat maintenance charge regulations, builders in our country can levy maintenance fees ranging from Rs. 2 to Rs. 25 per square foot, depending on the amenities provided. Higher fees generally correspond to better facilities and services.
Here are three common methods for calculating maintenance charges in housing societies:
- Equal Sharing: In this method, all residents pay the same maintenance fee, regardless of their flat size. While simple and easy to calculate, it may not be the most equitable.
- Per Square Foot: This approach customizes charges based on the flat size, meaning owners of smaller flats pay lower fees, while larger flat owners pay more. It’s a fairer system for residents with different flat sizes.
- Hybrid Model: The hybrid model combines elements of both methods. Fixed maintenance costs are split equally among residents, while variable costs are calculated per square foot. This approach balances simplicity with fairness across varying flat sizes.
- An additional fee is charged for repair services and the upkeep of shared amenities, like lobby lighting and elevator maintenance, and is divided equally among all flats. Electricity and water charges, however, are based on each flat’s individual usage.
- Maintenance charges are higher for commercial properties compared to residential ones, as they cover the costs of managing and maintaining commercial spaces.
- In a recent ruling, the apex consumer panel clarified that homebuyers who are compelled to take possession of units in delayed projects lacking an Occupancy Certificate (OC) from the relevant civic authority cannot be obligated to pay monthly maintenance fees.
How does it impact you financially?
Society maintenance charges play a crucial role in determining the life cycle cost of a property, as they directly impact the long-term expenses associated with its upkeep and management.
“While investors, particularly in the case of commercial property, understand maintenance charges meaning, end-users may not have the same degree of comprehension of its impact. Multi-national and large companies understand its significance and thus, for commercial properties, maintenance charges have a big impact on the buying decision. In most commercial property cases, the maintenance charges are based on actual expenditure plus a certain percentage over the same,” Grover explains. Maintenance charges are higher in commercial properties than in residential ones, as the former will have components such as central air conditioning and larger common areas.
In the case of home buyers, the impact of maintenance charges on flats is neither understood well by many, nor do the developers care to highlight its impact. Experts point out that in under-construction projects, the maintenance charges may not be demanded initially and may not be discussed in detail. However, for a ready-to-move-in property, all the charges, including society maintenance charges and various deposits, are required to be paid upfront and hence, the home buyer learns about it. This has a bearing on the buyer’s decision.
GST on maintenance charges
Flat owners also have to pay GST at 18% if their monthly contribution to the residents’ welfare association (RWA) exceeds Rs 7,500, as per the Finance Ministry’s orders dated July 22, 2019. As per the rules, RWAs are required to collect the GST on monthly subscription/contribution charged from its members, if such payment is more than Rs 7,500 per flat per month and the annual turnover of the RWA by way of supply of services and goods exceeds Rs 20 lakh.
Regulation of maintenance charges under RERA
| The Real Estate (Regulation and Development) Act, 2016 (RERA) mandates, under Sec (4) (d), that the developer will 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. |
| Section 6 of the RERA also states that: Every allottee, who has entered into an agreement for sale, to take an apartment, plot or building as the case may be, under Section 13, shall be responsible to make necessary payments in the manner and within the time as specified in the said agreement for sale and shall pay at the proper time and place, the share of the registration charges, municipal taxes, water and electricity charges, maintenance charges, ground rent and other charges, if any. |
The maintenance charges law under the RERA stipulates that it is the duty of the developer to pay all maintenance charges, until the day he hands over the possession to the buyers.
“Thereafter, he has to ensure that the building remains without any leakages for five years beyond the date of hand over to the society. Builders usually charge a one or two-year maintenance charge as an advance, as part of the sale agreement and they have to inform buyers of all costs estimated at the time of the sale,” elaborates Verma.
Here are further key points from the RERA Act of 2016 concerning maintenance charges:
- No Arbitrary Charges: Builders cannot impose additional or arbitrary costs at their discretion.
- Transparency at Booking: Maintenance charges should be disclosed to the buyer at the time of booking.
- Regulated Fees: State governments set minimum and maximum maintenance charges, which builders cannot exceed.
- Size-Based Calculation: Charges are typically calculated based on the apartment’s area, leading to variations between properties.
- Collection Frequency: Builders decide how often maintenance fees are collected.
- The frequency with which maintenance fees are collected is determined by the builder. At the time of possession, he may request 12 or 24 months in advance.
- GST Applicability: If monthly maintenance exceeds Rs. 7,500, residents are required to pay an 18% GST on the amount.
- Dedicated Account: Builders must open a separate account for maintenance funds, with no permitted transfers or income generated from interest on this account.
Handover to RWA: Upon transferring maintenance responsibilities to the RWA, builders must provide the remaining balance along with an account statement.
Criteria for charging maintenance
| Type of maintenance charge | Applicability |
| Expenses on repair and maintenance of the building | 0.75% per annum of the construction cost of each flat |
| Service charges (housekeeping, security, electricity for common areas, equipment, etc.) | Equally divided among the flats |
| Expenses on repair and maintenance of elevators | Equally divided among the flats |
| Sinking fund | Minimum of 0.25% per annum of the construction cost of each flat |
| Non-occupancy charges | For flats which are rented, calculated at 10% of service charges |
| Parking charges | By number of parking slots of each member |
| Property tax and water charges | Actual consumption of each flat, or number of water inlets |
Information provided by RICS South Asia
See also: How much can housing societies charge as society transfer charges?
Responsibility of a builder
The growing demand for residential and commercial properties has led to the emergence of numerous new builders and developers, often offering unique amenities to attract buyers. However, this has also fueled a constant conflict between homebuyers and builders, particularly over delays in possession, which leaves the buyer at a financial and emotional disadvantage. Given that maintenance fees are recurring monthly expenses, renters must understand these charges before leasing an apartment.
Under the RERA guidelines for apartment maintenance charges, the builder is responsible for covering all maintenance costs until the property is handed over to the buyers. The builder must ensure the building is free of leaks before transferring control to the residents’ association. Typically, builders require payment of one to two years of maintenance fees upfront as part of the sale agreement and are obligated to disclose all anticipated costs to the buyers at the time of sale.
Maintenance charges cannot be income for builder
The builder cannot transfer the proceeds or maintenance charges received from allottees to his company’s account, because such money received for maintenance is not his income in any way. The logic behind it, is that a builder is only a facilitator for a limited amount of time and the onus of taking up the responsibility of maintenance of the flat and its premises is on the residents’ welfare association (RWA).
Maintenance charges should be deposited in a separate bank account
The developer is required to open a separate bank account, where the contribution from home buyers can be deposited.
Treatment of interest accumulated
Naturally, a lump-sum amount would yield a certain interest. However, this is not to be used by the builder for his own expenses. The interest will continue to accrue to the same account.
Role of chartered accountant
A chartered accountant must certify that the money has been used for the intended purpose only.
Builder’s responsibility for electricity connection costs
If a builder hands over possession to allottees without securing a domestic electricity connection and later agrees to cover the difference between the higher rate and the normal rate for the domestic connection, this cost cannot be charged to the maintenance account. Instead, it must be covered by the builder’s resources.
Cost incurred on deferred services
Now, suppose the builder went ahead and gave the possession of the flat to the buyer without arranging for an electricity connection. Guidelines as per Madhya Pradesh RERA, say that in such cases, if the builder says he would pay the difference between the normal rate for a domestic connection and that charged by the state electricity board, such charges cannot be paid out of the separate account used to deposit the maintenance charges. It should come out of the builder’s own resources.
Owner of balance in the separate account
Whenever the builder hands over the maintenance to the RWA, he/she is also liable to hand over the balance amount in the bank account to the RWA, along with details of income and expenditure, as certified by a CA.
State-specific RERA guidelines
Different states in India have adopted the Real Estate (Regulation and Development) Act (RERA) with slight variations to address their unique real estate challenges. Here are some examples of state-specific RERA interpretations and applications focusing on maintenance charges and responsibilities.
Maharashtra RERA (MahaRERA)
Maharashtra has been at the forefront of implementing RERA regulations effectively. Under MahaRERA, developers are required to disclose the maintenance charges upfront at the time of sale. These charges must be detailed in the agreement for sale, ensuring transparency for homebuyers. MahaRERA mandates that builders deposit maintenance funds into a separate escrow account, prohibiting their diversion for any other purpose. Additionally, the builder is responsible for maintaining the property until the residents’ welfare association (RWA) is formed and the maintenance responsibilities are handed over.
MahaRERA also enforces penalties for developers who fail to provide essential services during the interim maintenance period. This ensures buyers have basic amenities such as water, electricity, or functional lifts before fully transferring possession.
Karnataka RERA
In Karnataka, RERA guidelines emphasise accountability in calculating maintenance charges. Developers must justify the costs based on the size and type of the property. Karnataka RERA also outlines that maintenance charges should be proportional to the facilities provided, ensuring fairness in billing. For example, developers cannot levy additional charges for unutilised amenities such as swimming pools or gyms unless explicitly agreed upon in the sale agreement.
The state also has strict rules regarding handover timelines. Builders must maintain the property for a minimum period post-handover until the RWA assumes full responsibility. Karnataka RERA also enforces stringent penalties on developers who delay the formation of RWAs, providing homebuyers with greater assurance of timely transfer of maintenance responsibilities.
Tamil Nadu RERA (TNRERA)
Tamil Nadu RERA focuses on preventing arbitrary maintenance charges by setting clear guidelines for calculating costs based on the property’s square footage. It also mandates that developers disclose a detailed breakup of maintenance costs during the booking stage. TNRERA ensures that builders cannot levy charges for services that are not operational at the time of possession, such as clubhouses or parking areas under construction.
TNRERA also requires developers to resolve any disputes related to maintenance charges promptly. Homebuyers can approach the authority for redressal if they feel that the charges are unjustified or lack proper documentation.
Delhi RERA
In Delhi, RERA guidelines are particularly strict about maintaining under-construction properties. Developers are held accountable for ensuring that all essential services are operational before handing over possession. Delhi RERA also requires that maintenance charges collected in advance must be transferred to the RWA upon handover. In cases with a delay in RWA formation, the developer must maintain the property without additional costs to the residents.
What are society maintenance charges used for?
- Property upkeep: Maintenance fees are essential for the upkeep of common areas like gardens, pools, gyms, and security systems. They ensure a clean, well-maintained environment, allowing residents to enjoy these amenities without the hassle of individual upkeep.
- Safety and security: These charges cover security services, including staff and surveillance, creating a safe living environment for residents and contributing to peace of mind.
- Aesthetics and property value: Regular maintenance enhances the community’s appearance, positively impacting property values, making maintenance fees a beneficial investment for homeowners.
- Convenience and cost efficiency: By pooling resources, residents are freed from individual responsibilities for common areas, saving both time and potentially high costs of separate upkeep.
- Shared financial responsibility: Maintenance charges distribute the cost of communal upkeep evenly among residents, making it a more affordable and convenient approach compared to individual maintenance.
- Reserve fund for future repairs: A portion of the fees is allocated to a reserve fund for future repairs and upgrades, ensuring funds are available for major repairs and preventing large, unexpected costs.
- Professional management: Many residential societies employ professional management to handle maintenance, which promotes efficient and high-quality upkeep of the property.
- Legal and regulatory compliance: Maintenance fees help ensure the property meets local safety and regulatory standards, reducing legal risks and protecting homeowners from potential penalties.
Maintenance charges for different housing types
Maintenance charges vary significantly across different housing types, such as standalone apartments, gated communities, and villas, primarily due to differences in amenities, security measures, and shared facilities.
Standalone apartments:
Typically, standalone apartments have limited shared amenities and basic security provisions. Consequently, maintenance charges are generally lower, often covering essential services like common area cleaning, basic security, and minor repairs. These charges are usually calculated per square foot and can range from ₹1.5 to ₹3 per sq ft.
Gated communities:
Gated communities offer a wide array of amenities, including swimming pools, gyms, parks, and advanced security systems. The maintenance charges in these communities are higher to support the upkeep of these facilities and services. Residents benefit from shared costs, which can make access to high-quality amenities more affordable compared to maintaining similar facilities individually. Maintenance fees in gated communities can vary but are often higher than those in standalone apartments due to the extensive services provided.
Villas:
Villas, especially those in exclusive communities, may incur maintenance charges similar to or even exceeding those of gated communities, depending on the services and amenities provided. In some cases, villa owners might be responsible for their own maintenance, leading to variable costs based on individual preferences and standards.
Role of residents’ welfare association (RWA)
The Residents’ Welfare Association (RWA) plays a pivotal role in managing maintenance charges once the builder hands over the property. RWAs are responsible for negotiating service contracts, collecting maintenance fees, and ensuring efficient utilisation of funds for the upkeep of the housing society. They act as a bridge between residents and service providers, ensuring that the quality of services like security, housekeeping, and repairs meets expectations.
RWAs also oversee the allocation of maintenance funds, including contributions to sinking funds and reserves for future repairs. They are tasked with maintaining transparency by providing detailed financial reports to residents during annual meetings. Any maintenance charges or additional expenditures increase usually requires member approval through voting. By taking a structured and transparent approach, RWAs ensure smooth management of society’s finances and address residents’ concerns effectively.
Housing.com POV
Understanding society maintenance charges is crucial for homebuyers and residents to manage their finances effectively and ensure a hassle-free living experience. From knowing what these charges include to being aware of the rules under RERA, having clarity helps avoid unexpected costs and disputes. Whether for routine maintenance, luxury amenities, or sinking funds for major repairs, transparency and accountability in how these charges are calculated and utilized play a significant role in maintaining the quality of life in housing societies. Homebuyers should carefully review all details related to maintenance charges during the purchase process to make informed decisions and enjoy a well-managed living environment.
FAQs
Is GST applicable on maintenance charges?
Apartment owners have to pay GST at the rate of 18%, if their monthly maintenance charges exceed Rs 7,500.
What is non-occupancy charges?
The residents’ welfare association can levy a charge on flats that are rented out, up to a maximum amount of 10% of the service charges.
