No More Maintenance Mismanagement: What Homebuyers Need to Know About New RERA Mandates

To refrain builders from collecting hefty maintenance fees from homebuyers, the Real Estate (Regulation and Development) Act (RERA) introduced stringent new regulations regarding Interest-Free Maintenance Security (IFMS) funds. The regulations are aimed at curbing the mismanagement of capital collected by builders, ensuring greater transparency and accountability. Additionally, the move is a big relief for homeowners who have long struggled with non-transparent financial practices under the name of maintenance deposits.

Implementation in Uttar Pradesh

These new maintenance security regulations came into force in Uttar Pradesh with immediate effect, offering significant protection for those currently purchasing or planning to buy a home in any city in Uttar Pradesh. The move ensures greater financial transparency and enforces stricter builder accountability across the state.

Financial Accountability Was Adressed

Under the new guidelines, builders should not be holding maintenance security funds in personal or current accounts; instead, they need to open a separate account and invest the funds in fixed deposits (FDs) with banks offering the highest interest rates. To safeguard these assets, builders. In this way, customer funds are secure while accruing interest, preventing builders from accessing or misusing the capital.

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Fee Structures Introduced

Under the newly introduced regulations, RERA has established standardised maintenance security charges based on the property category and size. The mandated rates are as follows:

• Multistory flats (group housing): Rs 20 to Rs 100 per square foot

• Commercial shops (non-AC): Rs 40 per square foot

• Commercial shops (with central AC): Rs 50 per square foot

Fund Usage and Audit Mandates

The guidelines ensure strict usage and reporting standards for these funds. Collected monies are restricted to major repairs—specifically for elevators, parks, generators, and other essential common equipment—and cannot be utilised for daily maintenance expenses.

Furthermore, when common areas are handed over to the Resident Welfare Association (RWA) or Apartment Owners Association (AOA), the builder is mandated to transfer the entire security amount, along with accrued interest, to the association's account. 

Annual General Meeting

To ensure compliance, the RWA or AOA must have these funds audited annually by a chartered accountant. The resulting audit report must be presented to residents at the society's Annual General Meeting (AGM) within three months of receipt to detect any potential irregularities.