Buying a home in UP? New RERA rules change how maintenance money is handled | Personal Finance

The Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has overhauled the rules governing Interest Free Maintenance Security (IFMS)—a one-time amount collected from homebuyers for the long-term upkeep of common facilities in housing projects.

 

The new framework aims to address one of the most common sources of disputes between homebuyers, developers and Residents’ Welfare Associations (RWAs): what happens to the maintenance corpus collected by builders after possession. The amendments have been introduced through the 12th amendment to the UP RERA (General) Regulations, 2019 under Regulation 47 and came into force immediately after being published on the authority’s website.

 

Here’s what the changes mean.

 
 

What is IFMS?

 

Interest Free Maintenance Security (IFMS) is a one-time, refundable maintenance corpus that builders collect from homebuyers at the time of property registration. It is meant exclusively for the long-term maintenance, repair and replacement of common assets such as:

 

• 
  Lifts
• 
  Clubhouses
• 
  Water pumps
• 
  Electrical systems
• 
  Common lighting
• 
  Landscaping
• 
  Security systems
• 
  Other shared infrastructure

 

Unlike monthly maintenance charges, IFMS is intended to create a permanent reserve fund for major future expenses.

 

What changes under the new rules?

 Builders can no longer mix IFMS with their own funds

 

Earlier, many developers collected IFMS but there was little regulatory clarity on how the money had to be held or invested.

 

Under the new rules, every rupee collected as IFMS must be deposited into a separate designated bank account with a scheduled bank. Builders cannot mix this money with project funds or operating accounts.

 

The money must earn the highest possible FD interest

 

Perhaps the biggest change is how the corpus has to be managed.

 

Instead of leaving the money idle, promoters must obtain quotations from eligible banks and invest the corpus in the fixed deposit offering the highest rate of interest, ensuring both safety and better returns for homebuyers.

 

This means the maintenance fund should grow over time instead of remaining stagnant.

 

Builders must hand over the entire corpus to the RWA

 

Once the project’s common areas are transferred, the builder must also transfer:

 

• 
  the entire IFMS corpus,
• 
  the interest earned,
• 
  and a detailed statement showing collections, expenditure and audit trail to the Residents’ Welfare Association (RWA) or Association of Allottees.

 

This is one of the most significant consumer-protection measures in the amendment.

 

The money can only be used for maintenance

 

The new regulations make it clear that IFMS cannot be diverted for any other purpose.

 

It can only be used for:

 

• 
  repair of common areas,
• 
  maintenance of common facilities,
• 
  replacement of equipment,
• 
  operation of shared services.

 

The corpus must remain separate from routine monthly maintenance collections.

 

Annual audit becomes compulsory

 

The RWA or Association of Allottees must:

 

• 
  maintain proper accounts,
• 
  get them audited by a Chartered Accountant,
• 
  and place the audit report before the Annual General Meeting (AGM) or Extraordinary General Meeting (EGM) within three months of completion.

 

The move is aimed at improving transparency even after builders hand over projects.

 

How much IFMS can builders collect?

 

UP RERA has standardised IFMS charges based on project type instead of leaving them entirely to developers.

 

The prescribed rates include:

 

• 
  Group housing: ₹20-₹100 per sq ft, depending on the category of residential unit.
• 
  Commercial projects: ₹40 per sq ft for non-central air-conditioned developments and ₹50 per sq ft for centrally air-conditioned projects.
• 
  Separate rates have also been prescribed for plotted residential and commercial developments.

 

Why has UP RERA introduced these rules?

 

Maintenance funds have long been a contentious issue in residential projects.

 

In many housing societies, homebuyers have complained that:

 

• 
  IFMS money was never transferred to RWAs,
• 
  builders failed to disclose how the corpus was invested,
• 
  interest earned on the money was not accounted for,
• 
  and there was little transparency on how the funds were utilised.

 

The new framework seeks to address these concerns by prescribing rules for collection, investment, transfer and auditing of the maintenance corpus.

 

UP RERA Chairman Sanjay R. Bhoosreddy said homebuyers contribute this money for the long-term upkeep of common facilities and it is therefore essential that the corpus remains secure and is used only for its intended purpose.