The Uttar Pradesh Real Estate Regulatory Authority has ordered developers to keep Interest Free Maintenance Security funds in dedicated bank accounts. This change ensures that maintenance money cannot be mixed with a developer's general business cash, aiming to improve transparency and protect the deposits of homebuyers until handover.
The Uttar Pradesh Real Estate Regulatory Authority (UP-RERA) has introduced a new directive that changes how developers manage Interest Free Maintenance Security (IFMS) funds. Under these updated rules, builders are now required to hold these deposits in separate, dedicated bank accounts. This move is designed to stop developers from commingling maintenance funds with their own operational or working capital.
Protecting Homebuyer Deposits
IFMS is a refundable deposit that homebuyers typically pay during the possession process or when a sale deed is signed. The purpose of this fund is to ensure the upkeep of common areas and facilities within a housing project until these responsibilities are transferred to a Residents’ Welfare Association (RWA). By mandating a separate account, the regulator aims to ensure that these funds are not diverted for other corporate needs or construction costs, which has been a frequent point of contention between residents and developers in the past.
Interest Rates and Fund Management
To ensure the value of these funds is preserved, UP-RERA has mandated that developers must invest the IFMS corpus in the highest interest-bearing fixed deposits available. Before placing these funds, developers are required to request quotes from multiple scheduled banks to identify the best return options. Furthermore, the authority has set clear guidelines for IFMS rates, which are tailored to the type of project. For example, standard group housing projects are subject to rates starting at ₹20 per sq ft for lower-income housing, scaling up to ₹100 per sq ft for high-end, luxury residential projects.
Transition to Resident Associations
When a developer eventually hands over the common areas to an RWA, the new regulations require a structured transfer process. The promoter must provide a full accounting, which includes a detailed history of all collections, expenditures, and deductions made from the fund. This handover must be accompanied by an audit report, ensuring that the RWA receives the full, documented corpus along with the operating rights to the bank account. Once the RWA assumes control, it is also obligated to keep these funds in a distinct account and perform annual audits by a Chartered Accountant to maintain ongoing financial transparency.
This regulation is part of the 12th amendment to the UP-RERA General Regulations of 2019. Investors and homebuyers should watch for how quickly developers comply with these new account-segregation requirements and whether this leads to more stable maintenance operations in newly delivered projects across Uttar Pradesh.