The Uttar Pradesh Real Estate Regulatory Authority has mandated that developers manage Interest Free Maintenance Security funds through dedicated, interest-bearing bank accounts. This directive aims to increase transparency and ensure these funds are fully transferred to Resident Welfare Associations for common area upkeep.
The Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has introduced stricter financial governance for real estate developers operating in the state. Through the 12th Amendment to its 2019 regulations, the regulator has standardized the collection and management of Interest Free Maintenance Security (IFMS) funds, which are commonly collected from homebuyers at the time of possession.
Under the new guidelines, developers are now required to deposit all collected maintenance security funds into a separate, designated account held with a scheduled bank. To maximize the value of these funds, the regulations mandate that the corpus be invested in fixed deposits that offer the highest interest rates. This is intended to protect the capital while ensuring it generates returns that can be utilized for future maintenance needs.
Standardized Rates and Mandatory Transfers
UP RERA has provided a clear schedule for IFMS collection based on project specifications. For multi-storey group housing, developers can charge between ₹20 and ₹100 per square foot depending on the category of the unit. For commercial developments, the rates are set at ₹40 per square foot for non-central air-conditioned spaces and ₹50 per square foot for centrally air-conditioned units.
A significant focus of the new framework is the mandatory transfer of these funds to the Resident Welfare Association (RWA) or the Association of Allottees. When developers hand over control of common areas and facilities, they must provide a comprehensive transfer statement. This document must include a full audit trail of the funds, unit-wise collection data, and a summary of any expenditures made from the corpus. These funds are legally earmarked exclusively for the maintenance, repair, and operation of common services and cannot be comingled with other operational receipts.
Audit Requirements and Accountability
To ensure ongoing transparency, RWAs are now tasked with maintaining rigorous financial records. The regulations require an annual audit of IFMS funds to be conducted by a Chartered Accountant. The findings of this audit must be formally presented to members during the Annual General Meeting or an Extraordinary General Body Meeting within three months of the audit's completion.
By enforcing these accounting standards, the regulator aims to reduce disputes between developers and resident associations regarding the misuse or depletion of maintenance funds. For investors and homeowners, the primary monitorable will be how effectively these associations implement the audit process and whether the stipulated interest-bearing accounts are consistently maintained by developers during the project handover phase.