Maintenance charges, sinking fund and corpus: what your builder owes before handover

The corpus fund and the sinking fund a builder collects from flat buyers are the buyers' money, not the developer's. Under the Real Estate (Regulation and Development) Act, 2016, the promoter must maintain the project until the owners' association is formed and then transfer the balance in the maintenance and corpus accounts to that association, with an audited statement. A builder who sits on the collected corpus or refuses to account for the maintenance fund is in breach of a specific statutory duty — and that is a common, recoverable grievance, not something owners have to absorb. This explainer covers how maintenance charges are computed, what separates a sinking fund from a corpus fund, the promoter's maintain-then-transfer obligation, and the remedy when the money does not come across.

How maintenance charges are computed

There is no single national rate fixed by statute. In practice, residential projects collect monthly maintenance using one of three methods, and the method should be stated in the sale agreement or the association's bye-laws rather than left to the builder's discretion:

• Per square foot of carpet area — the common method where flat sizes differ, so a larger unit pays proportionately more for shared upkeep
• Equal per unit — a flat amount per apartment regardless of size, sometimes used for amenities that every household uses equally
• Hybrid — a per-square-foot component for general maintenance plus equal charges for specific shared services

Reported per-square-foot rates vary widely by city and amenity load, broadly in the range of a few rupees to the mid-twenties per square foot per month. Treat any quoted figure as project-specific, not a benchmark. What matters more than the rate is disclosure: RERA practice requires the developer to give buyers a written breakdown of what the charge covers, how often it is levied, and how it is spent. A charge with no breakdown is the first thing to question.

Builders also collect advance maintenance — a lump sum covering a fixed forward period, often one year, taken at possession. The accepted position is that the promoter may collect advance maintenance only for a limited period and only until the residents' association takes over; it is not an open-ended deposit the builder keeps drawing down indefinitely. Unspent advance maintenance, like the corpus, belongs to the owners.

Sinking fund vs corpus fund — the difference that matters

Buyers often hear the two terms used interchangeably. They are not the same, and conflating them lets a builder blur what is owed.

The practical link: the corpus collected by the builder is meant to seed the association's reserves, and once the body is registered it can be carried into the sinking fund. What a builder cannot do is treat either as income. The collected amounts are not the promoter's revenue, must sit in separate bank accounts, and the interest they earn accrues to the fund — not to the builder.

The promoter's maintain-then-transfer obligation

Two RERA duties bracket the handover of money. Section 11(4)(d) makes the promoter responsible for providing and maintaining the essential services, on a reasonably chargeable basis, until the co-operative society or residents' association is formed. That is why a builder legitimately runs and bills for maintenance in the early period — but the period is bounded by association formation, not the builder's convenience.

Section 11(4)(g) is the transfer duty. When management passes to the association, the promoter must hand over the balance lying in each maintenance-related bank account, along with an income-and-expenditure statement certified by a chartered accountant. The corpus, the unspent advance maintenance and the sinking-fund contributions are part of that balance. The accepted financial-conduct rules reinforce it: separate accounts for corpus and maintenance, no diversion to the builder's books, interest retained in the fund, and CA-certified accounts. A handover with no audited statement is an incomplete handover.

What to verify at handover — a checklist

Before the association accepts the financial handover, confirm each of the following in writing:

1. A statement of every maintenance, advance-maintenance, corpus and sinking-fund account, showing amounts collected per flat and dates
2. The closing balance in each account, supported by current bank statements
3. An income-and-expenditure statement for the builder-managed period, certified by a chartered accountant
4. Confirmation that interest earned on the corpus and maintenance funds stayed in those accounts
5. Transfer of the balances to the association's own bank account, against a dated receipt
6. The basis on which monthly maintenance was computed (per carpet area, per unit or hybrid) and a breakdown of what it covered
7. A written handover-and-takeover document listing the funds transferred, signed by the promoter and the association

The remedy when the builder won't hand over

If the developer keeps the corpus, refuses to account for the maintenance fund, or stalls the transfer, the route runs through RERA, and it overlaps with the broader common-areas handover. The practical sequence:

1. Send a written demand to the promoter citing the Section 11(4)(d) maintenance duty and the Section 11(4)(g) transfer duty, asking for the audited statement and the account balances, with a firm deadline.
2. Form and register the owners' association if it does not yet exist — there must be a legal body entitled to receive the funds. (See our guide to association registration in Karnataka for the correct statute.)
3. If the demand is ignored, file a complaint with the State RERA Authority under Section 31, attaching the demand and any partial accounts the builder has shared.
4. Ask the Authority to direct the transfer of the balance corpus and maintenance funds, production of the CA-certified statement, and penalties for continued non-compliance; escalate to the Real Estate Appellate Tribunal if the order is not honoured.

The corpus and sinking-fund dispute usually travels with the common-areas standoff — the same builder who will not hand over the clubhouse is the one sitting on the deposit. Treat them as one demand. Our companion piece on common-areas handover sets out the Section 11 and 17 deadlines that drive the wider transfer.

SourceThe Real Estate (Regulation and Development) Act, 2016 — Section 11 (functions and duties of the promoter), Ministry of Housing and Urban Affairs

SourceiPleaders — Norms for charging society maintenance under RERA and other laws (Section 11(4)(d) and 11(4)(g) on maintenance and transfer of balance)

SourceClearTax — GST on apartment maintenance charges (Rs 7,500 per month and Rs 20 lakh annual turnover conditions)

SourcePropWatch — Builder won't hand over the association or common areas? Your RERA remedies

SourcePropWatch — Apartment association registration in Karnataka: which Act, and why most are registered wrong

SourcePropWatch — How to choose the right apartment in India: the buyer's checklist