Can A Builder Legally Charge Both IFMS And Sinking Fund?

Sujan Afi S

Just as a small bird builds its nest from scratches, we too do that. We save bit by bit dreaming a lot about our house. A home is not only a shelter for us, we have our emotions related to it. It is a place that we love. It is a place that we call ‘ours’! Hence, we should always remain alert to save ourselves from unwanted or unethical situations. 

If you don’t remain alert, then you might face several problems. One such is getting overcharged by the builder! How? Well, there are a few kinds of charges that you need to pay to the builder during the entire process of buying a property. One of such charges is ‘sinking fund’, another is ‘IFMS fund’. 

You might wonder what these might be!

Well, in this article we will understand these charges and whether both of these can be charged by the builder from you. 

What is a Sinking Fund?

This is a fund under which a sum of money is being charged regularly (generally monthly) from the owner of the flat by the builder to cover the emergency cost and long term structural cost. It is an old mechanism to collect the maintenance and repair costs of the building and common space.

The amount of the sinking fund is nominal, nevertheless, becomes a considerable sum collectively.

What is IFMS?

The concept of Interest-Free Maintenance Security (IFMS) is a new one. In the case of IFMS, a lump sum amount of money is paid to the builder at the time of taking over the possession of the flat or apartment or the like. IFMS is kept in a separate account and the builder has no right to spend it for his personal use or mingle it with his/her account.

Generally, the purpose of the IFMS fund is to use it for various regular maintenance costs or small repair costs. Globally the concept of IFMS fund is popularized for its characteristics of one-time charge to the owner of the flat and has replaced the concept of sinking fund where a sum of money is being collected from the owner regularly.

After the formation of the Resident Welfare Association (RWA) or Association of Apartment Owners (AOA) the builder is compulsorily required to hand over this IFMS fund to the association.

Can a Builder Charge Both Sinking Fund and IFMS?

Confusion exists in India regarding the payment of the sinking fund and IFMS. The question arises if a builder can charge both the sinking fund and IFMS from the property owner. Under RERA there is no clear instruction about the charge of sinking fund and IFMS. Besides, in India, the RERA act changes with the change of state.

Therefore, it is quite difficult to answer whether a builder can charge both the sinking fund and IFMS. Both the sinking fund and IFMS fund act as contingency reserves. But according to some legal advertisers, charging both the sinking fund and IFMS to the property owner at the same time is unethical as well as illegal. 

Because IFMS is globally introduced to mitigate the problem of regular charges like sinking funds. The interest coming from the IFMS fund can be successfully used for various small repairs and regular maintenance of the building which eliminate the need for a sinking fund!

In most cases as the amount for the sinking fund is nominal, therefore, the home or flat owner does not protest or hesitate to pay it. Hence, the builder gets a chance of charging both!

At present, the IFMS fund has international acceptability. Therefore, to increase the international acceptance and foreign investment in the Indian real estate sector it is important to clarify sinking funds and IFMS under the RERA act.

Further, it is better to eliminate the system of sinking funds and keep only the IFMS fund which has international acceptance. 

Taking Everything Into Account

It is advised to the investor or real estate buyer to check the details of the RERA act of the respective state before buying the property. Charging both the sinking fund and IFMS is not ethical in many cases.

Therefore, you need to be aware of this issue and need to raise the necessary voice if you feel that something unethical or illegal is being done with you.

Further, it will be better if you take the help of an expert real estate agent. For that, you may reach out to our experts at Roodland.

We have a devoted team who understand your problems and act accordingly. So, drop a mail at to get in touch with us if you feel necessary.

Till then, you can check a few more articles hosted on The Real Talks platform.


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