The Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has introduced a new framework for the collection, management, investment, transfer and utilisation of Interest Free Maintenance Security (IFMS) collected from homebuyers.
The amended provisions under Regulation 47 of the UP RERA (General) Regulations, 2019 aim to bring greater transparency, accountability and financial discipline to funds collected for the long-term maintenance of residential and commercial projects.
The changes are particularly important for homebuyers, promoters, Residents’ Welfare Associations (RWAs) and Associations of Allottees in projects across Uttar Pradesh, including major real estate markets such as Noida, Greater Noida and Lucknow.
What Is Interest Free Maintenance Security (IFMS)?
Interest Free Maintenance Security, commonly known as IFMS, is a one-time amount collected from homebuyers for the future maintenance and upkeep of common facilities in a real estate project.
The corpus is intended to support expenditure relating to:
- Operation of common areas
- Maintenance and repairs
- Replacement of equipment
- Shared services and facilities
- Long-term upkeep of the project
In many housing projects, disputes have arisen over the amount of IFMS collected, the manner in which the promoter maintained the fund, whether interest earned on the money was transferred and whether the entire corpus was handed over to the residents’ association.
The new framework seeks to establish a clearer system from the time the money is collected until it is ultimately transferred to the RWA or Association of Allottees.
Why Did UP RERA Amend the IFMS Rules?
The objective behind the amendment is to ensure that money collected from homebuyers for maintenance remains secure and properly accounted for.
According to UP RERA, IFMS is collected for the long-term maintenance of common facilities and therefore should be protected from misuse or diversion.
The framework focuses on four major principles:
Secure collection → Separate banking → Transparent investment → Complete transfer and audit
The amended rules are designed to ensure that the maintenance corpus remains available for the purpose for which homebuyers contributed it.
Promoters Must Collect IFMS at the Time of Registration
Under the revised provisions, promoters are required to collect the prescribed IFMS amount from allottees at the time of registration of the sale, lease or sub-lease deed.
The amount collected cannot simply be mixed with the promoter’s ordinary business funds.
Instead, the regulations require the promoter to deposit the IFMS corpus into a separate designated bank account with a scheduled bank.
This requirement is important because it creates a separate financial trail for the maintenance security amount.
Separate Bank Account for IFMS Funds
One of the most significant features of the new framework is the requirement that the IFMS corpus must be maintained separately.
The IFMS fund should not be mixed with:
- Regular maintenance collections
- The promoter’s general business funds
- Construction funds
- Other project accounts
- Routine operational expenses
A separate account makes it easier for allottees and the eventual residents’ association to determine:
- How much IFMS was collected
- From which allottees it was collected
- Whether any amount was spent
- What interest was earned
- What balance remains for transfer
This can potentially reduce disputes at the time of project handover.
IFMS Money Must Be Invested in Fixed Deposits
The new regulations also prescribe how the collected IFMS corpus should be invested.
The promoter is required to invest the funds in a fixed deposit scheme offering the highest rate of interest among eligible banks, after obtaining quotations.
The objective is to ensure:
Safety of the corpus + transparency in investment + maximum possible returns
Instead of allowing the money to remain unutilised or mixed with other funds, the framework seeks to ensure that the corpus earns returns until it is transferred to the residents’ body.
What Are the Prescribed IFMS Rates?
UP RERA has prescribed different IFMS rates depending upon the nature of the project.
Group Housing Projects
For group housing projects, the prescribed IFMS ranges between:
₹20 to ₹100 per square foot
The exact amount depends upon the category of residential units and the applicable project classification.
Commercial Projects
For commercial developments:
- ₹40 per square foot for non-central air-conditioned projects
- ₹50 per square foot for centrally air-conditioned projects
Separate rates have also been prescribed for plotted residential and commercial developments.
Homebuyers should therefore verify the applicable IFMS rate for their particular project and category before making payment.
Entire IFMS Corpus Must Be Transferred to the RWA
Perhaps the most important protection under the amended framework is the requirement that the promoter transfer the entire IFMS corpus to the Residents’ Welfare Association or Association of Allottees.
The transfer is required at the time of handing over the project’s common areas.
The transfer is not limited merely to the principal amount collected from buyers. The framework also addresses the financial trail and accrued returns associated with the corpus.
The objective is that the maintenance security collected from homebuyers should ultimately remain under the control of the body responsible for maintaining the project.
Promoter Must Provide a Detailed Transfer Statement
At the time of transferring the IFMS corpus, the promoter must provide a detailed statement.
The statement is expected to contain important information including:
- Unit-wise IFMS collections
- Details of expenditure incurred
- Audit trail
- Financial records relating to the corpus
- Final balance transferred to the RWA or Association of Allottees
This requirement can help residents verify whether the amount transferred corresponds with the total money collected from the allottees.
For example, if an association believes that the promoter collected IFMS from 500 purchasers but transferred a substantially lower amount, the unit-wise collection statement and audit trail can become important records.
How Can the IFMS Fund Be Used?
The IFMS corpus cannot be treated as a general-purpose fund.
The amended provisions restrict its utilisation to specific purposes connected with the common facilities of the project.
The fund may be used for:
- Operation of common areas
- Maintenance of common facilities
- Repairs
- Replacement of equipment
- Maintenance of shared services
The fund should therefore be used for the long-term upkeep of common infrastructure rather than unrelated expenditure.
IFMS Must Be Kept Separate From Monthly Maintenance Charges
The regulations distinguish between the IFMS corpus and ordinary maintenance collections.
Monthly maintenance charges are generally collected to meet ongoing expenses such as:
- Security
- Housekeeping
- Electricity for common areas
- Water charges
- Routine repairs
- Administrative expenses
IFMS, on the other hand, is intended as a separate maintenance security corpus.
The new framework requires proper separation of these funds so that the long-term corpus is not confused with the routine monthly maintenance account.
Mandatory Accounting and Audit of IFMS
The RWA or Association of Allottees receiving the IFMS corpus will also have important responsibilities.
Proper accounts must be maintained regarding:
- Receipts
- Payments
- Utilisation of the IFMS corpus
- Balance remaining in the fund
The accounts must be audited by a chartered accountant in accordance with generally accepted accounting principles.
This creates an accountability mechanism not only for the promoter during the collection and transfer stage but also for the residents’ body after it receives the corpus.
Audit Report Must Be Placed Before the General Body
The audit report relating to the IFMS fund must be placed before the:
Annual General Meeting (AGM) or Extraordinary General Body Meeting (EGBM)
within three months of completion of the audit.
This requirement is significant because it allows members to review the financial position of the IFMS corpus and raise questions regarding its utilisation.
Members should be able to understand:
- Opening balance of the IFMS corpus
- Interest or other income earned
- Amount utilised
- Purpose for which money was spent
- Closing balance
What Does This Mean for Homebuyers?
For homebuyers, the amended framework provides a more structured approach to maintenance security funds.
Before the introduction of such detailed rules, disputes could arise when:
- The promoter delayed transferring the IFMS corpus
- Buyers were unsure about the amount collected
- Interest earned on the corpus was not clearly disclosed
- The corpus was mixed with other funds
- There was no clear audit trail
The revised framework seeks to ensure that homebuyers have a clearer financial record of the money collected for the future maintenance of their project.
What Should RWAs and Associations of Allottees Check at Handover?
When the project is handed over, the RWA or Association of Allottees should carefully verify the IFMS transfer.
Important documents and information should include:
1. Unit-Wise Collection Details
The association should verify the IFMS collected from every allottee.
2. Bank Account Records
The relevant account and investment records should establish how the corpus was maintained.
3. Fixed Deposit Details
The association should examine the details of fixed deposits, interest earned and maturity amounts.
4. Expenditure Records
If any expenditure has been made from the corpus, complete details and supporting documents should be available.
5. Audit Trail
A proper audit trail should establish how the amount moved from collection to investment and finally to the residents’ body.
6. Final Amount Transferred
The RWA should reconcile the total amount transferred with the collections, interest and any permissible expenditure.
A Major Step Towards Financial Transparency
The revised IFMS framework represents an important attempt to bring financial discipline to a fund that can involve substantial amounts in large residential projects.
For a project containing hundreds or thousands of apartments, even a relatively small IFMS charge per square foot can result in a corpus running into crores of rupees.
Therefore, requirements relating to:
Separate accounts, fixed deposit investment, financial records, mandatory transfer and audit
can play an important role in protecting the maintenance corpus created from homebuyers’ contributions.
Conclusion
The new UP RERA framework provides a clearer system for dealing with Interest Free Maintenance Security funds from the time they are collected until they are handed over to the residents.
Promoters are required to maintain the funds separately, invest them in accordance with the prescribed framework and transfer the corpus along with the applicable financial records to the RWA or Association of Allottees at the time of handover.
After receiving the corpus, the residents’ body must maintain proper accounts, ensure that the fund is used only for its intended purpose and subject the accounts to audit.
The overall objective is straightforward: money collected from homebuyers for long-term maintenance should remain secure, transparent and available for the benefit of the project and its residents.
