In a significant move aimed at enhancing transparency, accountability and financial discipline in real estate projects, the Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has introduced a new framework governing the collection, management and transfer of Interest Free Maintenance Security (IFMS) funds.
The new provisions, notified under the 12th Amendment to the Uttar Pradesh Real Estate Regulatory Authority (General) Regulations, 2019, came into effect on 15 July 2026 and are expected to significantly reduce disputes between developers and Residents’ Welfare Associations (RWAs).
What is Interest Free Maintenance Security (IFMS)?
Interest Free Maintenance Security (IFMS) is a one-time, interest-free deposit collected by developers from homebuyers, generally at the time of possession or registration of the property.
The purpose of IFMS is to create a long-term maintenance reserve fund for:
- Repair and upkeep of common areas
- Maintenance of equipment and infrastructure
- Replacement of common facilities
- Future maintenance expenses of the housing project
Over the years, IFMS has become one of the most disputed issues between developers and resident associations due to delays in transfer, lack of transparency, and disagreements over the amount collected.
Separate Bank Account Mandatory for IFMS Funds
Under the amended regulations, developers are now required to:
- Collect IFMS at the time of registration of the sale, lease or sub-lease deed.
- Deposit the amount into a separate designated bank account with a scheduled bank.
- Keep the IFMS account independent from regular maintenance accounts.
The objective is to ensure that maintenance funds are not mixed with the developer’s operational funds and remain fully protected for the benefit of homebuyers.
Investment in Highest Interest-Bearing Fixed Deposit
The regulations further require developers to invest the IFMS corpus in a Fixed Deposit (FD) offering the highest available interest rate among eligible banks.
Developers are expected to:
- Obtain quotations from banks.
- Select the bank offering the highest interest rate.
- Ensure safety and growth of the corpus.
This provision ensures that homebuyers receive the benefit of interest earned on the maintenance corpus.
Mandatory Transfer of Entire IFMS Corpus
One of the most significant changes introduced by UP RERA is the mandatory transfer of the entire IFMS corpus along with accrued interest.
At the time of handing over the project’s common areas, the developer must transfer:
- Entire IFMS amount collected.
- Accrued interest earned on the corpus.
- Detailed financial records relating to the fund.
The transfer must be made to:
- Residents’ Welfare Association (RWA), or
- Association of Allottees.
This provision is expected to eliminate disputes over maintenance funds after project handover.
IFMS Can Be Used Only for Maintenance Purposes
The amended regulations clearly restrict the utilisation of IFMS funds.
The corpus can only be used for:
- Operation of common facilities.
- Maintenance of common areas.
- Repair works.
- Replacement of equipment and infrastructure.
- Shared services within the project.
The funds cannot be diverted for any unrelated purpose.
Separate Accounts and Mandatory Audit
The RWA or Association of Allottees receiving the IFMS corpus must:
- Maintain a separate bank account.
- Keep detailed records of receipts and payments.
- Record utilisation of funds properly.
- Conduct annual audits through a Chartered Accountant.
The audit report must be placed before:
- Annual General Meeting (AGM), or
- Extraordinary General Body Meeting (EGBM)
within three months of completion of the audit.
This ensures complete transparency in the management of maintenance funds.
When Can Developers Collect IFMS?
The regulations permit promoters to collect IFMS only:
- At the time of registration of the sale deed;
- Registration of lease deed; or
- Registration of sub-lease deed.
The amount collected must immediately be deposited into the designated account and invested as prescribed.
Prescribed IFMS Rates
UP RERA has prescribed project-specific IFMS rates.
Group Housing Projects
- ₹20 to ₹100 per square foot depending upon the category of residential units.
Commercial Projects
- ₹40 per square foot for non-central air-conditioned buildings.
- ₹50 per square foot for centrally air-conditioned buildings.
Separate rates have also been prescribed for:
- Plotted residential developments.
- Commercial plotted developments.
What Documents Must Be Transferred to the RWA?
At the time of project handover, developers are required to provide a detailed transfer statement containing:
- Unit-wise IFMS collection details.
- Expenditure incurred from the corpus.
- Audit trail.
- Interest earned.
- Final amount transferred.
This provision significantly strengthens accountability and transparency.
Why Was This Amendment Necessary?
Several resident associations had raised concerns regarding:
- Delay in transfer of IFMS corpus.
- Non-disclosure of maintenance funds.
- Lack of interest payment.
- Incomplete financial records.
- Disputes regarding the amount due.
The new framework seeks to eliminate these issues by creating a transparent and regulated mechanism.
Benefits of the New IFMS Framework
The amendment offers several benefits:
For Homebuyers
- Protection of maintenance corpus.
- Greater transparency.
- Benefit of interest earned.
- Improved accountability.
For RWAs
- Timely transfer of funds.
- Better financial planning.
- Stronger control over maintenance activities.
For the Real Estate Sector
- Improved governance.
- Reduced litigation.
- Enhanced buyer confidence.
- Better project management.
UP RERA’s Objective
UP RERA Chairman Sanjay R. Bhoosreddy stated that homebuyers contribute these funds for the long-term upkeep of common facilities and therefore the corpus must remain secure and be utilised solely for its intended purpose.
The new regulations are expected to:
- Strengthen Residents’ Welfare Associations.
- Promote sustainable project management.
- Ensure proper utilisation of maintenance funds.
- Protect the interests of allottees.
Conclusion
The new UP RERA framework on Interest Free Maintenance Security (IFMS) marks a significant reform in the management of maintenance funds in real estate projects. By mandating separate bank accounts, investment of funds, transfer of the entire corpus with accrued interest and compulsory audits, the regulator has introduced a robust mechanism that protects homebuyers and strengthens the role of resident associations. The amendment is expected to reduce disputes, improve transparency and create greater trust in the real estate sector across Uttar Pradesh.
