🛑 *Awareness Campaign for Members of Society regarding matters pertaining to Sinking Fund*
• Our Society has spent much of its Sinking Fund on the ongoing major repairs. If approved by General Body there is nothing wrong in it.
• *However, I am hearing stories that the society office bearers are floating rumours that the amount spent from the Sinking Fund on repairs has to be replenished or put back in those FDs.*
*This is absolutely bulshit. There is no such requirement as per Byelaws.*
• Then what is the reality - read these post to know.
Dayanand Nene
➡️ *What is Sinking Fund?*
• A Sinking Fund is a collection of money set aside to pay off a debt or replace an asset.
• In terms of society or building, sinking fund is created by putting aside a portion of the Monthly Maintenance for future needs of the society/ building i.e. it is to be used in future for repairs and renovation of the society buildings.
➡️ • Therefore, sinking fund is a financial reserve that a housing society sets aside to pay for future maintenance and repair costs.
It's a financial strategy that helps ensure the society can meet its long-term financial obligations without having to burden its members with large, unexpected assessments.
Here are some things to know about a sinking fund in a housing society:
Purpose
A sinking fund is used to pay for major repairs, renovations, and the replacement of key infrastructure elements like roofs, elevators, and common facilities.
How it's collected
A sinking fund's assets are usually collected from members per month over a period of time through recurring contributions, generally done through Monthly Maintenance.
*How much to contribute:*
*The General Body of the cooperative housing society can decide the sinking fund contribution, but it must be at least 0.25% per year of the construction cost of each flat.*
*Benefits*:
A sinking fund helps maintain the financial health of the society and prevents the need for sudden, hefty special assessments from members.
➡️ Byelaw no. 13 (C) of the Model Byelaws provides for Sinking Fund.
This provision helps cooperative housing society to collect contribution towards this sinking fund from the society members on month on month basis and keep on accumulating year after year by long term investment in accordance with Bye Law No. 15 and directions given under section 70 of the Maharashtra Co-operative Housing Societies Act, 1960.
➡️ Most of the Cooperative Housing Society takes the decision on the Sinking Fund Contribution at the time of taking over from the builder / developer / inception, which remains constant for years together, while the construction cost of the flat keeps on increasing.
It is therefore suggested that the Managing Committee should conduct a valuation of the construction cost of each flat by a certified Architect once in 5 year and decide the revision in sinking fund contribution in General Body Meeting
.
*When can Sinking Fund be utilised?*
*When a society undergoes major repairs or redevelopment, the sinking fund is often used to help pay for it. It can be an essential source of funds for big projects.*
➡️ Bye Law No 14(c) Utilisation of Sinking Fund
Sinking Fund: On the resolution passed at the meeting of the general. Body of the Society, the Sinking Fund may be used by the Society for reconstruction of its building/buildings or for carrying out such structural additions or alteration to the building/buildings, as in the opinion of the Society's Architect, would be necessary to strengthen it / them or for carrying out such heavy repairs as maybe certified by the Architect and on approval of General Body.
*If a Society utilises its Sinking Fund for major repairs - what should it do?*
➡️ If a housing society uses its sinking fund for major repairs, it should continue to collect future sinking fund contributions as earlier and reflect the utilization in the balance sheet.
🔶 *There is no provision in law that the spent amount should be immediately replenished by members contribution. In fact, collection of Sinking Fund through Monthly Maintenance is a ongoing exercise and it will continue at the rate stipulated or decided by the society, after the major repairs are over and Sinking Fund will like before automatically keep getting replenished.*
❎ *Anybody claiming so or advising so that members have to make extra contribution to put back money spent from Sinking Fund is lying.*
*Society Management cannot force members to make contributions by misleading them.*
*Members should realise this*
Dayanand Nene
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