By Sandeep Reddy, co-founder of Zapkey
Most homebuyers are very happy when they hear from the builder that the project has received OC (occupation certificate) which means the builder can start handing over possession. However, very soon this state of happiness turns a little sour when they get to know the amount they need to pay at the time of possession- which will have a serious dent on the buyer’s pocket. In our view this is because the buyers are generally not fully aware of the applicability and the quantum of common area maintenance (CAM) charges which could be a function of not knowing this at the time of booking or they may have forgotten about it given that the project may have taken several years to complete.
We at Zapkey analyzed advance maintenance charged by builders for 15 projects in Mumbai which showed that there is a wide variation from Rs 10-30/sft/month (on carpet area) and non-standard tenures for which this advance is collected. RERA also does not explicitly mention any specific formula or standards for this.
What does RERA say about maintenance charges? The Real Estate (Regulation and Development) Act, 2016 (RERA) mandates, under Sec (4) (d), that the developer will be responsible for providing and maintaining the essential services, on reasonable charges, till the taking over of the maintenance of the project by the association of the allottees.
Let us understand more about Advance Maintenance Charges
Maintenance charges are the operating charges levied on residents of a housing society. The residents or owners of a particular property in an area are charged for the maintenance of a commonly owned property area. It is collected periodically i.e., monthly, semi-annually, or annually depending upon the project. In under-construction projects, a developer may collect advance maintenance charges for a fixed period as mentioned in the agreement and charge for such accordingly at the time of possession. This is to ensure common areas of the project are maintained until society is formed and operational to take over such duties. This amount doesn’t go to the builder and is not counted as income for the builder but has to be deposited in a separate account. Any balance CAM is to be transferred to the society or apex body at the time of handing over the responsibilities to manage and maintain the facilities.
In Maharashtra, maintenance charges are dependent on the area of the property. The total amount required to maintain the common areas and facilities are divided in proportion to the ﬂat area. The developer cannot demand advance CAM before receiving OC. This means the builder cannot force buyer to take possession of a unit by paying charges without receiving proper OC, especially in delayed projects.
Zapkey ﬁndings from analysis of Advance Maintenance Charges for 15 projects spread across multiple localities.
Wide variation from Rs 10-30/sft/month of maintenance charges (GST not included) even though the projects had similar amenities like gymnasium, clubhouse, swimming pool etc. We observed that South Mumbai locations or premium projects had much higher CAM charges.
- Projects like Rustomjee Crown in Prabhadevi had CAM of Rs 30/sft/month and for a 1404 sft apartment it works out to ~Rs50,000/month (including GST). Peninsula Bishops Gate, a very posh apartment complex in Breach Candy has a CAM of ~Rs 25/sft/month which translates to a whopping Rs 1.37 lacs/month for a 4700 sft apartment.
We would like to note that as per GST laws, maintenance charges paid by residents to the Resident Welfare Association are exempt up to Rs.7,500. In case the amount charged exceeds Rs.7,500 per month per member, GST is chargeable on the entire amount charged.
There were 2 projects in our study- Transcon Triumph in Andheri West and Sheth Montanta in Mulund where CAM worked out to sub Rs7500/month.
But in general, we observed the majority of the projects has a CAM in the range of Rs 10-15/sft/month.
- Tenures for which advance maintenance is collected by builders ranged from 12-24 months. Generally, this is the period within which the builder plans to handover the building to RWA/society from possession.
We had some projects like Lodha Bellagio in Powai and Dosti Eastern Bay in Wadala which split the CAM into Building and Layout/Federation (for common areas in case of multiple towers) maintenance. For example, Lodha has Building CAM for 18 months but Layout or Federation CAM for 60 months. Generally, this helps spread the load of CAM across owners as possession of various towers happens over time.
- Even though most of the agreements mention the Advance Maintenance Charges explicitly, we found some projects like Kanakia Zen World and Kanakia Silicon Valley did not mention the exact CAM numbers. The agreement generally mentions that this amount will be charged on pro-rata basis in proportion to all other allottees in the whole project.
We believe mentioning the proposed advance maintenance charges upfront in agreements is a good practice as it helps avoid conﬂicts between builders and owners later at the time of possession.
- Generally total Advance Maintenance collected by developer ranged from 0.5-1.4% of the property value (registered value). Projects with higher Advance Maintenance as a % of property value were Piramal Revanta in Mulund, Runwal Bliss in Kanjurmarg and Rustomjee Crown. Also, it is interesting to note that some of the premium projects were on the lower end of the range specially because of the high/premium property value- Peninsula Bishops Gate and Godrej Urban Park were at 0.5% and Oberoi Elysian at 0.7%.