Housing societies in Maharashtra maintain a sinking fund to cover long-term capital expenses such as reconstruction, major structural repairs, and additions recommended by qualified professionals. When a structural auditor flags significant repair requirements, members often question whether the sinking fund can be used and whether fresh contributions must be collected—especially if redevelopment is being planned in the near future.
Purpose of the Sinking Fund
The sinking fund is meant for large-scale, long-term structural needs, including:
• Reconstruction of the building
• Major structural repairs
• Any additions or alterations essential for safety and stability
The fund ensures that societies are financially prepared for critical repairs without excessive dependence on emergency contributions.
Use of Sinking Fund for Recommended Structural Repairs
If a structural audit recommends major repairs, the society is legally permitted to use the sinking fund, provided it obtains approval from the general body. This is in line with the Model Bye-Laws, which clearly allow sinking fund utilisation for major structural work.
It is the duty of the managing committee to ensure the building remains structurally safe and well-maintained. Ignoring the auditor’s recommendations may expose the society to liability and safety risks.
Requirement to Maintain Minimum Balance
Bye-Law 13(c) states that every society must collect contributions towards the sinking fund, set at a minimum of 0.25% of the construction cost of each flat. This cost must:
• Be certified by the project architect
• Exclude land cost
• Reflect the actual construction cost incurred at the time of development
Once the sinking fund is used, the society is obligated to replenish the fund to ensure it maintains this mandatory minimum balance.
Why Replenishment Is Necessary Even if Redevelopment Is Planned
Many societies question why the fund must be restored if redevelopment is expected within 3–4 years. The reasons include:
• Redevelopment timelines are often uncertain, and projects may face delays
• Structural safety cannot be compromised during the interim period
• Legal compliance requires maintenance of the sinking fund
• A healthier sinking fund improves negotiation power with developers
• Unexpected structural emergencies may arise before redevelopment begins
Maintaining the sinking fund ensures the building remains safe and compliant until redevelopment work actually starts.
Approval Process for Using Sinking Fund
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Obtain a structural audit report from a certified auditor
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Place the repair proposal before the general body
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Pass a resolution approving:
• The repair work
• Utilisation of sinking fund
• Additional collection if required to restore the fund balance -
Maintain proper accounting entries and transparency for members
Conclusion
Yes, the sinking fund can be utilised for major structural repairs recommended by a structural auditor, but only with general body approval. After using it, the society must collect fresh contributions to maintain the statutory minimum balance, regardless of future redevelopment plans. This protects the building’s safety, ensures legal compliance, and keeps the society financially sound.
