Co-operative housing society bye-laws in states such as Maharashtra require a sinking fund contribution, usually set as a share of the construction cost of each flat and collected each year. The money is kept in a separate account or investment and used only for the purposes the bye-laws allow, with the general body’s approval.
Because the sinking fund benefits the building as a long-term asset, rent agreements typically make it the owner’s cost, not the tenant’s. When a flat is sold, the accumulated contribution stays with the society.
Buyers of resale flats can ask the society for its audited accounts: a healthy sinking fund means fewer surprise levies when the building needs major repairs.
Example
A 30-year-old society in Dadar needs ₹60 lakh of structural repairs. Its sinking fund holds ₹45 lakh after years of contributions. The general body approves using it and levies the remaining ₹15 lakh across 40 flats, about ₹37,500 each, instead of the full ₹1.5 lakh per flat it would otherwise cost.
Figures are illustrative, not market rates.
Questions about Sinking fund
Is the sinking fund refundable when I sell my flat?
Generally no. The contributions belong to the society for the building’s future repairs, so they stay with the society when a member sells. The buyer benefits from the fund built up.
Should a tenant pay the sinking fund?
Usually not. The sinking fund protects the building, which is the owner’s asset, so rent agreements commonly place it on the owner. Check the agreement, and spell it out when drafting one.
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