Sinking Fund
A sinking fund is a long-term reserve a housing society builds up to pay for major future capital repairs like lift replacement, terrace waterproofing, or structural restoration. It is collected separately from monthly maintenance and can only be spent on pre-approved major works after a general body resolution.
What is Sinking Fund?
A sinking fund is a long-term reserve that a housing society or apartment association builds up year after year to pay for the major capital repairs and replacements a building will inevitably need — external re-plastering and repainting, lift replacement, plumbing-riser overhauls, structural strengthening, or terrace waterproofing. Unlike monthly maintenance, which covers day-to-day expenses such as security, housekeeping and common-area electricity, the sinking fund is restricted: it cannot legally be spent on routine costs and can only be drawn down for pre-approved major works after a special general body resolution.
Why it matters for property buyers
When you buy a flat, you inherit a share of the society's financial health — including how much sinking fund has been accumulated. Two near-identical buildings can carry very different real risks: one with a fully funded sinking corpus glides through a ₹40-lakh lift replacement without a special levy, while one without it slaps every flat with a ₹50,000–₹2 lakh ad-hoc demand. For under-construction projects, the developer typically collects a one-time "corpus" or "advance sinking fund" from each buyer at handover (commonly ₹25–₹100 per sq ft), which seeds the future society's reserves. Before booking, always ask how large the existing sinking fund is and whether the developer corpus was actually transferred when the society was formed.
How to verify or calculate it
The Maharashtra Cooperative Societies Act Model Bye-laws (Bye-law 13(c)) prescribe a minimum sinking fund contribution of 0.25% of the construction cost of each flat per year. Karnataka, Tamil Nadu, Delhi and most other state cooperative laws follow similar 0.20%–0.50% norms. To calculate your share:
- Get the construction cost certificate from the builder or society.
- Multiply by 0.25% (or your state's prescribed rate).
- Divide by 12 for the monthly contribution per flat.
For a flat with a construction cost of ₹40 lakh, that works out to ₹10,000 per year or roughly ₹833 per month. To verify the existing corpus, ask the society for its latest audited balance sheet — the sinking fund must be shown as a separate reserve on the liability side, and the matching cash should sit in a fixed deposit, not the operational current account.
How Brickplot uses Sinking Fund in its score
Sinking fund discipline feeds into Brickplot's Maintenance & Society Health axis. Projects whose builders publish a clear corpus-handover plan, transfer the fund cleanly to the society at OC, and whose post-handover societies maintain audited fixed deposits score higher on this axis. Projects with vague corpus terms in the sale agreement, no proof of transfer, or a track record of post-handover special levies lose points.
Related terms: Property Tax, Possession Certificate, Handover Checklist
Related terms
Brickplot verifies sinking fund disclosures on every reviewed project as part of the independent 11-axis score. No builder commissions. No editorial override.