Understanding and Calculating Maintenance Charges in a Housing Society

When it comes to managing a housing society or Home Owners' Association (HOA), one of the key responsibilities is to ensure the seamless functioning and maintenance of all communal areas. Calculating the monthly maintenance charges is a critical task that requires precision and transparency. In this article, we will delve into the scientific method of calculating maintenance charges and explore the options available to gather and distribute these funds effectively.

Collecting Total Monthly Expenses

The first step in calculating maintenance charges involves determining the total monthly expenses incurred by the housing society. These expenses typically cover a wide range of areas:

Security costs Cost of common area electricity and water Maintenance costs such as garden, gym, pool, play areas, lobby, and room maintenance Cost of maintaining diesel generator sets (DG set) and elevators Degradation and repair costs for common equipment (typically 5% per annum of the cost of purchase) Cost of manpower and items used for cleaning common areas Garbage disposal costs Pet maintenance costs Vehicle parking area and garden maintenance costs Stationery costs Costs of meetings Communication costs

Addition of Reconstruction Costs

In addition to the above-mentioned monthly expenses, it is essential to factor in the cost of reconstruction of the building, assuming a life span of about 50 years. Generally, this cost is between 0.25% and 0.40% of the total built-up area. By adding these costs on an annual basis, one can derive the total amount to be collected annually and, consequently, monthly.

Distributing the Monthly Maintenance Charges

Once the total monthly expenses have been determined, the next step is to distribute these funds among the units within the building. There are two common methods used for this purpose:

Flat Amount Per Unit

The first method involves dividing the total monthly expense amount by the number of units in the building. Although this approach is simple, it can be perceived as unfair for smaller units as they will contribute a higher amount per unit area compared to larger units.

Per Square Foot Rate

The second method involves dividing the total monthly expense by the total built-up area (in square feet) to arrive at a per square foot rate. Then, the individual unit contribution is calculated based on the area of the unit. Under this system, bigger units pay more, and smaller units pay less. Although this approach seems more equitable, it may still seem unfair to larger units, primarily because of the perception that they benefit more from the communal spaces.

Adjusting for Cost Inflation

To ensure the longevity and sustainability of the housing society, it is crucial to periodically adjust the maintenance charges based on cost inflation. Typically, this adjustment should be done every 5 to 6 years. However, it is essential to ensure that the governing byelaws of the Association of Units support these changes.

Dealing with Defaults and Inconsistencies

Despite meticulous planning, there will always be instances of defaulters and differing opinions within the HOA. Ensuring the smooth functioning of the society requires constant communication and a harmonious relationship among all stakeholders.

The total budgeted or actual maintenance costs of all common areas and assets should be divided by the total built-up area, which gives a per square foot rate. This rate is then multiplied by the individual flat area to arrive at the per member contribution.