Sinking fund and corpus fund for Bengaluru apartments

Every association eventually meets the same moment: the lift is twenty years old, the quote is ₹18 lakh, and there is ₹4 lakh in the bank. The fund exists so that moment is boring. In Bengaluru, getting there involves one thing most guidance skips — a lot of associations are owed money by their builder and have never asked for it.

Corpus fund and sinking fund are not the same thing

Confusing these is how associations end up believing they have a fund when they have a claim.

What the builder owes you

Under RERA, the promoter's obligations are specific:

• Section 11(4)(e) — enable formation of the association of allottees within

three months of the majority of units being booked.

• Section 17 — hand over the common areas together with **all original

documents (title, sanctioned plans, warranties, maintenance contracts, tax receipts) and the balance in the maintenance and corpus accounts, supported by an audited statement of accounts**.

Karnataka RERA has ordered promoters to transfer corpus funds to associations, taking the view in substance that the entire purpose of a corpus fund is to be handed over, and that the promoter holds buyers' money in trust rather than as its own. Non-transfer is nonetheless common across Bengaluru.

If your association has never received an audited handover statement, that is an open claim, not a closed chapter. A K-RERA complaint is a real and frequently used remedy. Start by writing to the promoter asking specifically for the audited statement of the maintenance and corpus accounts under Section 17 — the request itself often moves things, and it creates the record you need if it does not.

Karnataka prescribes no percentage — your bye-laws do

Guidance you will find online citing "0.25% of construction cost per annum" is about Maharashtra, where a state model bye-law sets it. The Karnataka Apartment Ownership Act contains no equivalent prescription, and there is no state model bye-law supplying a default.

In Karnataka the contribution rate comes from your registered bye-laws, and if they are silent, the general body has to decide it. That is more freedom than Maharashtra associations have — and more responsibility, because there is no statutory floor protecting you from under-funding.

Some associations adopt a percentage-of-replacement-value benchmark; figures in the 10–20% range are sometimes quoted in industry commentary, but these are conventions rather than law and should not be treated as authoritative. The defensible method is to work backwards from what you will actually have to buy.

Size it against a replacement schedule

Now inflate each to its replacement year — 6–7% a year on construction inputs is a defensible assumption — and test whether your accumulated fund plus projected interest actually clears it. If it does not, you have a specific number to take to the general body, which is a far easier conversation than "we should probably increase the sinking fund".

Two of those lines are more Bengaluru-specific than committees expect. STP refurbishment is a large, recurring, unavoidable cost that many associations have never provisioned for at all. And where a complex relies partly on tanker water, the borewell and storage infrastructure carries its own replacement cycle.

Four mistakes that leave associations short

Leaving it in the savings account. A fund earning 3% loses to inflation every year. Over a twenty-year horizon, compounding is most of the fund — not a bonus on top of it. It belongs in fixed deposits in the association's name, laddered so tranches mature when work is planned.

Never revising the base. A contribution fixed on 2011 costs is funding 2011 lifts. Revisit the number at least every five years, and after any major quote that shows your assumptions are stale.

Borrowing from it for operating shortfalls. Once the fund becomes an overdraft for unpaid maintenance, it has stopped being a fund. If collections are short, fix collections — see recovering arrears.

No written plan attached to the number. A fund with no schedule is just a balance. The replacement table above is what makes the next committee keep contributing.

Getting the increase approved

An increase goes through the general body. What carries the vote is never the percentage — it is the schedule. Members resist an abstract increase and accept a concrete one, so put the replacement table in the AGM notice itself, not just in the meeting. See AGM rules for getting the notice right.

Keep corpus and sinking fund as distinct heads in the accounts from day one, so each balance, its interest and its withdrawals are visible separately at every audit — and so the corpus you eventually recover from the builder does not disappear into general funds. See what your accounts should show.

The short version

• Corpus comes from the builder under RERA s.17, with an audited statement.

Many Bengaluru associations are still owed theirs. Ask, in writing.

• Karnataka prescribes no sinking fund percentage. Your bye-laws decide, and

there is no statutory floor.

• Size the fund against a written replacement schedule, not a rule of thumb.
• Provision for STP and water infrastructure — routinely missed here.
• Interest does most of the work, so the money must not sit in savings.
• Revisit the base every five years.

Sources

• The Karnataka Apartment Ownership Act, 1972 — full text (India Code)
• The Karnataka Apartment Ownership Act, 1972 — PDF (PRS India)
• Karnataka Real Estate Regulatory Authority (K-RERA) — file a complaint