The Balancing Act!

Every Housing Society or Apartment Owners Association at its formative stages has to decide on the structure of Society Charges it will collect. It also has to decide on the basis on which the Society Charges will be shared by each Apartment.

What should be the basis of Calculation for the Society Bill?

Most debates center around the decision of making the charges on the basis of sq.ft. of each Flat or on a uniform basis where every flat pays equal Society Charges.  This debate gets more pertinent in Societies with high variation in the area of the Flats.

In India, the only Legislation that provides considerable guidance in this matter is from Maharashtra, approved by the Commissioner for Co-operation and Registrar, Cooperative Societies.

According to this legislation, the Regular Society Charges are to be apportioned in the following Manner:

1. Expenses on Repairs and Maintenance of the Building(s):  At the rate fixed by the general body from time to time, subject to the minimum of 0.75 percent per annum of the construction cost of each flat for meeting expenses of normal recurring repairs.

This implies, this can be charged on a sq.ft. basis, which is an indirect indication of the construction cost of the flat.

2. Service Charges (Housekeeping, Security, Common Area Electricity, Equipments): Equally divided by Number of Flats.

This implies, this can be charged on a flat fee basis, where each Flat pays the same amount irrespective of its area.

3. Expenses on Repairs and Maintenance of the Lift, including charges for running the Lift: Equally by all the members, irrespective of the fact whether they use the lift or not.

This is clearly a charge on a flat fee basis.

4. Sinking Fund: At the rate decided by the General Body, subject to the minimum of 0.25 percent per annum of the construction cost of each flat.

This again implies a Sq.ft. based fee., as in Item 1.

Apart from the above charges, many Societies collect following Charges as part of their Regular Bill -  Non-Occupancy Charges (for Flats which are Rented, calculated @ 10% of Service Charges), Parking Charges (by number of Parking Slots of each Member), Property Tax, and Water Charges (by actual Consumption of each Flat, or Number of Water Inlets).

The above may help you to design a Member Bill which works best for your Society.

While many Societies Bill their Members exactly by the book, many others combine the charges into 2 major components:

a) SqFt Based charges:  Items 1 & 4 above. Expenses on Repairs and Maintenance of the Building(s) AND Sinking Fund.

b) Equal Charges: Items 2 & 3 above. Service Charges AND Expenses on Repairs and Maintenance of the Lift.

What should be the Frequency of the Society Billing?

Society Billing frequencies in India vary from Monthly, Quarterly, Semi-Annual and Annual. Frequency can be decided based on 3 criteria:

1. Frequency of Major Society Expense Bills.

2. Willingness of Members to pay in Advance.

3. Minimal Administrative Effort to manage the Billing & Collection.

While #1 & #2 above indicate a Monthly frequency most often, #3 above tilts towards Quarterly.    This could also be a reason why Societies with Monthly Billing are increasing opting for Automatic Billing & Collection using Online Payment Gateway, so it reduces their Administrative Effort to ZERO for Billing and Collections.

What is the Structure & Frequency of your Society Bill?

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