Maintenance charge: Pay and forget?
May 16, 2014
Source : The Times of India

 

DELHI: Scene 1: You enter a  with no security check and as you walk in, there is peeling paint, crumbling plaster, unkempt lawn, garbage spilt over in the common areas, lifts not working but the ‘works’ are there in the lift!

Scene 2: You enter a gated community with tight security and are stopped to register your details. You are then greeted by sights of immaculate paint, well-manicured lawns, clean walkways, high-speed and clean lifts, staff running around to keep everything in order!

Don’t we all hope to live in Scene 2—maybe, at Scene 1 price — like every other Indian customer who desires the best deal at the best (read lowest) price!

Alas, but one cannot have European aesthetics and American safety standards at Chinese prices!

However, with the prosperity levels going up in the country, today’s customers have become more demanding and ask for high-quality maintenance service. And, developers are not disappointing them-especially in projects where residents are charged over Rs 1 lakh per month in maintenance charges.

Anubhav Jain, director of Silverglades, says: “The average monthly expenses are soaring as many luxury projects have large common areas, landscaping, security, and common area lighting that call for constant upkeep of heavy and complex equipment like generators and CCTVs. Well run RWAs (Resident Welfare Associations) keep the maintenance cost low, but luxury homes can charge anything from Rs 4-11 per sq ft.”

In Laburnum, the maintenance is anywhere between Rs 3-4 per sq ft, while at IVY it’s around Rs 4 per sq ft. Take the case of super luxury condominiums like The Aralias and Magnolias.

A penthouse owner at Aralias says he just paid a bill of Rs 78,000 last month; but that includes his private electricity charges-and remember, these are centrally air conditioned apartments.

Lifestyle amenities come for a price; here again, a club like The Aralias Club is a separate entity. Residents first take an annual membership for Rs 33,000 (plus taxes) in which the primary member, spouse, children, and parents can avail the benefits of the club’s services and facilities, including the use of the gymnasium, squash court, tennis court, basketball court, swimming pool, etc. Otherwise, the monthly maintenance charges at The Aralias are Rs 4.20 per sq ft per month where the common area maintenance charges are: Rs 3.10 plus common area electricity charges at Rs 1.10 per sq ft. A DLF spokesperson says, “Rs 4.20 per sq ft includes services like water charges, common electricity, housekeeping, security, and horticulture only.”

The bigger your apartment, the higher is your maintenance expenditure. Jaivir Singh, the president of Impact Group and who stays in a luxury condominium in Gurgaon, says: “The maintenance expense is proportionate to the size of the apartment. As a customer as well as a developer, I tend to agree with it.”

In a typical gated community, residents are expected to pay a one-time maintenance deposit, which is a handsome sum, ranging from Rs 30,000 to Rs 10,00,000. One-time charges typically offset the monthly expenses as they are pooled into a fund whose interest takes care of the subsequent monthly expenses.

The regular monthly maintenance charges can be anything from Rs 1-10 per sq ft. For an average apartment of 1,000 sq ft, the maintenance charge would be at the rate of Rs 1-2 per sq ft and hence the monthly outflow between Rs 1,000-2,000 per month.

This monthly maintenance amount takes care of housekeeping, mechanical electrical plumbing (MEP), security, insurance, fire safety, earthquake, besides one sinking fund or capital replacement fund.

After delivery of the apartment, the builder hands over the project to an RWA; usually, this happens after a year of possession. As a norm, developers would not like to dabble in the maintenance aspect of their projects as this is very much like after-sales service-a thankless job with uncertain profitability.

Generally builders charge advance payment for monthly maintenance for a period of twelve to eighteen months. After the first year or so, they leave this aspect to the residents’ associations.

Gaurav Gupta, MD of S G Estates Ltd and joint secretary Raj Nagar Extension, says: “We manage the maintenance aspects of the project in the first eighteen months through our facilities management company, Ski View Hotel Pvt Ltd. We take a one-time deposit at the time of booking the unit-say, for a 1,200 sq ft unit, we would charge a one-time fee of Rs 36,000. We build a corpus with this amount, which is then passed onto the RWA. As for the monthly maintenance fee, it is charged at the rate of Rs 1.7 per sq ft or Rs 1,800 per month.”

A majority of the developers take an advance fee for the time they are maintaining the property. Gaurav says that getting payments is the toughest part of the job, so the advance payment mode is the best route.

In the case of premium projects, developers charge a handsome amount in the very beginning.

Anubhav Jain says: “It’s better to charge a hefty one-time payment of IFSD (interest-free security deposit) because it’s a nightmare to collect CAM (common area maintenance) charges from people. We have faced this issue in Tarudhan where we have a 45 acre golf course-we took one-time deposit of Rs 3.5-8 lakh from each apartment and villa owner and that enabled us to seamlessly maintain the entire 75 acre property that is full on weekends. Some developers have started offering concierge services in luxury group housings as well-basic cost of that is included in CAM and additional charges are on usage basis.”

IFSD ranges from Rs 100 to Rs 250 per sq ft for good projects where a lot of common area is maintained. Swimming pools, golf greens, etc, require thorough maintenance and with decreasing availability of good staff the costs are going up all around.

But from the customer’s point of view, this is ground for corruption. While many developers are seen to protect the quality of the asset through good maintenance-as their brand name is at stake-in the case of unscrupulous builders who are there to make a fast, they can leave the accounts high and dry.

Shuchi Sharma, a resident of a CGHS and a chartered accountant by profession, says: “Small builders often extract the last pound of flesh through this maintenance fund and do little for the benefit of the society. It is when the residents make a noise, that he is forced to exit. The RWA often inherits a messed up system, and starts with negative balance sheets.”

Today’s customer is well aware and demanding. Maintenance has become a key point of differentiation. Therefore, even in the same micromarket, the well-maintained societies charge a good premium over and above the rest. And people are willing to pay for it.

Maintenance charges in some mid-end societies can be exactly double the others in the vicinity, say if the prevailing rate is Rs 3,000, well-maintained societies could charge as much as Rs 6,000. This is generally on account of the bigger size of the generator, which enables one to run even air conditioners during power outage. Besides, the quality of service is excellent and plumbing, electrical and any other issues in the apartment are taken care promptly without any additional charges.

At Noida, the charges are in the range of Rs 1-2.5 per sq ft; for instance, it is Rs 1,000 per month in Jalvayu towers in Sector 47, Noida, and Rs 900-1,200 in BPCL apartments, Sector 62, Noida-but this does not include everything.

Take the case of Dwarka. The amount under the header of maintenance is just Rs 1,500, but water problem is an issue specific to the subcity. Hence there are additional expenses on a regular basis like water-supply charges or tanker-water charges, amounting to nearly Rs 2,000 per month. There are additional generator charges and festival fund; the total outflow is anywhere between Rs 3-4,000 per month.

Residents in gated communities assume that their maintenance fees will take care of everything, but as an owner in the gated community, the resident is ultimately responsible for its upkeep, no matter what happens.

Maintenance requires nurturing the asset. You could cut on the frills and fancy things, but you cannot compromise on basic hygiene, safety, and functionality. The more you sow, the more you reap.

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