First-time home buyers often come across a whole dictionary of legal terms in their effort to find their dream home. One such confusing and frustrating term is ‘Corpus Fund’. Most of the time, this is an extra payment to be made while buying a house, that is, it is excluded from the actual price of the home.
Therefore, it is important to understand what it exactly means, why it is charged and how it is calculated.
What is a Corpus Fund?
A Corpus Fund is a dedicated pool of money collected from homeowners and set aside for a specific purpose. It is created to ensure long-term financial stability, growth and maintenance of a real estate project.
Why is it collected?
A Corpus Fund is collected by the developer to maintain the amenities and facilities of a project until a Housing Society is formed. In some ways, it acts as a pre-paid maintenance charge.
At the time of buying of property, the developer collects a lump-sum amount from the buyer and adds it to the fund. While the project is being developed, this fund is used to maintain all the infrastructure and amenities that have already been constructed so that they remain in the best condition at the time of handing over the apartments.
Usually, the fund itself is not touched. The amount in the fund is invested into other securities and the interest and dividend accrued from these investments is used for maintenance projects.
Once construction is completed and a Housing Society is formed, the fund is handed over to the society management. It turns into a Sinking Fund to take care of major repairs, reconstruction, etc.
What is it used for?
The interests and dividends generated by the Corpus Fund are used to pay for facility management and supervision expenses such as electricity in common areas, cleaning common areas, servicing amenities, etc.
The fund can not be used for anything other than the aforementioned expenses. It can not be accessed by a third party for personal use.
How can it be calculated?
The Corpus Fund is usually calculated based on the square footage of the apartment. In some cases, it can exceed Rs.1 lakh.
A Corpus Fund is set up to ensure that at the time of possession, the homeowner receives amenities and services of the best possible quality. It is an important step to ensure transparency and maintain high standards.
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