What is IFMS (Interest-Free Maintenance Charge) in Real Estate? Definition, Meaning, & Full Form!

September 16th, 2023


The Interest-Free Maintenance System in real estate is when property developers offer interest-free financing for necessary repairs and maintenance to potential buyers or tenants. This makes the property more attractive and ensures timely maintenance work.

The Interest-Free Maintenance System in real estate refers to a strategy where property developers offer interest-free financing options for necessary maintenance and repairs to potential buyers or tenants.

By offering interest-free financing, property owners aim to make it more attractive for buyers or tenants to invest in the property while ensuring that essential maintenance work is carried out promptly. This system offers several advantages for both parties involved.

Buyers or tenants can spread out the cost of repairs over an extended period without incurring additional interest charges, making it easier to manage their finances. Property owners benefit by attracting more interested parties and achieving higher occupancy rates due to reduced upfront costs associated with necessary maintenance, thus enhancing the overall value of their investment. Consequently, the Interest-Free Maintenance System is an innovative approach that fosters ongoing maintenance and facilitates smoother real estate transactions.

What is IFMS?

IFMS is a deposit that builders collect when a flat has been handed over. Suppose the flat owner cannot pay the monthly fees for common area maintenance; the builder will use this security deposit.

This IFMS money will stay with the builder until the Resident Welfare Association has been formed or until 60% of the apartments there are occupied. According to law, the RWA is the rightful authority to manage the common areas and facilities of a Group Housing as soon as there is an occupancy of more than 60%.

IFMS solely benefits the buyer and must be paid when the buyer purchases a property. It is set aside for any future planned or unplanned maintenance that might take place within the property. These maintenance fees are also in accordance with RERA regulations.

Purpose of IFMS

The primary objectives of an Interest-Free Maintenance System in real estate are to provide a sustainable solution for property owners to maintain their properties while minimising financial burdens and ensuring the longevity and attractiveness of the properties.

Property owners can invest in necessary repairs and improvements without incurring additional costs by offering interest-free maintenance loans or grants. This system aims to encourage responsible property ownership and prevent neglect or deterioration of real estate assets. Moreover, it helps promote safe and habitable living environments for tenants by addressing structural integrity, electrical systems, plumbing, and other essential repairs.

By implementing an interest-free maintenance system, real estate stakeholders can safeguard their investments and contribute to overall community development by maintaining safe and attractive housing options for residents.

Calculation and Collection of IFMS

Interest-free maintenance security charges are calculated in various ways. Still, they are often determined by the size of the property, the kind of amenities offered, or a percentage of the property value.

In real estate, an interest-free maintenance system is a beneficial aspect for property buyers. Typically, this system is collected at the time of purchase and enables buyers to access necessary funds for property maintenance without incurring additional costs or interest charges.

This collection process usually occurs as part of the overall payment structure during the transaction’s closing, ensuring buyers have immediate access to these funds while safeguarding their financial interests.

It is important to note that the exact mechanism for collecting these funds can vary depending on specific arrangements between the buyer and the property developer or housing association.

However, it is common for developers or associations to set aside a portion of each buyer’s payment towards a collective fund dedicated exclusively to property maintenance.

Utilisation of IFMS

The funds obtained from the IFMS are primarily used for the maintenance, repair, and care of common areas such as parks, gardens, pools, clubhouses, lifts, and security systems. These fees ensure that the property is up-to-date, functional, and aesthetically pleasing, enhancing the residents’ overall quality of life.

The administration or affiliate in charge of the property must maintain accurate records of the resources acquired and their use in order to ensure transparency and accountability. Regular financial evaluations should be conducted, and everyone should have access to essential information about maintenance costs and equipment usage.

Benefits of IFMS

An interest-free maintenance system for property owners offers several notable advantages.

  • First and foremost, IFMS allows property owners to plan their budgets more effectively as they can spread out the maintenance costs over a period of time without incurring any additional interest. This mitigates financial strain and enables property owners to allocate funds towards other critical property management or investment aspects.
  • Moreover, an interest-free maintenance system encourages regular upkeep and preventive measures, ensuring that properties are well-maintained and minimising the risk of costly damages.
  • Additionally, this system promotes transparency and trust between property owners and maintenance service providers, as there is no hidden cost associated with interest payments.
  • Adopting an interest-free maintenance system proves highly beneficial for property owners by providing financial flexibility, encouraging proactive maintenance practices, and fostering strong business relationships with service providers.

Legal Aspects and Regulations

The RERA Act of 2016 contains a number of clauses that deal with preventing promoters or contractors from misusing the IFMS charges, some of which are as follows:

Under Section 11 (4) (a) of the RERA Act, 2016, the promoter shall be responsible for all functions under the provisions of this Act or the rules and regulations made thereunder to the allottees as per the agreement for sale or to the association of allottees, as the case may be till the conveyance of all the apartments plots or buildings to the allottees or the common areas to the association of allottees are made.

Under Section 11 (4) (e) of the Real Estate (Regulation and Development) Act, 2016, the promoter of a real estate project is under an obligation to enable the formation of the association of the allottees so that the amount lying in the hands of the contractor be transferred to the Resident Welfare Association. The person who has not got the services or amenities like the supply of water, parking spaces, etc., despite making payment of Interest-Free Maintenance Charges (IFMC) he can file a consumer complaint under the Consumer

Protection Act, 1986 for the deficiency of service on the part of builder or contractor.

Section 11 (4) (g) further says that the promoter shall pay all expenses until he transfers the physical possession of the real estate project to the allottee or the associations of allottees which he has collected from the allottees for the payment of expenses including land cost, ground rent, municipal or other local taxes, charges for water or electricity, maintenance charges including mortgage loan and interest on mortgages or other encumbrances and such other liabilities payable to competent authorities, banks and financial institutions which are related to the project.

IFMS – Common Misconceptions

Often, an IFMS can be confused with a sinking fund. But here is how it is different:

A sinking fund is money that property owners recurrently set aside to cover unexpected crises and expensive repairs down the road.

IFMS is designed to pay for the ongoing expenses of maintaining the facilities. The developers insist they utilise it to pay predictable, ongoing, and comparatively minimal charges. Even though IFMS has reestablished the Sinking Fund, a few developers impose both fees.

Another common misconception of an interest-free maintenance system is that it is entirely free. While no upfront costs or interest charges may apply to the maintenance services, it does not mean the service is completely cost-free.

The term “interest-free” refers to the absence of interest charged on any borrowed funds used to finance these services. However, there are often other fees or hidden costs associated with the maintenance system, such as administration fees, late payment fees, or service charges.

Some providers may offer interest-free terms only for a limited time period, after which regular interest rates may apply. It is essential to carefully read and understand the terms and conditions of any interest-free maintenance system before committing to ensure that you are fully aware of any potential costs involved beyond the absence of interest.

Is GST applicable on Maintenance Charges? 

GST must be paid on the total amount charged if it is more than Rs. 7,500 per month per member. GST is exempt if the maintenance fee is less than Rs. 7,500.


The importance of an interest-free maintenance system cannot be overstated in today’s professional landscape. This system is vital for ensuring the seamless functioning of equipment and machinery, minimising downtime, and optimising productivity levels.

By operating on an interest-free basis, companies can allocate their financial resources more efficiently to other crucial expenses, such as research and development or employee training. Additionally, this system promotes sustainability by encouraging organisations to focus on preventive maintenance rather than reactive repairs. This approach not only prolongs the lifespan of assets but also reduces the overall costs associated with emergency breakdowns or unforeseen damages.

Moreover, an interest-free maintenance system fosters trust and transparency between service providers and clients, promoting long-term partnerships built on loyalty and mutual benefit. Overall, adopting such a system is a smart investment that enables businesses to maintain their competitive edge while safeguarding their financial health in the long run.

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1. What is the full form of IFMC in property?

Interest-free Maintenance Charges is the full form of IFMC. The costs or fees that a home buyer must pay the contractor or builder are interest-free maintenance charges (IFMC). The builder or contractor reserves it in a separate account until the residents' organisation is founded.

2. What is the full form of IFMS fund?

Interest-Free Maintenance Security Charges is the abbreviation for IFMS. Until the founding of the residents' welfare association (RAWs), it is an additional fee paid by real estate buyers to builders and developers for maintenance, upkeep, security, and development projects.

4. What is PLC in real estate?

PLCs, or preferential location charges, are frequently connected to construction projects in the real estate industry. These are supplementary fees assessed on top of a housing unit's basic sale price (BSP), adding to the financial load on a homebuyer.

5. Is IFMS applicable only to the residents?

IFMS is a fee that the buyer must pay when investing in a property. It doesn't matter if the property is residential or commercial—the buyer will be subject to the tax for maintenance needs in the future.

6. Will it be included in the security deposit/token money?

In contrast to security deposits and token money, IFMS in real estate is totally different. Prior to the developer forming the Residential Welfare Association, the additional charge is specifically transferred to a different account.

7. Is IFMS similar to sinking funds?

IFMS and Sinking Funds have been distinguished by the builders and developers. While sinking funds are utilised for emergencies and repairs, IFMS is used for ongoing costs.

8. Difference between Sinking fund and IFMS?

An amount is periodically set aside by the owners as a sinking fund to meet future maintenance costs and unplanned emergencies. On the other hand, IFMS is gathered to pay for the ongoing expenses of maintaining the facilities.

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