Alternative Solutions for Affordable Sinking Fund and Reserve Fund Contributions in Cooperative Housing Societies

If the prescribed rates for the sinking fund (0.25%) and reserve fund (0.75%) based on the construction cost per sq. ft. as per the model bye-laws are not affordable to society members, alternative solutions can be explored while staying within the framework of the Maharashtra Cooperative Societies Act and By-Laws.

Alternative Solutions:

1. Review and Amend Contribution Rates (General Body Resolution):
   - Process:
       - Convene a General Body Meeting (GBM).
       - Present the financial constraints of members and the inability to contribute at the prescribed rates.
       - Propose an affordable alternative rate for the sinking and reserve funds based on a realistic financial analysis.
   - Approval:  
       - Pass a resolution in the GBM to adopt the revised rates with at least a 2/3rd majority of members present and voting.
   - Compliance: 
       - Inform the Registrar of the resolution and ensure it aligns with the objectives of maintaining funds for long-term repairs and contingencies.
2. Contribute Based on Estimated Future Expenses:
   - Assess the society's actual repair and contingency needs over the next 5–10 years.
   - Calculate sinking and reserve fund contributions based on these estimates rather than the construction cost.
3. Introduce a Flat Rate Contribution:  
   - Instead of linking contributions to the construction cost per sq. ft., introduce a fixed monthly or yearly contribution amount that is agreed upon by the members in the GBM.
4. Gradual Increment Plan:
   - Start with a lower rate for sinking and reserve funds and increase the contributions gradually over the next few years.
   - This approach can ease the financial burden on members while building the required funds over time.
5. Opt for Additional Annual Contributions:
   - Rather than regular monthly charges, collect sinking and reserve funds annually or semi-annually, reducing the immediate burden on members.
6. Explore External Funding Options: 
   - For major repair works or long-term projects, societies can explore options like:
   - Low-interest loans from cooperative banks or housing finance institutions.
   - Government subsidies or grants (if applicable).
7. Voluntary Contributions: 
   - Seek voluntary contributions from financially able members to supplement the sinking and reserve funds.

Key Considerations:

1. Registrar's Approval: 
   - Any changes to the prescribed rates in the bye-laws should be approved by the Registrar to ensure compliance with the law.
2. Transparency: 
   - Clearly communicate the financial requirements and implications to members during discussions and ensure that decisions are taken collectively.
3. Periodic Review: 
   - Reassess the adequacy of funds and the contribution rates periodically to ensure long-term financial stability.
   
   By adopting these solutions, societies can balance affordability for members with the need to build sufficient sinking and reserve funds for future contingencies.

By: CsLawship.in

Alternative Solutions for Affordable Sinking Fund and Reserve Fund Contributions in Cooperative Housing Societies