How to calculate sinking fund in housing society?
A sinking fund is money set aside for future major repairs and replacements in housing societies. Here's how to calculate it:
Basic formula: Sinking Fund = (Estimated future repair cost - Current fund balance) ÷ Number of years until repair needed
Step-by-step calculation: 1. List major upcoming expenses (painting, lift replacement, plumbing, etc.) 2. Estimate costs for each item (get quotes if possible) 3. Determine timeline for when each expense will occur 4. Calculate annual contribution needed for each future expense 5. Add up all annual contributions to get total monthly sinking fund charge
Most societies charge a fixed amount per square foot monthly. For example, if a building needs ₹50 lakhs for painting in 10 years, the annual sinking fund contribution would be ₹5 lakhs, divided among all flats based on area.
As a society treasurer, here's how we calculate our sinking fund:
- We maintain a 10-year projection of major expenses
- Current major items in our fund:
- Building repainting (every 8 years)
- Lift modernization (every 15 years)
- Water tank replacement (every 20 years)
- Terrace waterproofing (every 12 years)
Our calculation method: 1. Estimate current replacement cost for each asset 2. Divide by remaining lifespan to get annual amount needed 3. Add 10% annually for inflation and contingencies 4. Divide total by 12 for monthly per-square-foot charge
We review these calculations annually and adjust contributions as needed. The key is to start early - don't wait until repairs are urgently needed. A well-managed sinking fund prevents special levies and keeps the society financially healthy!