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The importance of improved financial management for housing societies

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Why housing societies need better money management

A recent trend in housing societies is the debate over how to effectively manage the society funds. Most apartment complexes are managed by Resident Welfare Associations (RWAs) or co-operative housing societies (CHS), which collect maintenance charges for various expenditures. While some societies traditionally invest their corpus funds in fixed deposits (FDs) in nationalized or co-operative banks, residents are questioning if there are more lucrative investment options available.

According to the Co-operative Societies Act, housing societies are permitted to invest in government securities, mutual funds, debentures, and other financial instruments to generate better returns. However, many society bye-laws are outdated and do not allow for investment diversification. Some committee members are advocating for a change in investment strategies to optimize returns and safeguard the society funds.

In light of recent banking crises, such as the PMC Bank collapse in 2019, residents are realizing the importance of risk management and liquidity. Some societies have already started investing in mutual funds, gilt funds, and corporate bond funds for better returns and flexibility in fund withdrawal. However, resistance to change and fear of losing principal amounts still prevails in many housing societies.

Experts suggest that hiring investment professionals and creating a structured investment plan could be beneficial for managing society funds effectively. More awareness and willingness to adapt to modern investment practices are necessary to unlock the true potential of housing society funds and ensure financial security for all residents.

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