How To Calculate Sinking Fund For Housing Society?

The Housing Society has a lot of rules and regulations of its own and those need to be understood well to avoid chaos and confusion in the future. My uncle is a member of the society and last month he was talking about the Sinking Fund with my father. I had never quite heard of this term, so I got interested to know

how to calculate sinking fund for housing society and what it is. He said that it is a fund that can be used by the society for non-routine capital expenditure without permission of the registrar, subject to approval of the general body through a notice.

How is the housing society sinking fund calculation done?

My uncle said that in general as per Bye Law No. 13( C ), the General Body can decide the Sinking Fund Contribution that is subjected to the minimum of 0.25% per annum of the construction cost of each flat and is certified by the architect excluding the proportionate cost of the land.

The

sinking fund calculation cooperative housing society relies on a formula. My uncle explained it to us vividly, so let me tell you how it is done

Sinking Fund Payment Amount = (A(r/n))/ ((1+r/n)^nt)-1)

Where 

A = targeted amount to meet its purpose

n= payment frequency or number of payments per year

t= number of years over which payments will be made

r= annual interest rate

If a society has decided to accumulate Rs 2,000,000 over 12 years and lets the interest rate be 5% and quarterly payments, then the answer will be

(2,000,000*(0.5/4)) / ((1+0.05/4)^(4*12)-1)) = Rs 30,661.50

This is what I got to know on

how to calculate Sinking Fund for Housing Society.