Service charge explained: the construction fee and the monthly bill

Two charges, one name

Buyers often hear “service charge” at the booking table and assume it is the monthly fee for the lift and the guards. In a land-share project it usually means something else: the fee the developer charges for managing construction on the shareholders' behalf.

The monthly maintenance charge comes later, after handover, and is set by the owners' association. Both are legitimate costs, but they pay for different things and should appear separately in your budget.

The construction consultancy fee

In Asseto's land-share projects, shareholders pay the actual cost of construction, and Asseto charges a consultancy service charge of 10%, 12% or 15% of that cost, depending on the project. The percentage is stated in your booking papers and on each project's page. The fee pays for the work of running the project, including:

• Planning, design coordination and approvals.
• Selecting and managing contractors, vendors and suppliers.
• Site supervision and quality control, including material tests.
• Cost records — bills, vouchers and payment ledgers — open for shareholder review.
• Shareholder support, documentation and monthly progress reports with photographs.
• Handover coordination and the deed of partition.

A worked example

Suppose the construction cost attributable to your 1,500 sqft flat comes to ৳45 lakh over the build. At a 10% service charge you would pay ৳4.5 lakh in consultancy fees, spread across your instalments; at 12% it would be ৳5.4 lakh. Because the fee is a percentage of the actual cost, it follows the final construction bill rather than being fixed on day one.

When comparing developers, ask what each fee covers. A lower percentage that excludes supervision or documentation can cost more in the end.

The monthly maintenance charge

After handover, owners share the cost of running the building: guards and cleaners, lift and generator maintenance, fuel, common-area electricity and water, and a reserve fund for repairs. The owners' association sets the amount, usually per flat or per square foot, and reviews it every year.

Expect the bill to rise with the number of lifts, the size of the generator and the level of security. Ask the developer for an estimated monthly budget before you book, and ask whether it includes a reserve fund — buildings without one struggle when a lift motor or a water pump fails.

Questions to ask before you sign

Five questions settle most confusion about service charges:

• Is the consultancy fee a percentage of the actual cost or of an estimate?
• Which services does it include, and which are billed separately?
• How often will I see the bills behind my instalments?
• What is the estimated monthly maintenance charge after handover?
• When will the owners' association be formed, and who manages the building until then?