SUMMARY OF 6. Construction Inflation Rates (CIR) and Interest Income Rates (IIR)
When it comes to reserve fund planning, the provincial legislations and service providing associations – REIC, AIC, CAI, APRA etc. – do not currently provide guidance on how to effectively compose with a reserve fund’s Construction Inflation Rate (CIR) and Interest Income Rate (IIR).
Too often this very important step in the process is left to the bias of the writers or not dealt with at all. This has important consequences that typically skew reserve fund planning recommendations.
Reserve fund planning that does not incorporate accurate rates is doing all stakeholders a disservice.
Reports are questionable if they do not compose with the variability of the rates and are further lessened if they propose financial plans with annual contribution increase rates that go up and down – or up forever – over the planning horizon.
With a best-practice approach to the CIR and the IIR, owners and future buyers can organise their personal finances around a sound and stable reserve fund financial plan.