The Maharashtra Real Estate Regulatory Authority (MahaRERA) has stated that starting July 1, 2024, developers in the state will not be able to take money from home buyers and deposit in different bank accounts as it will become mandatory for them to maintain different designated bank accounts for the purposes. As of now, many developers have been asking home buyers to draw payments towards different bank accounts for different purposes. For example, flat booking amount is deposited in one bank account while they are asked to deposit the money in another bank account for amenities and infrastructure such as gymnasium, swimming pool, parking etc.
To discontinue this practice and enforce discipline, ensure compliance, enhance efficiency, transparency, accountability and uniformity in financial operations of housing projects, the MahaRERA has mandated developers to open three bank accounts in a single bank, thereby securing and protecting home buyers’ investments, a circular issued by the MahaRERA said.
The developers have been asked to open three separate accounts, first for ‘RERA Designated Collection Account’ for 100% of revenue from the flat buyer, second for ‘RERA Designated Separate Account’ for 70% of funds allocated for project’s land & construction, and the third account for 'RERA Designated Transaction Account' for balance 30% of funds.
This directive will be mandatory to follow and effective from July 1, 2024. Relevant consultation paper was issued in mid-March to discuss the same with various stakeholders. Following extensive consultation and discussion, these measures will now be implemented. Projects with more than one promoter will also have the flexibility to open a ‘RERA Designated Master Account’ to receive all collections from the home buyers, it said.
MahaRERA Chairman, Ajoy Mehta said, “The Authority is committed to building trust among home buyers by legally empowering them to ensure their investments are secured and protected. MahaRERA has highlighted the legal rights of home buyers in the housing projects concerning various crucial aspects such as parking, amenities, standardised agreements for sale, allotment letters, etc. To ensure financial discipline in project operations, MahaRERA has taken a crucial decision mandating opening of three bank accounts in a single bank for each of the projects.”
“If a project involves more than one promoter, four bank accounts will be required. These measures will be effective from July 1. This move is aimed at having financial discipline and transparency in the managing revenue as well as expenditures related to project’s development, thereby enabling precise financial oversight in the real estate sector. Such a measure is expected to minimise potential delays in project’s completion, thereby benefiting homebuyers and enhancing the real estate sector’s credibility. MahaRERA is committed to fostering this trust,” Mehta added.
Section 4(2)(i)(D) of the Real Estate (Regulation and Development) Act, 2016, has a provision for dedicated bank accounts. This is to ensure transparency, financial discipline and better monitoring of transactions. It is mandatory to segregate 100% of the revenue, that is the amount related to apartment’s booking and other charges (excluding government taxes and charges), received from the home buyers. Thereafter, a minimum of 70% of the revenue will have to be transferred to another account, i.e. RERA Designated Separate Account, solely for land and construction expenditures.
The balance 30% of the revenue can be transferred to the RERA Designated Transaction Account. Banks will facilitate this process through auto sweep and the funds in any of these accounts cannot be withdrawn via cheques, online banking, credit cards, debit cards or any other means.
With the entire operating procedures defined for receipt, expenditure and refund, the developers will not be able to excuse themselves, citing lack of funds, from returning the booking amount to those flat purchasers who intend to exit the project.
If any home buyer cancels his registration, the developers will have to pay back 70% of the amount received as well as compensation for any losses from RERA Designated Separate Account. Interest on the amount will also be applicable. Furthermore, 30% of the original amount will be transferred from the developer's RERA Designated Transaction Account.
In case of cancellation of a flat’s booking, the homebuyer in several instances has to take a time consuming and longer route of lodging a complaint, attending hearings, securing an order, sending relevant documents to the district collector for issuing of recovery warrants.
This entire lengthy process will be shortened as funds will be available with the developer to refund and compensate the home buyer for losses, if any. With bank details and funds available now, MahaRERA can efficiently provide instructions for recovery from the specified account. This decision will be crucial for such recoveries and prove to be a game-changer.
For the developer, the RERA Designated Transaction Account will be utilised for project-related expenses other than land and construction. Similarly, RERA Designated Collection Account and RERA Designated Separate Account are legally protected from getting attached by any government agencies. The bank has to be vigilant that they do not allow creating any third-party encumbrances on either or both of these two accounts. The collection and diversion of funds to any unauthorised accounts will be unacceptable.
All transactions in these RERA designated bank accounts will have to cease upon project’s completion and the bank accounts cannot be used unless MahaRERA extends the project. Also, the developer cannot alter the bank account without MahaRERA’s approval.
Funds can be withdrawn only on submission of certificates from the project’s chartered accountants, engineers and architects. If there is more than one promoter, their responsibilities will be as per their mutual agreement. This protocol has been made for the first time. Due to several such provisions, there will be restrictions on misappropriation of money, transparency in fund’s utilisation, bring in financial discipline and immensely help in project’s timely completion.
Apart from this, many developers finance the project by mortgaging the land or flats or the entire project. Furthermore, they may divert funds from the project’s account without the knowledge of home buyers. This lack of transparency could potentially lead to problems in the future for the project and buyers alike.
Now, the promoter must declare the loans availed from any financial institutions against the mortgage of land or flats or the entire project. It will be mandatory for the developer to disclose the financial institution’s name, address, transaction date, sanctioned amount, withdrawn amount, balance amount, etc. The availed loan’s overall details along with amount utilised for construction should be certified by project’s Chartered Accountant with their UDIN number. It is only after following this process a developer can be allowed to withdraw the interest on loan.
