Gurgaon: The ministry of finance has directed all public sector banks to ensure compliance with provisions of the Real Estate (Regulation and Development) Act, 2016, while allowing developers to withdraw funds from Rera accounts.
The move came a week after H-Rera chairman Arun Kumar warned legal action against banks for allowing withdrawal of funds by developers from the regulator’s accounts by not following the rules.
In a letter to banks, under secretary of ministry of finance Subhashchandra Amin said that as informed by the Haryana Rera chief, the developers are not complying with the provisions such as submission of certificates of chartered accountants, engineers and architects prior to withdrawal of funds from Rera account and the banks are allowing the withdrawals without ensuring these compliances, which is in violation of Section 4 (2)(1) (d) of Rera Act.
“In his letter, the HRera chief had requested the ministry of housing and urban affairs (MoHUA) to take up the matter with the department for financial services (DFS) for issuing instructions to all banks,” Amin said.
In a move to check misuse of funds collected from homebuyers, Kumar had directed banks to strictly monitor fund withdrawals to avoid legal action and inform developers that they may face a penalty up to 5% of the project cost in case of violations.
According to the Act, 70% of the amount collected for any real estate project from homebuyers has to be deposited in a separate bank account to cover the cost of land and construction and is to be used only for that purpose.
The developer can, however, withdraw the amount from this account to cover the cost of the project in proportion to the percentage of completion of the project after certification from the engineer, architect and chartered accountant concerned.
The regulator also warned developers that they may face a penalty. “In case of non-compliance under Section 4 of the Rera Act, a penalty of up to 5% of the project cost can be imposed… you may bring this to the notice of all concerned and advise them to strictly monitor withdrawals to avoid legal action for such lapses,” the authority told banks.
As per Rera norms, the details of accounts that are opened by the developer for real estate projects include a project master account (where the entire amount realised from homebuyers is deposited), Rera-compliant account (where 70% of the amount collected from homebuyers is deposited) and promoters’ free project account (where the remaining 30% amount is deposited).
