UP-RERA Enhances Oversight of Real Estate Project Accounts
As per Section 4(2)(1)(D) of the RERA Act 2016, the legislation stipulates the rule of diverting 70% of funds into real estate project-related bank accounts. Furthermore, following RBI's directives issued on December 14, 2020, UP-RERA, on December 24, 2020, issued its own directive, making it mandatory for promoters to maintain three bank accounts for all new real estate projects launched from April 1, 2021.
Sanjay Bhoosreddy, Chairman of UP-RERA, emphasised the importance of promoting transparency and efficient utilisation of funds in construction. He stated, "We have initiated steps to ensure a transparent system for opening and managing project-related bank accounts. Collaboration between banks and promoters will enhance transparency in the banking system related to project accounts."
Apart from requiring three bank accounts for new real estate projects, UP-RERA has requested SLBC to issue guidelines to banks and financial institutions. These guidelines include:
1. Automatic Deduction: Promoters are required to instruct banks to automatically deduct 70% and 30% from the collection account and deposit these amounts into separate transaction accounts, respectively.
2. Account Operations: Bank accounts will only be opened in the main promoter's name, and banks must ensure that funds from the separate account are exclusively used for the construction and development of the specific project. Promoters will not be provided with debit cards, checkbooks, or net banking facilities.
3. Transparency Reporting: Banks are to communicate their adherence to the above guidelines, and promoters are to upload this information onto the UP-RERA portal.
This proactive approach aims to establish stringent provisions for the management of bank accounts related to real estate projects, ensuring transparency and strict compliance with regulations. Additionally, banks must confirm that transactions from the project's separate account align with the progress of construction, as certified by the promoter's organisation's engineer, architect, and chartered accountant.
With these measures in place, UP-RERA seeks to foster a more transparent and accountable real estate sector in Uttar Pradesh, promoting the interests of homebuyers and the real estate industry alike.