UP-RERA had issued a direction on December 24, 2020 which states that all new real estate projects being launched from April 1, 2021, it is mandatory for promoters to maintain three bank accounts.
In order to ensure banking system related to project bank accounts more stringent and transparent, Uttar Pradesh Real Estate Regulatory Act (UP-RERA) has written a letter to State Level Bank Committee (SLBC) to ensure management of bank accounts of real estate project according to the directions of Reserve Bank of India (RBI) and RERA Act.
The section 4(2)(1)(D) of RERA Act 2016 states provisions to follow rule of 70-30 percent diversion of funds for the bank accounts related to real estate projects.
Apart from this, after directions of RBI, issued on December 14, 2020, UP-RERA had also issued a direction on December 24, 2020 which states that all new real estate projects being launched from April 1, 2021, it is mandatory for promoters to maintain three bank accounts.
Sanjay Bhoosreddy, chairman, UP-RERA said, “we have taken initiative to ensure utilization of it solely in construction and make a transparent system of opening and management of bank accounts related to projects. Arrangement from banks and promoters, both, will achieve to bring due transparency in the banking system related to project accounts and we are putting all efforts to ensure this.”
Apart from opening three bank accounts for all new real estate projects, UP-RERA has asked SLBC to issue directions to banks/ financial institutions on following points:
1. In the process of opening bank accounts of real estate projects, promoters will give standing instruction to the banks to deduct 70 and 30 percent, not more than this, of amount automatically from collection account and deposit them in separate and transaction account respectively.
2. Bank account will be operative only in the name of main promoter and to ensure utilization of amount of separate account in construction and development of the particular project, banks would not facilitate debit card, cheque book and net banking facility to the promoter.
3. Ensuring execution of above points, branch of the bank will send the information to U.P. RERA office and the promoter will upload it on portal
This process will make stringent provision of management of bank account related to real estate projects and create desired transparency.
The banks have to ensure transaction from separate account of project in equal ratio of construction being completed in the project and this has to be certified by engineer, architect and charted accountant of the promoter’s organization.
Here are some of the benefits of the UP-RERA’s collaboration with the SLBC:
- Increased transparency and accountability in the management of bank accounts of real estate projects.
- Reduced risk of misappropriation of funds collected from homebuyers.
- Protection of the interests of homebuyers and ensuring that their funds are used for the intended purpose.
- Improved confidence of homebuyers in the real estate sector.