Sunday, July 14, 2024

UP-RERA Mandates Three Bank Accounts for Real Estate Projects to Safeguard Consumer Interests

The Uttar Pradesh Real Estate Regulatory Authority (UP-RERA) has issued comprehensive guidelines requiring real estate projects to maintain three separate bank accounts. The move aims to ensure effective protection of consumer interests and strict adherence to the RERA Act, providing a guarantee for the timely completion of projects.

According to UP-RERA, promoters are prohibited from creating liens on the project’s separate account, and they are not allowed to pay interest, penalty, or assured returns from this account. Sanjay Bhoosreddy, Chairman of UP-RERA, emphasized that disclosing three accounts on the UP-RERA web portal and ensuring proper fund utilization will contribute to time-bound project completion. Rigorous control mechanisms are set to ensure transparency and accountability in account management, with violations facing heavy penalties.

Each project is required to have a collection account for allottee payments, and promoters must disclose this account in advertisements, allotment letters, agreements for sale, and all communications with allottees. Promoters must provide standing instructions for auto-sweep of at least 70% of the amount from the collection account to the separate account and not more than 30% to the project’s transaction account.

As part of the registration application, promoters must submit details of the three bank accounts: the collection account, the separate account, and the transaction account. Funds from the separate account can only be used for land costs, construction, and project development. Promoters can pay normal interest on project loans but are restricted from paying penal or compound interest or interest and compensation to allottees.

All secured and unsecured loan amounts for project financing must be deposited in the separate account. Withdrawals from the separate account require submission of certificates from a chartered accountant, engineer, and architect to the bank, not exceeding the verified cost of completed work.

Bhoosreddy emphasized increased strictness, especially in cases of project rehabilitation under Section 8 of the RERA Act. In such instances, promoters must deposit 100% of funds collected from allottees and all money raised through loans for construction and development in the separate project account. Allottees must be informed about making payments exclusively into the separate account.

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